(Mark Your Calendars: RealShare Apartments East, February 15^th in Washington, DC).

ENCINO, CA-The US apartment sector powered through last summer’s economic doldrums to record strong absorption gains and higher occupancy rates. So says a 2012 National Apartment Report, which was released by Marcus & Millichap. Tight supply conditions exist, especially in metros with high barriers to entry, says the report. “Foreclosures in the single-family market, the inability of most Americans to meet mortgage financing requirements and households choosing rental housing for lifestyle reasons or employment mobility contributed to a net rise in apartments.”

Hessam Nadji, managing director, research and advisory services at the firm, tells GlobeSt.com that “Demand for rental housing will remain robust in 2012 as strong demographic trends combine with shifting consumer behavior. The total population within the prime 20-34 year old renter cohort has increased dramatically, and will increase by an additional 2 million through 2015,” he says. “As this age cohort continues to face significant hurdles to homeownership and as the tight employment market encourages flexible housing decisions, many of these new households will continue to favor renting.”

In addition, Nadji says, though foreclosure activity has begun to recede from peak levels, homeownership rates have declined dramatically since reaching their 69.2% peak in 2004. “The most recent readings place homeownership at 66.3%, and this sharp decline has significantly added to rental housing demand. As a result, rental housing will remain a favored choice for the coming year.”

Nadji tells GlobeSt.com that “strong demand trends will continue to pressure rental housing stock, and although many developers have begun to ramp-up construction plans, substantive increases in construction remains one to two years out.” Presently, only 85,000 new apartments are anticipated for 2012, he says, “a significant shortfall from the forecast demand of 120,000 apartments in 2012. This will press vacancies to the 5% range by year-end, the lowest level since 2001, and empower owners to advance effective rents by 4.8%.”

Foreclosure activity has begun to decelerate from peak levels, but will remain elevated through the coming year, adds Nadji. “Many of the foreclosures delayed by the investigation into ‘robo-signing’ that surfaced in 2010 will continue to move forward while areas that have demonstrated very slow employment growth will continue to face significant risk.”

He points out that Southern California, Florida, Georgia and Michigan will face the steepest hurdles while Arizona and Nevada, where foreclosures were most prevalent over the last couple of years, have improved prospects in the coming year “as job growth is forecast to significantly outpace the national average in these areas.”

The San Francisco Bay Area has earned two top spots in this year’s NAI, which ranks 44 major apartment markets based upon a series of 12-month, forward-looking economic and supply and demand variables including forecast employment growth, vacancy, construction, housing affordability and rents. The Bay Area dislodged its East Coast counterparts, with San Jose (#1) and San Francisco (#2) occupying the top positions in this year’s index, edging out New York (#3) and Washington, DC (#9). The Silicon Valley benefitted from robust technology employment and significant income gains, as well as 40 percent of all venture capital funding in 2011. Rounding out the bottom of the NAI are Jacksonville (#44), Tucson (#43) and Sacramento (#42).

Barring any unforeseen shocks to the global financial markets, an array of lenders will continue to finance multifamily developments and acquisitions in 2012 against a backdrop of historically low interest rates, says William E. Hughes, senior vice president and managing director of Marcus & Millichap Capital Corp. “Fundamentals and a favorable spread against Treasurys will promote multifamily development this year. Fannie Mae and Freddie Mac will remain the chief suppliers of apartment loans in an increasingly crowded field of providers.

“In fact, monetary policy—both domestically and worldwide—should keep interest rates low for several years to come,” adds Hughes. “Expect life companies and commercial banks to grow market share by pursuing assets with good credit features and stabilized revenue.”

After a brief respite in the third quarter of 2011, multifamily investment sales activity is expected to rebound this year. “Sellers will bring more properties to market, capitalizing on strong investor demand, based on the strong economic gains recorded at the end of 2011,” says John Sebree, national director of Marcus & Millichap’s National Multi Housing Group. “We expect capital to migrate to secondary markets and value-added investments. Sales volume will rise as risk tolerance expands and capital becomes more fluid. Expect higher levels of workout activity from banks and lenders,” Sebree notes.