David Young, managing director of JLL's capital-markets group, added that multifamily transaction volume last year was “incredible; for the first time, the US sector outranked every other asset class. We can expect the 2013 investment landscape to remain about the same with a moderate uptick in multifamily transactions this year. There is definitely an opportunity for the investment community to capitalize on this stable asset class in the coming years.”

Other industry research supports this finding, showing that demand that has been pent-up for years is far from being satisfied. In fact, Urban Land Institute's “Emerging Trends in Real Estate 2013” report projects room for new supply. “Some fallow development years have further tightened many markets as developers are only now beginning to catch up,” the report from PwC and ULI said. “In high-barrier-to-entry places, particularly metropolitan areas along the coasts, new projects may have trouble keeping up with demand, resulting in mid-to-low single-digit vacancy rates and rent spikes and extremely solid appreciation. So long as these trends continue, over the long term apartments should continue to outperform all other property types on a risk-adjusted basis, with excellent cash-flow components.”

In addition, GSEs Fannie Mae and Freddie Mac continue to fuel the market as a source of lending for the exit of development projects, while construction lenders have stepped up at the dirt level, JLL reports. Favorable interest rates and attractive capital made development in the wake of the downturn possible for this sector. As the multifamily market continues to expand in 2013, the NMHC expects that most markets will adjust to the changing landscape of needs.

“Development activity continues to increase in most markets, with just over half reporting a substantial pickup in land acquisition, lining up financing and getting building permits, though not yet much in the way of actual construction starts,” reads an NMHC statement from 2012. “An additional 20% said that developers have been breaking ground on new projects at a rapid clip.”

JLL's research shows that phenomenal multifamily growth may be on the horizon in some metropolitan areas where development was suppressed due to the recession. The firm surveyed 28 metropolitan areas and found that nearly 70% of regions will have triple- or quadruple-digit supply growth this year over 2012 due to some metro areas in desperate need of new development.

Markets that are supported by economic job growth will draw the Millennial and Baby-Boomer generations back to the urban core and surrounding suburban pockets. South Florida, Las Vegas, Phoenix, Chicago and Los Angeles will be some of the top markets for supply deliveries in 2013.

“While markets like South Florida will experience outsized deliveries in 2013, in reality those numbers are a fraction of what we've seen in the past—just 40% of the historical annual average,” said Vaghefi. “After several years of meager deliveries, the sector is finally starting to respond to demand in the marketplace. We've got a long way to go before we cross that 'bubble' threshold.”

As GlobeSt.com and Real Estate Forum reported earlier this month, this year has started out strong for apartment investment, what with Equity Residential and AvalonBay Communities' $16-billion buy of Archstone Inc.'s assets. The deal not only quenched long-circulated rumors and speculation of a potential Archstone IPO, but it also marks the largest deal in the sector since 2007.

Do you think the apartment market is in danger of being overbuilt? Leave your opinion in the comment box below.