Despite a sagging economy and a floundering housing market, multifamily investments continue to perform steadily; however, the rate of growth has been slowing in the face of the weak national economy, according to Marcus & Millichap's quarterly “Performance Monitor.” According to the monitor, revenues managed to continue their upward drive, advancing at a year-over-year rate of a little more than 4 percent. Steady fundamentals generated a 4.2 percent rise in apartment operating revenues since the second quarter of last year.

Multifamily starts have also risen steadily since hitting their trough in the first quarter of 2007. With a 14 percent rise in foreclosure notices over last quarter, many former home owners have moved to the rental market. Completions, starts, and permits all increased from the first quarter of the year, with multifamily completions rising 36 percent year-over-year and starts and permits growing by 25 percent and 2.5 percent, respectively.

However, reflective of the housing market, the condo component of starts (about one-third of total starts) has continued to tumble, falling from its peak performance of 54 percent in the second quarter of 2006. This has made for a deepened pool of shadow rentals. At mid-year, about 11.7 million homes were being used as rentals, bypassing the previous high-tide mark of 11.5 million in 1995.

Asking rents increase by 1 percent during the second quarter, compared with the 1.2 percent growth rate achieved in the second quarter of last year. Year over year, asking rents rose by 4.4 percent. The growing use of concessions, primarily in the Sun Belt states, which are flooded with shadow stock, will continue to cool effective rent gains through the remainder of the year.

2Q 2008 REVENUES & COMPLETIONS Source: Marcus & Millichap Research Services