1. Jacksonville, Fla.

If you look purely at the numbers, Jacksonville, Fla., could be the worst market in the country. Walnut Creek, Calif.-based Marcus & Millichap Real Estate Investment Services has it at No. 44—dead last—on its National Apartment Index.

Greg Willett, vice president of research and analysis for Carrollton, Texas-based M/PF Research, sees similar problems. “Jacksonville’s late 2009 occupancy rate (at 86.3 percent) was the lowest across the 64 metros that form the core of our analysis,” Willett says. “And rents were cut 5.7 percent over the past year.

“Beyond the general struggles with the economy, one of the problems they have had is lots of new supply, some of it initially intended to be for-sale condos,” Willett continues.  “Deliveries topped 2,400 units last year, translating to inventory growth of more than 3 percent in a market that small.”

Marcus & Millichap says the market indeed received 2,000 new units in 2009, with 1,000 more on the way this year. There’s no demand there to really sap up these new units. In 2009, employers cut a whopping 19,000 jobs. This year, Marcus & Millichap expects that number to fall to 3,000 positions eliminated.

In all, this supply/demand equation means vacancy rates will push up 60 basis points to 14.5 percent (after jumping 170 basis points last year). Marcus & Millichap expects rents to fall 4.1 percent to $747 per month this year, while it projects effective rents to slip 5.3 percent to $693 per month.

“There is demand in the market, mainly reflecting that some households are bouncing back from shadow-market product into conventional apartments, so occupancy should begin to head upward as the completion tally diminishes,” Willett says. “But they still have about 1,000 units to go on the delivery side, so improvement in occupancy during 2010 won’t be especially vigorous. And there seems to be no way they get out of rent cut mode this year.”

2. Phoenix
Like South Florida and Vegas, Phoenix has been the symbol of death and destruction in this housing bust. In certain segments, Phoenix is showing signs of improvement. Construction activity will decrease by more than 60 percent in 2010, according to Marcus & Millichap. After averaging deliveries of about 4,100 units a year, only 1,800 apartment units are expected in 2010.

And, with employers cutting a whopping 112,600 jobs in 2009, they’re actually expected to add 11,000 positions this year, which is a 0.7 percent gain. “Job contractions in Phoenix have clearly had an impact on property operations and occupancies,” says Mary Ann Klinger, senior vice president of operations for Birmingham, Ala.,-based Colonial Property Trust.

But there are still problems. Denver-based AIMCO pin-pointed the market as one where it was seeing pressure on rents in the market. And Phoenix is a market that varies neighborhood by neighborhood—and some neighborhoods are still decimated. “The B-minus and C-plus assets west of the city are decimated,” says Nicholas Michael Ingle, director of capital markets for Phoenix-based Hendricks & Partners. “It’s not really unusual for buildings to be at 50 percent occupied.”

That’s bad. And a major problem is existing homes. “In Phoenix, we don’t have a lot of supply, but we’ve lost a lot of jobs and have a lot of empty homes,” Ingle says.

Because of these factors, Marcus & Millichap expects vacancies to rise 30 basis points to 12.6 percent this year, after rocketing up 120 basis points last year. The firm expects asking rents to fall 2.5 percent in 2010 to $729 per month, while effective rents are projected to decline 3 percent to $656 per month. Novato, Calif.-based RealFacts says that Phoenix’s year-over-year rents have fallen 12.2 percent and its year-over-year occupancies have fallen 1.7 percent.

3. Las Vegas
With its massive overbuilding and job loss, Sin City has been a problem market for a while now for apartment owners. But it’s behind South Florida in its recovery. “The problems in Las Vegas began well after South Florida,” says Ron Witten, president of Dallas-based Witten Advisors.

The condo glut, with cranes all up and down the strip, has been well-documented. But the completion pace does appear to be slowing down. Marcus & Millichap says completions are expected to total 990 apartments this year, after clocking in at 2,500 units last year. Still, there is enough supply coming online to cause problems.

“The Northwest Las Vegas submarket has five properties coming online within the next 90 days, and there are no jobs there,” Ingle says.

But that’s not the only issue. “Las Vegas is still losing jobs and has a lot of oversupply,” Witten says.

The local economy, which depends on consumer spending and construction, lost 57,000 jobs last year, but could actually add 2,500 positions in 2010, according to Marcus & Millichap. But that would be enough to stop the slide in apartment fundamentals with vacancy projected to 70 basis points to 12 percent in 2010 (after it jumped 320 basis points last year). Marcus & Millichap projects asking rents falling 4.8 percent to $782 per month and effective rents to drop 6.6 percent to $708 per month. RealFacts says that year-over-year rents have fallen 12.5 percent and occupancies have dropped 2.1 percent, making it the firm’s worst market in 2010.

Willet sees similar problems. “Las Vegas still has considerable struggle ahead of it,” he says.

4. Seattle
Without a doubt, the Emerald City has better days ahead. Need proof? Look no further than the institutional players and REITs eyeing and buying properties in the market. But for the remainder of 2010, rental owners in Seattle won’t have a lot of fun.

“The biggest downturn over the next year will probably be in Seattle,” Willett says. “They’re still struggling with the economy. The rent cuts just keep getting bigger and bigger. We’re saying that Seattle revenues will come down another 6 percent. That’s a pretty sizeable hit. We’re forecasting that rents still have another 6 percent to go before they bottom out in Seattle.”

Owners agree. Palo Alto, Calif.-based Essex Property Trust sees revenues in Seattle dropping 9 percent to 11 percent. Marcus & Millichap expects a 50 basis point rise in vacancy to 8.4 percent this year (after a 210 jump last year). It also expects asking rents to go down 2.8 percent to $928 per month and effective rents to drop 3.9 percent to $852 per month. RealFacts says that rents have gone down 11 percent year over year and occupancy has gone down 2.3 percent, making it the ninth-worst market in 2010 for that firm.

There are multiple problems causing these sharp drops. Marcus & Millichap says that major Seattle employers, including Washington Mutual, Microsoft, and Boeing, had layoffs in 2009—hurting demand. Marcus & Millichap does expect things to pick up this year, with employers expanding payrolls 1.6 percent.

And there’s still the issue of new supply. In 2009, 4,150 units were delivered there. This year, 2,600 are expected. “There are not a huge number of units on the way,” Willet says. “But if you look in terms of inventory growth rate, it’s still pretty meaningful.”

5. Dallas
Dallas, like other Texas markets, has a supply problem. It’s expected to have the most new completions in the country in 2010—outpacing another Texas metropolis, Houston. But the 7,800 units expected in 2010 will trail last year’s 11,700 units. Despite that, this year’s starts will expand apartment stock in Dallas by 1.4 percent. “We’d put Dallas on the list of toughest markets for 2010 because they have so much new supply to deal with,” Willett says.

Part of the problem is that the market went sour after some others and hasn’t totally gone through the downswing yet. “Compared to other markets, Dallas/Ft. Worth was clearly slower to have had problems,” Klingler says.

Some people aren’t as negative about the market. Marcus & Millichap has it at No. 23 on its National Apartment Index. Part of this reason is because the region should see some job growth to absorb this year. After shedding 66,000 jobs in 2009, Dallas is expected to add 66,000 spots this year, which is a 2.3 percent increase. Out of those 66,000 spots, 12,000 professional and business services positions should be added, according to Marcus & Millichap. The firm expects core areas such as Oaklawn, Uptown, and the central business district to see the largest upside as jobs return.

The projected job growth won’t be enough to thwart rising vacancy though. Home prices are affordable and supply remains high and conditions will continue to deteriorate in 2010. Marcus & Millichap expects apartment vacancy to rise 40 basis points to 9.5 percent. The firm thinks asking rents will actually rise 0.4 percent to $768 per month, while effective rents slip 0.9 percent to $677 per month as concessions remain a problem.