After running through 20-plus slides depicting the well-being of the economy in general and the multifamily market in particular, Hessam Nadji got to the nut of it: “It will be 2011 before we see vacancy rates come down, and we see a recovery in construction.”

Nevertheless, Nadji, managing director of research services at Marcus & Millichap, a multifamily research and brokerage firm, tried to put a positive spin on his presentation. The worst of the economic recession is over, he said. “2010 will be a tough year, though there may be some upside surprises," Nadji said. "We have to look to 2011 before we see any meaningful gains in operations.”

Nadji predicted that the industry would have to navigate some strong headwinds before fully recovering. Though the overall economy seems to be improving, it is not going to bounce back strongly like after previous recessions. Consumers are over-burdened with debt. Unemployment is still growing. Plus, “the shadow market problem will be with us throughout 2010 because we’ll have foreclosures through 2010.”

On the positive side, Nadji's data indicated that the housing market has bottomed, though he expects prices to continue declining for nine to 12 months due to foreclosures. But the really good news, in Nadji’s mind, is that the government averted a collapse of the financial system. “The government did avert the worst-case scenario. A year ago, we were very close to a run on the banks… As bad as things are, they could have been a lot worse.”

The fortunes of the apartment market, Nadji said, are tied to job growth, and things are looking up on that front. “We’re losing only 250,000-plus a month. That’s still a problem. But we’ve retreated from an extreme condition.”

Even so, markets that escaped from job losses early in the recession eventually succumbed. “No market has been immune,” said Nadji, noting that even Texas markets have been hit with rising unemployment. Some of the hardest-hit markets depended for jobs on housing construction and manufacturing.

The other major problem in the economy, Nadji said, is weakness in consumer spending. This recession featured an unprecedented decline in retail spending, partly because consumers were saddled with too much debt, and they could no longer tap their home equity. “It’s scary out there. The consumer is cornered.”

Growth coming out of a recession is typically way above the long-term average due to pent-up demand and other factors. This time, he said, most economists predict an average level of GDP and job growth next year.

But there could be a pleasant surprise on the job front. Companies may have over-reacted to the recession and cut too many jobs. They have to quickly hire people back once things improve. “We should be prepared to see better than expected numbers for these reasons,” Nadji said.

Meanwhile, corporate profits have exceeded expectations of late because of strong cutting early in the recession. Plus, the weak dollar is contributing to exports. Half of the $750 billion in stimulus money will be spent in 2010. Also, companies and consumers are sitting on a horde of cash. “What happens when that capital moves back into the economy?”