Jim Hurley knows a simple way to gauge the real estate market. “When people are talking about real estate at cocktail parties, it's not a good time to be buying,” says Hurley, portfolio manager for the California State Teachers Retirement System. The pension fund, also known as CalSTRS, owns 19,000 units.

And people are definitely talking. The sluggish performance of the stock market and other investment vehicles, combined with historically low interest rates, has fed a real estate frenzy around the country. And, given apartment properties' relatively stable performance over time, the multifamily sector suddenly finds itself hosting a very crowded party of people who want to be part of the scene.

In multifamily today, private money is everywhere, from wealthy private individuals interested in scooping up properties to mom-and-pops combining their funds with tenant-in-common arrangements to foreign investors jumping into the market.

In 2003, $29.5 billion came into the apartment market, according to Real Capital Analytics, a research and consulting firm in New York. In 2004, that total jumped to $43.3 billion. But these players also could slip away as fast as they arrived if interest rates shift or other market conditions improve. How long can the industry expect these investors stay at this apartment party? Take a look at the crowd and find out.

It's Like Learning About Fine Wine Who's Buying: With shrinking returns in other areas, pension funds and other big institutions are increasing their allocations into real estate, specifically multifamily. “Compared to other investment vehicles, it makes sense for them to invest at these levels,” says Scott Galloway, a senior managing director at Holliday Fenoglio Fowler, a commercial real estate intermediary in Houston.

Pension funds are also jockeying to become bigger players. Not only have they increased their allocations, they've also changed their investment criteria. Instead of seeking Class A assets, they're now looking at value-added deals. They're even partnering with private operators and coming in with adjusted expectations. “We're all lowering our yield requirements,” Hurley says.

Last Call? Most institutions still don't think they've poured enough capital in multifamily. “Institutional investors are viewing apartments as a better place to put their money than they were 10 years ago,” explains Kitty Wallace, a senior vice president with Sperry Van Ness, a broker based in Irvine, Calif.

As a matter of fact, the institutions would like interest rates to go up so the converters and large private buyers trickle out of the market and they can get to properties more easily. “The large institutions will be relieved when that happens,” CalSTRS' Hurley says.

Regulars Wait For Bargains Who's Buying: Private companies have always been in the apartment business, making their money off managing and selling properties. But more and more of these companies are tapping into additional streams of capital, such as large opportunity funds and high-net-worth individuals.

Last Call? Like the pension funds, apartment owners and managers are just waiting for interest rates to rise. Not only will this reduce the competition for properties, but it should also lower vacancy rates. Once rates go up, some operators will have debt locked in while occupancies and rents improve. “We buy A and B assets and we try to put low-rate financing in place,” says Greg Finch, president of Venterra Realty Management, a private Texas company with 9,000 units. “As rates go up, we will still be benefiting.”