Multifamily Sector to Remain Strong with a Few Hiccups in Some Markets

The recent housing crisis and the broader economic climate have led to a strong multifamily housing market nationwide. ""Marcus & Millichap Real Estate Investment Services'"":http://www.marcusmillichap.com/ recently released National Apartment Report promises another year of expansion in the multifamily market as ""the alignment of powerful demographic and economic trends continues to fortify nationwide apartment performance.""

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The firm ranks 44 markets based on several forward-looking indicators such as employment growth, construction activity, vacancy rate, housing affordability, and rent rates.

With the tightest vacancy rate in the nation, New York topped this year's list, followed by San Jose, California--which ranked No. 1 last year--and San Francisco--which held the No. 2 spot last year.

Jacksonville, Florida, ranked last on the list due to its high vacancy rates, which are not expected to improve this year.

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California markets are doing well, taking up 5 of the top 10 spots on this year's index.

While ranking relatively low on the list, a few Midwest markets are expected to demonstrate marked improvement over the year.

Detroit, Michigan, and Columbus, Ohio, ranked 32 and 33 this year, having moved up six and eight spots, respectively. Both cities owe their improvement to their manufacturing sectors, according to Marcus & Millichap.

Another notable Midwestern market, Minneapolis, ranked No. 7 this year, while claiming the nation's third-lowest vacancy rate and fourth-highest job growth.

Austin, Texas; Washington D.C.; and West Palm Beach, Florida, all slipped a few spots on the National Apartment Index this year. All three markets face challenges with supply increases likely this year.

Austin, Texas, fell from the No. 7 spot last year to No. 15 this year. Washington D.C. fell from No. 9 to No. 17, and West Palm Beach, Florida, slid from No. 32 to No. 40.

Nationally, Marcus & Millichap expects rents to increase between 4 and 5 percent this year as the national vacancy rate reaches 4.3 percent.

New construction will introduce about 150,000 new apartment units to the market, while household formation will grow, bolstered by echo boomers and immigrants.