New construction in multifamily is ahead of 2013 levels thus far this year, says Reis.

NEW YORK CITY—Notwithstanding strong metrics for the second quarter—including an historically low vacancy rate, appreciable year-over-year rent growth and the best Q2 showing for absorption in three years—the apartment sector’s recovery is maturing, Reis Inc. said Wednesday in its quarterly report. “Vacancy compression stalled during the second quarter of 2014 and it continues to slow gradually over time,” says senior economist Ryan Severino. “This is a trend that we have observed over the last few years and a harbinger for the apartment market going forward.”

After hitting bottom in 2011, new multifamily construction increased in 2012 and 2013, and thus far this year it’s ahead of the pace seen a prior.  “As construction continues to ramp up and demand moderates, this will put upward pressure on national vacancy,” Severino says.

That much is typical. What’s “a bit unusual,” Severino observes, is that demand should remain relatively strong as new supply surpasses it, thanks to the large numbers of young, single potential renters.

“In previous cycles, the national vacancy rate has usually been pushed up by dwindling net absorption as the economy slows down and then heads into a recession just as construction is accelerating,” according to Severino. Reis isn’t expecting a recession over the next few years, “even though we do forecast an increase in vacancy, making this phase of the cycle somewhat unique.” The research firm cites a national vacancy rate of 4.1% for Q2, unchanged from the previous quarter and down 20 basis points from a year ago.

Asking and effective rents both grew by 0.8% during Q2, while these metrics were up 3.2% and 3.4%, respectively, year over year. “Rent growth, though weak by historical standards given such a low vacancy rate, continues to accelerate,” Severino says.

Reis’ figures for rent growth nationally are a shade more conservative than RealPage’s, which reported on Wednesday morning. For the 100 largest apartment markets across the US, RealPage’s MPF Research Division, effective rents for new leases rose 1.9% during Q2, marking a 14-year high for quarterly growth.

The two reports were in accord, though, in identifying an acceleration in rent growth. The RealPage report put it at 3.5% for Q2, compared to 3.2% in Q1 and 2.9% in Q4 ’13. On Monday, reported that Axiometrics‘ Jay Denton called Q2 “one of the strongest three-month stretches we’ve seen in the 19 years we’ve been tracking apartments.”