The report's most telling indicator for the state of the market was the number of investment sales. Last year, 72 projects with 8,301 units were sold. The previous year brought trades of 332 complexes, totaling 33,008 units, while 2000 ended with the sales of 454 communities, representing 46,268 apartments.

Despite the decline in trades, the market's saving grace seems to have been in the investment sales arena. Many local experts, though, have pointed out Houston's apartment market looks strong simply because its peers are so strained.

At the 2002 close, vacancy was 5.3%. Sperry Van Ness senior adviser William Forrest tells GlobeSt.com that vacancy could jump another 2% to 3% this year. It's no surprise that Houston, as elsewhere, is feeling the pinch from single-family housing with mortgage rates at all-time lows for some time now.

Forrest also points out that new construction must shoulder its share of the blame for declining vacancies. Last year, 12,316 units in 54 developments were under construction and 37 more proposed to add another 10,408 units, all carrying delivery dates within the next 18 months. At 2002's end, absorption was down 4,451 units; at midyear, the reading was 462 units. In 2001, 6,063 units were absorbed.

The report says the record rents, which is averaging $655 monthly, aren't helping owners because of increased costs. Forrest says taxes, insurance and utilities have doubled and in some cases tripled over the last year, effectively eating up any rent increases and jeopardizing owners' take-home pay. He predicts tax protests and related proceedings will reach record proportions this year in Harris County as owners seek protection for their investments. Last year, the ability to refinance debt at lower interest rates than the existing mortgage was the only bright spot for owners, according to Forrest.