"This represents a 3.5-year supply, given that the market has absorbed an average of 6,300 units annually over the past 10 years," says John M. Leonard, vice president and regional manager of Marcus & Millichap's Atlanta office.

Overall vacancies are expected to dip to 10.8% by year end, down from 11% in 2003. "Vacancies have stabilized and owners are becoming reluctant to sweeten the pot with additional concessions for tenants," Leonard says. Investment in apartment properties remains strong.

"While the median price per unit has drifted lower over the past two years, transaction velocity has held remarkably stable," Leonard says. "An abundance of capital continues to target apartment deals to take advantage of the favorable financing environment."

The broker sees values remaining "relatively stable this year, despite expectations for increased foreclosure activity." There will be more deals this year than in 2003. The current median price of $47,000 per unit should hold over the next six months.

Class C properties have "garnered substantial interest from the investor community, accounting for 77% of Atlanta's total transaction volume, with values rising by 7%," Leonard says.

On the renting front, North Fulton County continues to outperform metro area averages, the M&M report finds. Clayton County "continues to face heavy competition from its housing market," Leonard says. The DeKalb County submarket "remains the hardest hit, with some owners reporting rental rates at pre-1996 levels and vacancy rates in the teens." The average asking rent is expected to increase by 1% this year, to an average $806 per month.