"The Lincoln Park and Lakeview type markets are holding up very well and we've seen that there has not been a material price erosion in these better locations," Doug Imber, president of Chicago-based Essex Realty Group Inc., tells GlobeSt.com. "But as you look down the food chain in terms of quality of asset or location, values have eroded more dramatically. When you look at properties in some of the westside and southside neighborhoods, the price erosion has been very severe."

Asking rents also decreased, though less substantially, settling around $1,064, down just 0.3% since this time last year, Marcus & Millichap reports. Experts say this too tends to vary greatly from submarket to submarket.

"This is a very submarket specific thing, and while overall it's not been good, in most markets it's not as bad as people feared," Imber says. "If you look in the Gold Coast or South Loop, where there's been an increase in supply and the shadow rental market, occupancies have suffered. On the other hand, neighborhoods like Lincoln Park, Lakeview and Ravenswood have performed better than many landlords probably feared in December."

Marcus & Millichap's research shows that multifamily property values have also taken a significant blow. The median price per unit dropped to $77,724, a 1.8% drop from Q1's median of $79,125, the report says.

"The moral of the story is that better areas have held their values, and the tertiary areas have really dropped off materially," Imber says. "If I look at higher quality assets in better locations that have low cap rates, implicit in that cap rate is less volatility. It makes sense that there would be less price erosion in the better locations and more volatility in the historically higher cap rate markets."

Overall, the average cap rate in the Chicago metro multifamily market is up 30 basis points since the first quarter and 100 basis points year-over-year to 7.9%, according to Marcus & Millichap's research. This data points to one positive consequence of the otherwise abysmal economic conditions - that great opportunities exist amidst the challenges.

"On the demand side, if someone is well capitalized and has strong management, this is probably the best buying market we have seen since the Resolution Trust Corp.," Imber says. "It's difficult to forecast short-term changes in the economy, and who knows when this recession will end and hiring and new household formation will begin, but if you look at the fundamentals of the multifamily market, the outlook is excellent. The increase in the renter population from Generation Y is enormous, there is now a material constraint on new construction looking forward and there is a high barrier to entry for home buying; all of which combined makes the long-term fundamentals for apartment investing excellent."

In terms of investment sales, Imber points to two distinct marketplaces - performing and nonperforming - and the great divide that exists between them. Essex is currently representing two dozen different banks on the sale of Chicago area distressed real estate, with more than 60% of those assets located in the south and west neighborhoods of the city.

"Those neighborhoods are being injured in two ways - there's an overabundance of supply of these distressed assets and there are virtually no lenders willing to assist in acquisition and/or rehab financing," Imber says. "Those neighborhoods will probably experience a longer recovery period. Then there is the performing marketplace, wherein prices as a whole have softened but how much depends on the quality and location of the asset.