Rental apartment completions fell to just 123,000 units in 2011, the second lowest level on record. Insubstantial deliveries have clearly coincided with a period of strong rental demand, fomenting the occupancy and rent trends that have become hallmarks of the apartment sector's recovery. In response to rising cash flow and value, and with an eye to a future characterized by lower homeownership, development activity is rising rapidly from its recession nadir.

Construction initiated for the ownership market, including single-family homes and multi-unit properties, has languished amid the housing sector's broader stagnancy. Fourth quarter rental starts, on the other hand, more than doubled the prior year's activity. As compared to long-term averages, rental construction currently underway is unremarkable at the national level. There is room for the development to rise further. But markets with fewer barriers to new supply are at the leading edge of the cycle and, in the extreme, already risk an imbalance of supply and demand by late 2013. Elsewhere, permiting levels foreshadow a further acceleration of rental starts in 2012. The market's enthusiasm for the apartments is understandable. It should not, however, give way to cavalier dismissals of the supply response as the pipeline deepens.