WASHINGTON, DC—Even as this month's reports on single-family housing sales show deceleration in price increases, the fundamentals for multifamily remain solid. That's the word from the National Multifamily Housing Council and the National Association of Realtors, both of which reported that vacancies ticked downward in the second quarter.

Citing two recent reports, the NMHC noted that vacancy rates “decreased to pre-recession levels by one measure and remained unchanged by another” Specifically, the Census Bureau's Q2 apartment vacancy rate for all rental properties was 9.5%, unchanged from both Q1 of 2014 and from a year ago. Conversely, MPF Research's national vacancy rate for investment-grade apartments fell 60 basis points from Q1 and 30 bps year-over-year to 4.4%.

“This is the lowest vacancy rate for investment-grade apartments since Q3 2007,” according to the NMHC. Regionally, the Northeast had the lowest Q2 vacancy rate at 3.4%, while the South had the highest, “although at 5.4%, it was still the lowest rate in more than seven years.”

 NAR reported Tuesday that multifamily vacancy stands at 4.1%, and predicts a decline to 4% by Q3 of next year. By any measure, according to NAR, it remains a landlord's market. Areas with the lowest multifamily vacancy rates currently are Orange County, CA, Providence, RI and Sacramento, all at 2.2%; and two Connecticut cities (New Haven and Hartford) at 2.5%. 

In step with the downward-ticking vacancy rate, average apartment rents are projected to rise 4.0% this year and in 2015, according to NAR. Multifamily net absorption is expected to total 223,400 units in 2014 and 171,000 next year.

“New construction for multifamily housing has picked up in recent months and looks to be alleviating the short supply,” says Lawrence Yun, chief economist at NAR. “However, the demand for rental housing continues to show strength. As a result, rent growth will outpace broad consumer inflation in upcoming years.”

By contrast, although both the latest S&P/Case-Shiller Home Price Indices and Federal Housing Finance Agency House Price Index have shown continued gains, those gains are slowing. S&P Dow Jones Indices said Tuesday that the National Index gained 6.2% in the 12 months ending June 2014 while the 10-City and 20-City Composites gained 8.1%; “all three indices saw their rates slow considerably from last month. Every city saw its year-over-year return worsen.”

“Home price gains continue to ease as they have since last fall,” says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators—starts, existing home sales and builders' sentiment—are positive. Taken together, these point to a more normal housing sector.”

The FHFA's seasonally adjusted HPI, calculated using home sale prices from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac, rose 0.8% in Q2. This is the twelfth consecutive quarterly price increase in the HPI, while the increase between May and June marked the seventh consecutive month of price increases.

“The extraordinary price appreciation observed over the last few spring seasons was not evident in the second quarter of this year,” says Andrew Leventis, principal economist at FHFA. “However, house price appreciation for the nation as a whole remained positive,” and remained “near or below the baseline rate of inflation in most states.”