The report from the firm's Ontario office also forecasts thatthe region's apartment market will remain among the top performersin the nation as an overheated housing market and a growing economyput more residents into the renter pool. "The tight market willallow owners to achieve aggressive rent growth, and buyers willcontinue to outnumber sellers as the market remains among thestrongest in the nation," comments Kevin A. Assef, a managingdirector of Marcus & Millichap and regional manager of thefirm's Ontario office, in the newly released report.While apartmentmarkets in Los Angeles and Orange County have long attractedinvestors from throughout the country, the Inland Empire apartmentmarket remained relatively small until recent years and was not thedraw for investors that it has since become. But the housing boomand rising home prices in Riverside and San Bernardino counties inrecent years have created conditions more favorable to apartmentdevelopment, resulting in market conditions that "have keptinvestment activity brisk with prices rising even though yieldcurves are declining," the M&M report says.Competition amonginvestors has pushed Inland Empire apartment prices, with themedian price on track to post a year-end increase of more than 30%,Marcus & Millichap estimates, with smaller properties of 20units or less making up the bulk of sales, accounting for nearly70% of all transactions. "The multitude of buyers in this categoryhas created a bidding frenzy on most properties, with many sellingat or above list price," the investment brokerage says. The currentmedian selling price of $88,000 per unit for properties with fiveto 20 units represents an increase of 34% over 2003. Among thefactors cited in the study as reasons for the current and futureexpected performance of the market are the Inland Empire'scontinued job growth, strong population growth, limited productionof new apartments, and declining housing affordability.The vacancyrate for class A apartments peaked early in 2004 at 5.7% but isstarting to improve as owners are luring tenants with offers of upto two months of free rent and lower security deposits, Marcus& Millichap reports, while vacancy for class B and class Cproperties is currently 3.4% and is expected to drop to 3% by yearend. Average asking rents are expected to end 2004 up 6.5% from2003 to $927.