With apartment vacancies appearing to have peaked, and U.S. rents even starting to edge up slightly, offerings of quality multifamily assets have attracted multiple bidders and secured premium prices in the first half of 2010, with investors having an especially keen appetite for institutional-grade assets in attractive coastal markets. However, as with most asset classes in the current commercial real estate market, multifamily sales are largely divided between the asset haves and have-nots. With few high-quality performing apartment assets for sale and an abundance of pent-up capital seeking to invest, some properties have drawn multiple, even dozens, of bids.

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    Mortgage rates have sunk to the lowest level in more than five decades, but consumers aren't rushing to refinance their loans or buy homes. Mortgage company Freddie Mac said Thursday the average rate for 30-year fixed loans sank to 4.58 percent this week. That's down from the previous record of 4.69 percent set last week and the lowest since the mortgage company began keeping records in 1971. The last time they were cheaper was the 1950s, when most long-term home loans lasted just 20 or 25 years. Rates have fallen over the past two months. Investors wary of the European debt crisis and the stock market have shifted money into the safety of Treasury bonds, driving down yields. Mortgage rates tend to track the yields on long-term Treasuries.

            Now investors — many buying with their own cash — are back. Since last year, the share of homes bought by investors at daily auctions has multiplied more than fivefold. The scene unsettles some, wary that investors could dump homes if the market weakens or take advantage of buyers or renters. Others are troubled at banks' willingness to settle at auction rather than give more substantial concessions to struggling homeowners. But something's got to be done with all these overmortgaged, underappreciated houses. "The investors are a tool to help get those properties moved into new hands," says Diane Drain, a Phoenix bankruptcy attorney and real estate trustee. "At this point, the dam is so broken. How do you stop the flow? I don't know how you do it other than one little stick at a time."

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    While commercial real estate values have not rebounded in the first six months of the year, the fear that 2010 was a disaster waiting to happen has subsided as liquidity has started flowing back into the market, according to new reports out this past week from PIMCO and PricewaterhouseCoopers.  The pair of reports suggest that, for institutional quality property at least, property values have found a bottom and cap rates have peaked and could even start to subside. Neither of the reports is projecting a worry-free environment, however, in fact both are projecting a long, long road to full recovery.

    "While most investors sense that the worst is over in terms of market deterioration, supply greatly outweighs demand across all property sectors keeping overall vacancy rates high and rental rates on a downward trend," said Susan Smith, director, real estate advisory practice, PricewaterhouseCoopers. "Top-tier locations are showing the most signs of life with respect to tenant interest and recovery potential. However, inspiring leasing trends have yet to fully materialize, further contributing to this sense of market flux."

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