Apartment owners got a taste of encouraging news in the first quarter, as vacancy rates for all rental buildings with at least five units declined to 12.1% from 12.5% in the previous quarter, according a National Multi-Housing Council (NMHC) report released Thursday.

For investment-grade apartments, the national vacancy rate dropped to 7.2% from 8.2% in the prior quarter. That’s the lowest level for the first quarter vacancy rate since late 2008, NMHC notes.

The declines occurred across the country, leaving the Northeast with the lowest vacancy level, 5%, and the South with the highest, 8.9%. Since the recession began in December 2007, the South and West have experienced the steepest rise in vacancy levels, according to NMHC.

The results echo a survey released several days earlier by NMHC, which showed widespread gains in the apartment market. “There is clear improvement in apartment market conditions on all fronts,” notes Mark Obrinsky, NMHC Chief Economist, with regard to the survey.

“Even so, a sustained recovery in the apartment market needs a firm economic and demographic foundation,” says Obrinsky. “While the long-term prospects for the industry are bright, in the near-term the industry’s prospects still depend upon a stronger rebound in both the job market and household formation.”

Net absorption of investment-grade apartments in the first quarter rose to 21,369, up 5,785 from the previous quarter and up 58,333 from a year earlier. That’s the best first quarter performance for absorptions in a decade, NMHC reports.

Meanwhile, investment-quality completions dropped to 22,210, down 6,481 from a year earlier. The decline reflects a sharp decrease in new starts that have shrunk the new supply.

Still, rent growth remained weak or negative in the first quarter, according to NMHC. Rents declined throughout the country for the fifth consecutive quarter. Rents for professionally managed apartments tracked by MPF Research dropped 3.1% in the first quarter. The sharpest declines in rent growth occurred in the West, 4.5%, and in the South, 3%.

Sales volume drops

With regard to transactions, sales volume dropped in the first quarter to $4.3 billion, a decline of 19.4% from the previous quarter among properties tracked by New York-based research firm Real Capital Analytics. The transaction volume, however, was still far higher than in the doldrums of 2009, and represented an increase of 88.8% from the same period last year.

Although the volume of deals declined on a quarterly basis, prices rose substantially, reaching an average of $114,618 per apartment. That was an increase of 31.5% from the previous quarter and 32.4% from 2009, NMHC reports. The bolstered prices represent a return to pre-recession levels, the trade group reports.

However, the market value of investment-grade apartments in the National Council of Real Estate Fiduciaries (NCREIF) database declined in the fourth quarter. It fell 1.0% from the previous quarter and 14.2% from a year ago, according to NCREIF.