The multi-family market is a victim of the correction in the single family and condo market: especially the detached market.  Its steep price decline has made homes affordable to over 70% of people.  Plus, many investors have been able to purchase single family homes and make them available for lease and directly compete in the price range of rental apartments.  

With the median home price around $120,000, it's often less expensive to own a home then rent and the addition of the government handout of $8,000 per first time home buyer the incentive to own becomes difficult to resist.

While the single family home market has already hit bottom and there is lots of turn-over...

"Multifamily markets, on the other hand, will continue to be under pressure for the foreseeable future, with vacancy rates staying above 12 percent this year and next -- about what was expected in second quarter -- and falling to slightly above 11 percent in 2011.

By 2011, the number of permits will be increasing from this year's trough of about 1,600 units to about 2,600 units. That number however, will be less than half of the 2007 actual. Absorption, which is expected to stay negative this year, is projected to be up slightly next year and stronger in 2011."  (Elliott D. Pollack)

The real numbers are even graver when you take into account the greater multi-family market, not just the larger complexes which the above numbers don't take into account.  

Vacancy in many parts exceeds 16% and some complexes are half empty and that's just physical vacancy.  There are additional losses incurred from economic vacancy: incentives and below market rents to induce new tenants. 

This is compounded by overall lower rents as owner try to compete against each other for the smaller pool of tenants.  Even small complex owners, like fourplexes, have cut prices.  I've seen a drop from $720 for a 2br unit to $600 per month, as an example.  That is a big cut in just over a year. 

That's part of the reason so many have gone to foreclosure: especially those owners who purchased purely for appreciation and from the start had to feed the property instead it feeding them.  That was a mistake and the lower rents and higher vacancy simply exacerbated it, often to the failure of the business.

The price corrections are extraordinary:  There are decent small multifamily properties priced at the same level as the early to mid 1990's and that was also a period of weakness in the economy.  More often price are close to 2001 levels.

The other side is the opportunity for savvy investors.  While the large complex value may still decline, the smaller complexes are out there at extraordinarily weak price.  Fourplexes that sold for $350,000 can be purchased for $70,000 with the need for about $15,000 in repairs and a good reserve until they are leased.