The major markets include New York, Boston, Chicago, San Francisco, Washington DC, and Los Angeles. The non-major markets represent everything else.
The major headline from the research report: the prices paid for apartments in these major markets have now crossed back above the all time peak at the top of the real estate bubble in December 2007. That's right, less than five years later, the bubble has not only reflated - it has pushed above the peak of the mania.
Prices in non-major markets are still 12% below the peak bubble/mania prices, but they are closing in fast.
Many of these investors are now purchasing buildings at cap rates lower than 2007. For a review on cap rates and how building prices are determined see 2012 Commercial Real Estate Outlook: How Prices Are Determined.
This is due directly to the current low interest rate environment we find America in today. As the Fed continues to artificially push all rates lower with all their might, it pushes investors further and further out onto the risk curve to try an obtain any form of yield. This has more money chasing available properties, bringing back the exact same artificial environment we saw during the 2004 - 2007 years.
This time, just as with residential homes, the financing comes from the government through Fannie Mae and Freddie Mac who finance (only) apartment buildings in the commercial real estate space. This is part of the reason why apartment prices have surged relative to other forms of commercial real estate (retail, office, industrial).
Where do we go from here?
When interest rates begin to rise off the current 0% levels, and I can only promise you that they will not go below 0% and keep falling, not only will investors be slaughtered this time around; tax payers will be on the hook as well.
A discussion of this sort will never be found during a presidential debate nor will it be found in any Congressional meeting. Fannie and Freddie are the elephant in the room that no one wants to even think about.
For a thorough review on the coming buying opportunity in commercial real estate (after the coming next leg down which will be truly horrific) see 2012 Outlook: Commercial Real Estate.