Source: Flickr / archer10.

The U.S. Census Bureau's recent housing construction report for April showed a 43% month over month surge in the number of multi-family housing starts, while single-family homes barely moved, showing a paltry 0.8% increase. Since last April, authorizations for buildings with five or more units rose by 29%, compared to a 12% increase in single-family houses.

Apartment REITs: The new housing play?
The upturn in the multifamily space looks like the new normal, with single-family home ownership below the 50-year average of 65.4% -- and some analysts predicting that it will fall even further.

With 93% of the multifamily units breaking ground in the first quarter slated for rental, apartment REITs like AvalonBay Communities(AVB 0.14%), Essex Property Trust Inc. (ESS 0.05%) and Equity Residential (EQR 0.26%) are looking like a great way to invest in the new "renter nation".

Stocking up on rentals
The apartment REIT sector has been buying up a storm, investing in $1.5 billion apartments in just the first quarter – not counting Essex Property's purchase of BRE Properties, which closed on April 1. That deal, the terms of which included $6.2 billion in cash and stock, created the biggest REIT on the west coast. The combined value of the company is now a little over $1 billion.

In late 2012, AvalonBay and Equity Residential banded together to purchase Archstone, the huge, high-end multifamily landlord whose acquisition in 2007 helped bankrupt Lehman Brothers. In addition to acquiring Archstone's nearly $10 billion in debt, the two REITs put up $6.5 billion in cash and stock to close the deal. AvalonBay acquired 22,000 apartments, while Equity took on 23,000.

As for 2014, AvalonBay management notes that it is on track to deliver over 5,000 new apartments by the end of the year, and Equity bought a five-year-old apartment project in Los Angeles in the first quarter, after selling one of their older San Diego assets in late 2013. Equity is planning to continue in this vein, selling its older, more suburban properties in order to buy apartments in well-populated urban locations.

Source: Flickr / Kevin Dooley.

Apartment REITs are having a great year
All in all, this sector is having a wonderful year. Vacancies are the lowest in the sector since 2001, and rents are rising nicely, averaging $1,089 per month last quarter, compared to $1,055 one year earlier. In its first-quarter earnings call, AvalonBay management noted that, as the job market has begun to recover, the stronger economy will be able to support not only higher rents, but more apartment deliveries, as well .

So far, all three REITs have gained at least 19% since the beginning of the year, and yields are sweet, at around 3%. According to NAREIT, the apartment REIT sector was up 16.4% from January to April of this year.

With the economy healing and the employment market improving, rising rents will likely fuel higher dividends, too. For investors looking for a place to put their real-estate investment dollars, the multifamily sector looks hard to beat.