CORRECTED - UPDATE 2-Avalon Bay FFO beats expectations

(Reuters Estimates corrects FFO excluding items figure to $1.18 per share from $1.24; the error first appeared in Update 1)

* Q2 FFO $1.18 vs $1.16 expected

* Sees pressure on apartment sector into 2010

* Shares flat in extended trade

NEW YORK, July 29 (Reuters) - AvalonBay Communities Inc (AVB.N), an owner and builder of apartments, posted lower second-quarter funds from operations on Wednesday, as the weak U.S. jobs market weighs on demand for apartments.

Quarterly FFO fell to $71.8 million, or 90 cents per share, compared with $97.9 million, or $1.26 per share a year earlier. Excluding items, FFO was $1.18 per share, 2 cents above forecasts, according to Reuters Estimates.

FFO is a key performance measure for real estate investment trusts, or REITs, because it excludes the profit-reducing effect of depreciation.

Alexandria, Virginia-based AvalonBay said the weak U.S. economy and continued job losses would pressure the apartment sector into 2010.

It forecast 2009 FFO of $4.15 to $4.30 per share, below analysts' estimates of $4.56 per share.

AvalonBay said rents and occupancy were lower, while operating costs rose in the quarter. As a result, its net operating income (NOI) for communities operating at least a year fell 5.5 percent to $105 million.

It posted the steepest declines in NOI in New England and Southern California markets, while net operating income in its key Metro New York market was down 3.5 percent.

The company, which said it has not started any new developments this year, reported after the closing bell. In regular trading its shares fell 74 cents to $58.81. (Reporting by Nick Zieminski; Editing Bernard Orr, Leslie Gevirtz)