Industry leaders yesterday shared their insights with a roomful of peers at a market forum sponsored by the Cushman & Wakefield Texas Multi Housing Group at Lincoln City Club. The C&W event attracted 160 multifamily capital players, who helped mark the first anniversary for the 12-member multi-housing group led by Don Ostroff and Will Balthrope.

The wait for "the good old days" is far from over, with job growth still needed to get the market hitting on all spark plugs. But, there are solid signs that some depressed multifamily markets, Dallas/Fort Worth for one, could be somewhat healthier by year's end.

Assuming the Bureau of Labor Standards' employment stats are correct, the DFW region will be creating jobs by year's end instead of losing them, said Greg Willett, editorial director for Carrollton, TX-based M/PF Research Inc. Until then, it's business as usual: concessions, no rent growth and higher-than-norm vacancies across all classes.

The good news is that Dallas/Fort Worth isn't alone in the battle. All Texas metros save San Antonio remain under performance pressures that aren't likely to change until the US economy does. Whether it's the DFW in the north or Houston in the south, occupancies are hovering at 90%. Houston, though, has a red flag rising with some 16,000 units under construction, the bulk of which will deliver before the year ends, Willett said.

The San Antonio market is holding at 92% occupancy, proving many forecasters wrong that the city's military-based economy would erode the numbers as it did before when the nation went to war.

Austin's 88.9% occupancy is the worst of the 58 markets tracked by M/PF researchers. "Austin's primary problem is supply not demand," Willett said, noting that rent was down another 5.5% to mark the third annual consecutive drop. Austin, though, is poised to grow in 2004 because single-family housing costs are still out of reach for many residents, keeping renters in place more so than elsewhere in the state.

"The real opportunities may be when the short-term rates rise again. The feds are keeping an anemic economy alive by keeping the cost of financing down," said Stuart Wernick of Quantum First Capital. The bet is cap rates will rise along with interest rates. Also at play is a "hold and control" mindset because replacement product, particularly in value-adds, is in short supply in most markets.

The cap rates might rise, but so will foreclosures when interest rates start tracking north, said John Kinzer of TriVest Residential, explaining effective rents right now are carrying more weight than cap rates as a criteria in his eyes as a class B buyer. He said 2003 sales are down for the middle product with many contracts now being renegotiated because the gap has widened between buyers and sellers as the changing interest rate changes the return.

Representing the class A market was Brent Ball of Fairfield Properties, who said its buyers are betting on the future not the present. "The going in cap rate," he explained, "closely mirrors that to get a developer out of hold. ... But, they're very opportunistically looking at the upside years down the line." The stretch these days in the category is lease-up.

The abundance of capital and willing buyers don't translate into an easy sale. Lenders are reluctant to loan to a buyer if there is existing debt, cautioned Ted Kerr of Walden Residential. One deal in Orlando, he said, took nine months to close for an asset with Fannie Mae debt, an obstacle partly due to the depressed conditions for the tourism-reliant city. In contrast, markets like Phoenix and even Jacksonville, FL are bringing record prices. Kinzer told the audience that Aimco recently collected $50,000 a door for a class B complex in Jacksonville. "That's a head-scratcher for anybody who's been in this market for awhile," he said, adding some 30 offers rolled in for the listing.