(To read more on the multifamily market, click here.)

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NEW ORLEANS-While the multifamily asset class continues toattract its share of national and international investment, thecondominium craze that was so hot even a year ago is officiallyover. Experts predict that, over the long term, demand willincrease for rentals, spurring more construction and investmentnationwide.

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M/PF YieldStar Inc., based in Carrollton, TX, recently hostedits first US multifamily markets conference, picking New Orleans asthe host city so industry leaders could see first hand the workthat's under way and still to be done. "We thought people would beinterested in seeing New Orleans," Greg Willett, M/PF's vicepresident of research, tells GlobeSt.com. Part of the roundtableconference was devoted to Gulf Coast rebuilding efforts, but moreso to provide a look at the big picture for M/PF's 57-marketnetwork.

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Private buyers continue to be leading the market's investmentsalthough more institutional playersare starting to step up, says one panelist, Don Ostroff, seniordirector with Cushman & Wakefield of Texas Inc. He saysinterest rate increases have pushed up leverage and institutionsare better able to handle it.

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"Institutional investors have been interested all along, butthey've been blocked from the market because condo converterssnapped properties up," Willett adds.

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The two experts agree that condominium converters and investorstrying to outbid others for the choicest properties are a thing ofthe past, at least in this cycle. Real Capital Analytics' datashows investment in conversion assets plunged from $30 billion in2005 to $9 billion in 2006. "If you look at any of the billions ofcondo conversion sales in 2005 and 2006, they fell by 60% or 70%,"Ostroff tells GlobeSt.com.

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Much of the problem involved too much supply, too little demandand too many investors snapping up single units and attempting toflip them to end users. "What we saw even three years ago was thatthe majority of condo buyers didn't even live in the place,"Ostroff says. A newly built condominium in South Florida was soldout in a matter of weeks. "But, it only had 24% occupancy becauseno one was living in the units," he adds.

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Along with South Florida, Las Vegas and Washington, DC ended uphardest hit in the condo arena. On the other end of the spectrum,Texas markets escaped most of the fall-out. "They didn't do much onthe condo side in Texas," Willett says.

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The question becomes what will happen to the empty units.Ostroff and Willett predict that some will likely end up in therental pool. What's uncertain is how many will end up there, whichis making supply predictions difficult in the coming year.

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"We just don't know what the supply will be," Willettacknowledges. "With so many condos out there and the market off, wedon't know if those condos will come on line as apartments ornot."

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Willett and Ostroff suggest that over the long term,fundamentals are terrific for more multifamily investment. Ostroffsays the graying of Baby Boomers on one side and the coming of ageof their children ensure upscale senior housing and multifamilyproperties will continue to do well. Also a factor is increasedimmigration because newcomers are more likely to rent than buyduring their first years in the US.

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"A big factor is that we've had a run-up in single family homeprices," Willett explains. "The cost differences between rentingand buying is larger than it's ever been."

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