Donald MacLaren, a Philadelphia-based senior director in Marcus& Millichap's national multihousing group, tells GlobeSt.comthat "debt certainly is a driver of deals. Since 70% to 80% of thedeal cost is involved with debt, as the debt market goes, so goesyour deal. As the debt market gets a little looser and as moremoney comes back into the market and it gets a little cheaper,you'll see a pickup in the number of deals that get done."

As an indication of the low profile would-be investors arekeeping lately, the first two quarters of '08 have seen just eightrental apartment property sales in Philadelphia of $5 million ormore, compared with 12 during the first two quarters of 2007,according to data from Real Capital Analytics. "You're going to seea slowdown," MacLaren says. "Before you would see nine or 10bidders on a property, and now you're seeing five or six bidders.Deals are taking longer. If you did 100 deals last year, you mightdo 90 this year."

With 1,200 new rental units slated for completion in '08, thereport predicts an increase of 0.6% in rental supply, which willnudge the vacancy rate upward 10 basis points to the low-4% range."Some demand-side pressures could arise from the for-sale housingmarket, where prices are declining and affordability is improving,"according to the report. The newly released Q1 Standard &Poor's/Case-Shiller home price index found that home pricesnationally fell by an average of 14%, although Philadelphia was notone of the markets measured in the index. Additionally, as in othermarkets nationwide, some for-sale construction could end up goingon line as rental units instead.