MF Q3 Effective Rents Drop 3.5%

Furthermore, according to statistics generated by MPF Research in Carrollton, TX, occupancy came down to 89.8%, down from 90% during Q2. The total inventory stands at 578,600 units.

MPF Research vice president of research and analysis Greg Willett says while absorption was positive at 2,770 units, there is still a large amount of inventory in the wings. So far this year, 14,515 units have been added to the total, with 17,576 still under construction.

"We anticipate half of those will finish in the fourth quarter, and the other half will come online in 2010," Willett tells GlobeSt.com. "While 8,000 units isn't all that much, it's still more than any place else in the country. We're one of the last ones here to wrap up the multifamily construction cycles."

This would mean once the spigot is shut off, things should be back to normal. At least, in theory. "Without any job growth, we won't be able to grow rents any time soon," comments Tom Burns, associate partner with Hendricks & Partners' Dallas office. He tells GlobeSt.com that some recovery should kick in at the end of 2010, but predicts it will take up to four years to get back to higher rent rates and fewer concessions.

And there are other issues looming in the area multifamily sector. "$300 billion in loans will come due during the next four years," Burns comments. "The majority of those buildings will need to be restructured or sold during the next three to five years." But the problem facing many of the owners, he continues, is the refinance-foreclosure duo, meaning assets will come to market way below market value. "Up to this point, we haven't seen a whole lot of that, but we think the tsunami will hit beginning the end of June 2010," Burns comments.

Burns acknowledges he can't advise much for those who acquired multifamily assets at low cap rates and high leverage between 2004 and 2007. Unless some sort of loan modification can be worked out, those will likely go back to the lenders. For everyone else, "if they want to sell, they probably need to sell now," he says. "Once those others hit the market, it will depress the value of everything else."