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DALLAS-Although much of the real estate news during the past year has focused on the liquidity crisis in the single-family sector, the multifamily arena is starting to feel the impact on all sides. Experts are seeing the trickledown effect in investment, development and supply on the multifamily side.

The multifamily market was in the spotlight yesterday morning during the spring conference of the National Association of Real Estate Editors, being held at the Magnolia Hotel at 1402 Commerce St. in the Downtown. The conference wraps up tomorrow.

A panel of industry experts agreed that the so-called “shadow market” of single-family homes in the market for rent is having an unanticipated impact on rental supply. Susan M. Ansel, COO for Atlanta-based Gables Residential, used an example from San Francisco, where some homeowners are offering three-bedroom homes for $1,500 per month. She pointed out it’s hard for three-bedroom apartments that rent for $2,400 per month to compete with that type of product.

Ansel also said short sales have become a new phenomenon in Southern California–and it’s having an impact on the multifamily sector. With short sales, homeowners are avoiding foreclosure by working out agreements with lenders to sell homes for less than their mortgages. The lenders then re-release houses to the market at the lower price points.

“That’s creating an opportunity for renters that formerly might have been priced out of the homeowners market,” Ansel says. “That’s been having more of an impact on A portfolios rather than B and C assets because we find that people leave A apartments typically to buy homes.”

Greg Willett, vice president of M/PF YieldStar in Carrollton, TX, says that, on top of the shadow market inventory, certain cities are getting aggressive in adding more multifamily units to the market. He pointed out that Houston, Dallas/Fort Worth and Austin are seeing a lot of inventory coming on line. M/PF YieldStar’s research has shown Houston added 18,000 new units since the year began. Austin has added 11,000 to date this year while Dallas isn’t too much of a concern because most new deliveries are replacing teardowns. “San Antonio just missed being on that list,” he said.

Willett said Atlanta, Phoenix and Seattle also could be facing problems with supply and demand. Condo failures in Seattle most likely will drive more units into the rental pool as it has in other heavily-weighted cities like Miami. He said Phoenix is experiencing the after-effect of its over-development binge from earlier in the decade.

But, it’s not all negative news for the multifamily market. Ansel said the Gables portfolio hasn’t seen an increase in delinquencies from tenants nor are they moving out in droves to buy or rent single-family homes. The basic fundamentals of job and population growth are still strong in many markets, she said, adding it will continue to drive rental demand.

On the investment and development side, Mark Alfieri, senior vice president for Dallas-based Behringer Harvard, said there is still plenty of available equity. He said it’s a great time to be a buyer because of that equity. In addition, he said increasing cap rates as underwriting procedures tighten.

On the other side, Alfieri acknowledged “it’s a tough time to be a seller.” As a result, longer-term holds are becoming more common. “Behringer Harvard is a long-term holder, typically seven to 10 years. But overall, I suspect we’re likely to see a period of floating values so long-term holds are likely going to be more common,” he told GlobeSt.com. “The days when you could flip assets over the short term are probably gone.”

Alfieri also said there seems to be large numbers of projects in the planning phase, but a good percentage of them won’t get too far, partly due to financing constraints and partly due to underwriting costs. He said many developers have taken 40% to 50% of what was planned out of their pipeline.

Ansel, however, told GlobeSt.com a different story following the session. “We still really feel good about what’s in our development pipeline,” she said. “We’re re-evaluating what’s in there right now and are re-evaluating our underwriting goals. But, we feel good about it.”

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