CMBS conduit loans led the decline--a result, says MBA, of the credit crunch's impact. In fact, the pullback by the CMBS market dramatically altered conditions in the lending sector. In the first six months of 2006, originations were actually 38% higher than the first half of 2006. But volume for the balance of the year was 11% less than the same period in 2006.

When looking solely at CMBS loans, volume in the first half of 2007 was 70% more than what was racked up in the first six months of 2006. For the second half of the year, 2007 came in 30% less than 2006.

Apartment investors weren't deterred, however, thanks to available financing from agencies. Fannie Mae and Freddie Mac originated 18% more loans in first-half 2007 versus the same period in 2006, and for the second half, the volume was 49% more. By dollar volume for the year, GSEs saw an increase in originations of 41%.

Borrowers of multifamily-secured loans were particularly busy in the final three months of the year, racking up 25% more originations compared with the third quarter of 2007.And those active in the industry believe the financing climate for apartments could be stabilizing, reveals the National Multi Housing Council's most recent Quarterly Survey of Apartment Market Conditions. The organization's debt financing index rose to 45% in the fourth quarter versus 17% in Q3, representing sharp improvement. However, the index remains below 50, which indicates that market conditions are looser.

Tighter underwriting standards and the inactivity from the CMBS segment led 40% of survey respondents to report that now is a worse time to borrow as compared to the prior quarter, and 25% to say things were unchanged. Nonetheless, that's an improvement than the last survey, when 76% of those polled said conditions were getting worse. Nearly a third of observers felt that borrowing conditions were getting better, up from just 20% in Q3.

[IMGCAP(2)] All of this is a reflection of improving conditions for the industry overall, says NMHC chief economist Mark Obrinsky. "The apartment industry is clearly benefiting from the downturn in the for-sale housing industry," he says. "While the shadow rental market may attract some apartment renters, thus far, the lowest homeownership rate in five-and-a-half years seems to have increased demand for apartment residences. Overall, the apartment industry remains healthy at this point due to continuing strong fundamentals and the fact that apartment firms did not overbuild in the latest economic cycle."

The tighter lending conditions for home loans has reduced the amount of renters going into the homeownership market, concurred 80% of respondents (up from 75% the prior quarter). But in this survey, 35% of those polled said there was a "big" decrease in the number of households leaving the rental pool, compared to 22% in Q3 and 18% at midyear.

Though debt is more available, it seems that equity providers have not upped their activity--39% reported equity financing conditions had not changed between the third and fourth quarters, and 54% said equity was less available than the prior quarter. At 24, the Equity Financing Index was the second-lowest number on record.

That, as well as the uncertainty stemming from the economic slowdown and the ongoing financial market crisis, impacted sales volume. Though it showed improvement--rising six points to 18 at year's end--the Sales Volume Index was below 50 for the ninth consecutive quarter.

The survey, conducted between Jan. 28 and Feb. 4, polled 102 chief executive officers and other senior executives of apartment-related firms nationwide.