But, although the GDP for the first two quarters was positive, there's a feeling that it was boosted a bit by the temporary rebate checks. Those are going to be gone as we get into the second half, and the overall economy might slide further. In addition, there's a feeling that we're not that close to the endgame in the for-sale housing market, and that is continuing to drag the overall economy down as well as put more houses out onto the rental market because they can't get sold. I think people are concerned that the second half of this year and the first part of 2009 are going to be a little weaker. But if you look at the actual operating data up to now, it hasn't been too bad.

GlobeSt.com: What was the most standout or surprising finding to you in the latest survey?

Obrinsky: The biggest story, not just in this quarter but in the past four quarters, continues to be the turmoil in the finance and credit markets, which in turn has led to worsening conditions for both debt and equity financing in the apartment world. Partly as a result of that, there's been a decline in the number of transactions happening. So those three indicators--the sales volume index, the debt financing index and the equity financing index--all showing really low numbers means that there's a very broad-based worsening of conditions in those markets. Every once in a while, we see a glimmer of a pickup going on, but it isn't sustained. So the investment side of the market remains very weak and sluggish.

On the market tightness index, the last four quarters it's been a little bit below 50, so that indicates that things aren't quite as tight as they were three months earlier, but it hasn't been a large, broad-based decline. If you go back to the past four quarters on market tightness, about half of the respondents said things were unchanged from the prior three months. We'll see how long that continues to hold up, but so far, that's been the closest thing to a bright spot we've seen in our quarterly survey.

GlobeSt.com: Fannie Mae and Freddie Mac seem to be the primary source of financing for the apartment industry. Do you think the issues the GSEs have been having will impact their activity in the sector, and, therefore, make the lending arena tighter?

Obrinsky: Based on what we know now, there isn't any reason to believe that Freddie Mac and Fannie Mae won't be able to continue to supply lots of financing to the multifamily world. I see nothing that would prevent that from happening. Having said that, they seem to be the one big alternative out there. I've seen estimates that suggest they've been financing as much as 80% of multifamily transactions. But with banks, in many cases, not participating at a very high level or sidelined completely, and the CMBS market remains largely shut down, there aren't many alternatives. Fannie and Freddie are offering financing, but it's available at a little bit higher rate and lower leverage than the industry has been able to get over the past few years. Conditions have tightened, but debt financing remains available.

Still, they don't provide equity financing, so that remains an issue. And they aren't really doing development financing, so for a developer looking for funds, the GSEs aren't really there to help you. They've had their problems, but particularly after the passage of the housing bill, I think the message is the federal government will ensure that Fannie and Freddie continue to operate in both the single and multifamily markets.

GlobeSt.com: A short while back, if you asked most people in the industry about excess inventory of for-sale units and shadow space, they would have said it isn't having much of an impact. Now, more folks are conceding that it is a problem. Is that true, or is it market-by-market?

Obrinsky: It's more of a problem in some markets than in others. Perhaps some people expected this would be a short-term issue. It seems like it's hanging around longer and, what's more, we may see continued increases in volume—more foreclosures and more single-family homes and condos going onto the rental market. The way I see it, if the job market generates jobs, there would be demand for rental units, whether they be apartments or condos or single-family homes for rent, because there's a reduced interest in homeownership and tighter credit for mortgages. So if we can continue to generate jobs, it's not a problem. But if the job market continues to deteriorate even further, then we've got a problem.

GlobeSt.com: For the rest of the year and into 2009, what do you think the industry's biggest challenges are, and how are multifamily owners dealing with them?

Obrinsky: At one level, the challenge is primarily the dysfunctional credit market and the difficulty in obtaining capital at favorable terms. The second is what to do if and when we see the economy continue to lose strength and jobs continue to decline. There's no good solution in that case. If jobs go down, whether anyone calls it a recession, it is for our purposes as an apartment industry. You just have to manage your way through that just like we did in 2001 and the few years after that.

On the credit market front, this is one of those difficult situations. The closest thing I could think of is the late 1980s and early 1990s, in the aftermath of the thrift industry meltdown. That was something that just took time until it straightened itself out. I don't know if there's anything in particular those in the industry can do about it other than accepting the fact that this may be the world we live in for longer than anyone wants.

GlobeSt.com: Comparatively speaking, do you think this downturn isn't as bad as prior ones?

Obrinsky: For our industry, although the credit crunch itself is somewhat worse than what we saw in the late 1980s and early 1990s, our industry is better positioned to weather this storm than we were back then. One big difference between now and the early 1990s is that we don't have a lot of distressed property owners. Back then, the credit markets were really tight, but you also had real problems at the property level. So a number of owners, recent developers, had negative cash flow. They couldn't remain in that situation and they ended up having to sell into a very difficult market, and they took a beating. We don't see that this time. For the most part, owners are cash flow positive, so they don't need to sell. People can wait out the current market difficulties.