The curious part of the building surge is it flies in the face of Main Street's perception that lending has dried up. Willett says many developers reported they had financing in hand before the capital markets stalled while others say they've resorted to layering funding through more than one source.

"Between commercial banks remaining willing, even if having become more discerning, to lend and the ongoing involvement of Fannie Mae and Freddie Mac, the flow of mortgage financing for multifamily properties will no doubt slow, but is unlikely to grind to a halt--especially for good assets that are well leased and in favorable locations," says Richard F. Moody, chief economist for Austin-based Mission Residential LLC.

In a recent report, Moody points out that Fannie Mae and Freddie Mac can "add to their holdings through 2009" and then are required to "begin shrinking their portfolios in 2010" under the terms of their takeover. The agencies' direct holdings account for 19.2% of all outstanding multifamily mortgage debt and securitized pools of mortgage-backed securities, according to Moody.

In the second quarter, Moody's research shows the agencies provided $13.26 billion of the net $16.26-billion increase in multifamily mortgage debt in the US. Commercial banks accounted for $3.19 billion of the net increase in Q2 multifamily mortgages and hold 20.1% of all outstanding multifamily mortgage debt and 50.2% of all other commercial debt.

"While the longer-term outlook for Fannie and Freddie remains uncertain, thus far the takeover by the federal government has not led to any disruption in their multifamily funding activities," Moody concludes, "which is fitting in light of the fact that this segment of the agency portfolios continues to turn in a solid performance--highly profitable with very low default rates." As for the future, he says the feds are likely to keep multifamily mortgage money flowing due to the commitment to affordable housing.

However, Moody says tighter lending standards--now in place--will dramatically affect development loans going forward., but "does not mean qualified borrowers will be automatically turned away." The silver lining is the measured slowdown will "prevent the type of significant supply-demand imbalance that developed in the late 1980s/early 1990s cycle," he concludes.

Willett says the difference between the present and the past is Texas is adding jobs. The impact of the state's economic health was reflected on his Q3 report card, with increased rents and occupancies in Austin, Dallas/Fort Worth, Houston and San Antonio.

On the occupancy front, Austin climbed to 94%, up six-tenths of a point since midyear; Dallas/Fort Worth, 93.2%, up a half-percentage point; Houston, 91.7%, up nine-tenths of a point; and San Antonio, 92.8%, just a blip higher than the last reading.

As for rents, Austin gained 3.1% to bump its average to $838 per month. Dallas/Fort Worth and Houston picked up a 2.9% gain, pushing the average monthly cost to $766 and $764, respectively. San Antonio's rents ticked up 1.9%, driving the average to $712 per month.

Dallas-based ALN Apartment Data's newest research shows the Texas markets clearly are outperforming top multifamily market peers. Texas occupancy statewide is 89.8%, down 0.9% in the year-to-year comparison. However, Florida dropped 1.9% to 89.5% and Arizona plunged 3.4% to 88.9%. Of the three, only Texas gained on average rent, jumping $23 to $771 statewide.

"In terms of overall performance, the Texas markets are in pretty good shape," Willett says, adding concessions have practically gone away. "Our concern is in the near term, given the amount that's under construction."

The Austin market already is showing signs of damage from the construction level. Occupancy might be OK, but rent growth as 5% to 6% when the year began. Houston's window will start closing in early 2009 while San Antonio will hold its own due to slower growth than the others. In Dallas/Fort Worth, the units are still in early stages. "It will take a little longer for it to show up," Willett forecasts.