NEW YORK CITY—As the economy and stock markets continue to spiral downward, REIT stocks have followed suit, according to the third-quarter earnings reports released in recent weeks. The good news for investors in public apartment firms is that valuations for most multifamily REITs haven’t fallen as drastically as those in other segments–say, retail developer and owner General Growth Properties, or industrial powerhouse ProLogis. But if the outlook of apartment REIT management teams is any indication, the worst is yet to come for the sector.

The wayward and ever-weakening economy, the escalating crisis in the credit markets and unease on the part of average Americans over job security–and their subsequent hesitancy to make any major spending decisions–have resulted in a cloud of uncertainty for the heads of many companies, who just a few quarters ago were confident in their ability to push rents up and grow their businesses for the foreseeable future. Today, those same executives have turned their focus to the present–namely, capital preservation and unloading debt from their balance sheets.

For apartment REITs in particular, these sentiments expressed by management have put additional downward pressure on stock pricing, if the economic situation hasn’t done so already.

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