"But we expect further widening in the relatively near term as investors seek compensation for taking on risk in a turbulent economy," note RCA analysts, eventually hitting 2002 levels as values and cap rates come more in line with reality.

The $33.5 billion in sales year-to-date are 50% less than the first 10 months in 2007. By number of properties, the 1,810 communities that changed hands represented a 44% decline over the 3,235 properties the same period last year.

Although investors continue to favor apartments over most other property types, that may change as employment cuts and the faltering economy slow, or even shrink, household formation levels. The decline is already being seen. About $1 billion worth of those assets were sold in October, down 49% from September and 6% from the prior October; the 52 garden communities sold were the lowest number since 2001. A dozen mid and high-rises traded in October for $263 million, down 57% from September and an 83% drop from the year before.

That didn't stop buyers from putting their properties on the market. Some $3.2 billion in offerings were put on the block, 10% more than September, and a ratio of three-to-one versus closed deals. It does, however, seem like sellers are more accepting of the market conditions; asking prices on a per-unit basis came down 4% over September, and no deals worth more than $100 million were closed or offered last month. Similarly, cap rates for properties on the market came up 13 basis points since the end of the third quarter. Yet with so much uncertainty in the financial markets and equity capital stuck on the sidelines, RCA expects transaction volume and velocity to remain low.

Also facing pressure is land sales, which have tapered off since the single-family housing bust and economic decline. Activity in terms of entitled land sales in September and October was down 90% over the same two months in 2007. So far this year, land sales have fallen 68%, similar to the decline seen in the core property sectors. The firm, citing figures from Construction Trak, notes that nearly 2,000 projects have been delayed or scrapped since early September.

By volume, sales of condominium and apartment sites are down 90% and 75%, respectively. "Many contracts signed by developers earlier in the year are being terminated, and even markets once considered immune to a slowdown such as Manhattan and San Francisco have seen land sales grind to a halt," according to RCA.

Prices for parcels have also been impacted; after reaching a high of $1.7 million an acre in late 2006, prices on land have come down by some 25%. Obviously once-hot housing markets like Florida and Nevada have felt the biggest hit, some more than 60%. Other areas that didn't have as much of a boom--such as suburban Texas--still declined, albeit slightly. Interestingly, land in suburban California continues to appreciate.

It's difficult to pinpoint exact trends when it comes to land sales and pricing. "At the residential market peak, major CBD condominium sites in global gateway cities were trading in the range of $250 to $450 per buildable square foot," they point out. "However, with CBD condo land trades having decreased and virtually disappeared through 2007 and 2008, no reliable pricing gauge can be found. For apartment land purchased before the bubble burst, pricing for the most valuable sites came in between $100 to $250 per buildable square foot, although the overwhelming majority of smaller land sites sold well below those levels."

In the third quarter, very few CBD residential parcels were traded, and even fewer went under contract. "With supply from the 2005/2006 development cycle just coming on line now," the firm says, "many developers will be cautious about adding additional land inventory until there is some clarity on the absorption of existing available inventory."