Third-quarter statistics from M/PF YieldStar in Carrollton, TX show Chesnut and his peers are right on target. Results from Austin, Dallas/Fort Worth, Houston and San Antonio reflect marked increases in absorption and rent, according to M/PF YieldStar vice president Greg Willett. “The demand we're seeing now is add-on demand not replacement demand,” he said.

In a snapshot of the stats, Austin's occupancy is 96.4%, rent rose 3.5%; Dallas/Fort Worth, 94.1% occupancy, rent up 2.3%; Houston, 93% occupancy, rent gained 2.3%; and San Antonio, 95.6% occupancy, rent up 3.9%.

Willett said the wild card in the deck is the impact from the single-family home inventory. “The number of single-family home rentals definitely will go up in 2008. It certainly will still be a force,” he stressed. On the bright side, many renters who leased single-family houses are returning to multifamily properties because they often miss built-in services and amenity packages. And the word from the street is some renters have had homes foreclosed on not too long after they moved in, Willett reported.

“Deals will take longer, but the good news is qualified buyers are going to get the nod,” said Douglas P. Hercher, executive vice president and principal, for New York City-based Cushman & Wakefield/Sonnenblick Goldman. He's also placing a bet that a corps of strong multifamily asset buyers will end up winning deals “at a discount to the high price” for their ability to make the close, with or without a lender at their side.

The upshot is the capital markets' attitude adjustment isn't predicted to trickle into the multifamily sector. “The fundamentals of the apartment market are being positively affected by subprime,” Keith T. Misner, executive managing director of C&W's capital markets group in Washington, DC, tells GlobeSt.com. He says the group has noticed a slight decline in the number of bidders, but it's not a red flag. In some cases, he says buyers are “sitting on the sidelines” until 2008 begins while others may simply have already spent their allocation and waiting for the new year to start buying again. Like others in the trade, he says there is no shortage of capital.

Misner says the subprime situation most likely won't even affect those multifamily borrowers who are holding floating-rate debt, thanks to rising occupancies and rents at their properties. And, he adds, “the level of interest remains so high for apartments as an asset class that they'll be able to attract equity investors” if the need or desire arises to replace floaters.

“There's clearly an overreaction to a very stable commercial real estate market because of subprime,” says Thomas P. MacManus, chairman and CEO of C&W/Sonnenblick Goldman. “We're going back to where we should be, back toward a point of equilibrium.”