Crowe predicted that the condo share of multifamily production will contract during the next few months and then, in early 2010,begin a slow, steady climb to a more historically normal 20% share of the multifamily market.

According to Crowe, the multifamily rental segment is not fairing much better. The vacancy rate for apartments with five or more units has risen to about 13% — well above average. In addition, rent increases have been extremely modest — and often offset by rent concessions or other enticements.

Crowe said that rental demand seems to be diminishing at a time when housing foreclosures are mounting because many of the households experiencing foreclosure are renting investor-owned condominiums or empty single-family homes, or moving in with their family or friends rather than into professionally-managed buildings.

Even with those rental market changes taking place, Crowe said that the Consumer Price Index (CPI) that reflects rent continues to remain at a higher level than the overall CPI.

Crowe did offer a glimmer of hope for the multifamily market — the 83 million or more echo boomers who are just entering their prime household formation years. Not only are they a market segment as large if not larger than their baby boomer predecessors, they are generally seeking a more urban lifestyle, including smaller and more energy-efficient homes, apartments and condominiums. 

Crowe said he expected the echo boomer to enter the market in full force during the next several years.

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