The basic laws of physics—what goes up must come down—apply to the forecast for multifamily starts over the next two years.

“Overall, multifamily starts are going down through next year and essentially, like the single-family starts, bottoming in the second quarter and showing a very slow rebound starting in the third quarter of next year,” says Bernard Markstein, senior economist and director of forecasting at NAHB. Not surprisingly, rental starts are picking up as the condo market rapidly shrinks.

Markstein predicts a generally strong outlook for multifamily through ‘09. “It's healthy in the sense that except for some of these really bad markets there's not terrible overbuilding,” he says. “Essentially, Washington, [D.C.], parts of southern Florida, Miami in part, Las Vegas, Phoenix, San Diego, and Los Angeles have had overbuilding of the condo units but the rental is where there can be some building if it's not overdone.”

The question on everyone's mind: Will the high number of vacant condo units expected to go rental lead to oversupply? “It's not a problem now but could be,” Markstein says. Only the future will tell.