All homes over time will start to shrink a bit.   

Essentially the entire housing market will shrink as a whole, along with all of the ancillary businesses that surround RE - lending, moving, furniture sales, auto sales (yes, a lot of auto sales are based around housing changes), realtors, Lowes and Home Depot, etc.

This is due to the fact that although rents are rising, so are the property values, which thus shrinks the cap rate, thus causing the property values to go up in these scenarios.

We are in a market where buyers are shrinking and deals are flowing 

There is growing supply for mid level median rent price housing, and the supply is shrinking - great for small landlords!

This drastically shrinks our buyer pool.2) big “if” here, but if we could retitle these as fourplexes, we could seek conventional financing (vs the commercial loan we currently have) and increase our cash flow substantially through lower rates and a 30-year am.Have any of you dealt with something similar?

Good things happen over time in real estate investing, and market prices recessing down in terms of the value of the home don't hurt until rents shrink, similar to the way that stock values dipping isn't real loss for an owner unless they sell.

It is a very dynamic market, ever shrinking so good to get back in the market since so many carriers are shutting down or changing their underwriting guidelines.  

There are a lot of markets that cash flow well today, but many of them have shrinking populations, stagnant job growth, economies based on non growth, narrow industries.

You need to have the financing lined up before you do this and programs are rapidly shrinking.