Real estate research firm Reis reports that the average U.S. vacancy rate of 4.7% for rental properties is the lowest since the fourth quarter of 2001. The data cover the first quarter of this year. The news represents another blow for the housing market, in which demand is already very slack.

One of the most widely held beliefs about the housing market contends that home prices have lost support as more people rent. The problem is circular. People rent because of the national home price trouble. Home owners abandon what they see as a situation in which it remains hopeless to own a house that, in most markets, cannot gain equity.

A poll taken recently by Gallup revealed that only 62% of Americans owned homes at the beginning of this year. The number has fallen from 73% in 2006 and 2007. Much of the difference can be traced to foreclosures. Another cause is people who sold their houses as the market began to crater. Many of them got out of the market just before the equity in their homes turned negative. Many people trapped with mortgages that sit underwater should become renters, too, once they can. The experience of living in a home worth less than the mortgage on it has been to terrible for most of those who have experienced it.

Historically low mortgage rates may have helped push home prices slightly higher in many regions. But home prices still need the support of an increase in the number of people who believe prices have bottomed. The Reis data offer one more set of reasons to believe that support will not grow.

Douglas A. McIntyre

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