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San Francisco prices have jumped nearly 5 percent in a year

  • Matt Mochizuki and Liz Brent, who rent a studio apartment for $1395 a month, in the Mission District of San Francisco, Feb. 18, 2012. Unlike home prices, rents have been rising, and with few rental buildings erected over the last few years, available units are going fast as apartment vacancy sits at its lowest level in more than a decade. (Lianne Milton/The New York Times)

The housing market remains a potent drag on the economy as home prices continue to slip, foreclosed homes fill some neighborhoods and millions of construction workers scramble for jobs.

But one group is sitting pretty: landlords.

Unlike home prices, rents have been rising, up 2.4 percent in January from a year earlier, according to recent data, not adjusted for inflation, released by the Labor Department.

With few rental buildings erected over the past few years, available units are going fast. Nationwide, the apartment vacancy rate is down to 5.2 percent, its lowest level in more than a decade, according to the research firm Reis Inc.

Rent increases are greatest in places like San Francisco; Austin, Texas; and Boston, where technology companies in particular are hiring, as well as in New York City and Washington, D.C. But cities like Chicago and Seattle, where house prices are still declining quite sharply, have had rental increases, too.

"We are more of a renter nation than we have been for a while," said Christopher Mayer, a professor of real estate at the Columbia University Business School.

Economists suggest favorable conditions for landlords will continue for at least a year, with employment gradually rising and apartment construction remaining constrained.

The home ownership rate has been falling from its peak of 69.4 percent in 2004, according to census data. By the fourth quarter of 2011, it was down to 66 percent. That means about 2 million more households are renting, said Kenneth Rosen, an economist and professor of real estate at the Haas School of Business at UC Berkeley.

Investors could help the market by turning empty houses into rentals, said Diane Swonk, an economist at Mesirow Financial in Chicago.

"It can make the difference between a neighborhood being literally like Detroit -- dead forever -- or a neighborhood that has another chance at life," she said.


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