It's difficult to think of real estate as a "fad" if only because property tends to be held for the long-term. That said, it's hard to overlook the notion that 2007 and beyond may be very good for rental ownership.

Increased home ownership is a national goal and often cited to justify various policies and programs. There's good logic behind such thinking and yet not everyone can or should be an owner. For instance: It typically makes no sense to own real estate for the short-term, say if a job change in another market looms in the next few years. It's hard to justify ownership in markets where value is in decline. Lastly, renting may be less expensive on a current cash basis than ownership in many areas, even when tax benefits are considered.

Rental rates are often related to acquisition costs rather than current market values. If 15 years ago you bought a single-family home for $100,000 and the rent today is $2,000 a month, you're doing well on your investment -- with leverage you might have paid just $10,000 in cash for the property. However, if the property now has a market value of $600,000 and your gross rent is $24,000 you're taking in just 4 percent -- and that's before subtractions for vacancies, taxes, insurance, repairs, etc.

Maybe as an owner you're better off selling the property, paying the long-term capital gains tax, and sticking the remaining cash in something as mundane as a CD paying 4.5 percent. No, you can't get a depreciation write-off for a CD, but then you need not worry about tenants, property damage or other ownership issues.

You can see this kind of thinking with the $5.4 billion sale of Manhattan's Stuyvesant Town and Peter Copper Village last year by MetLife. Owned by the insurance company since the 1940s, these properties included more than 11,000 units not far from Times Square, Wall Street and, more importantly, Katz's delicatessen.

The real reason to hold rental property is to gain equity, cash flow and additional buying power over time. If property values are rising then even a minimal positive rental income can often be justified. And if a rental property throws off strong cash flow, so much the better.

If you consider the trends now in place, then landlords in many communities are likely to see strongly rising rentals in the coming year. Why? Because there will be a relative decline in rental supply.

• New construction has slowed. The National Association of Home Builders reports that November housing starts were down 25.5 percent when compared with a year earlier -- and permits were off 31.3 percent. The fact that fewer permits are being issued means reduced starts in the future. For landlords, fewer starts means less competition from new properties.

• Interest rates in 2006 were remarkably low, lower at year-end (6.18 percent plus .4 points) than in mid-July (6.80 percent plus .5 points), according to Freddie Mac.

The low rates seen in 2006 have produced an oddity. According to Syd Machat, a real estate broker from western Maryland, "classic low interest rate incentives" have not driven buying patterns in this market.

Hence, says Machat, "The demise of a beloved cliche: the 'rates are so low, that healthy sales must result ... .'" In fact, figures from the National Association of Realtors show that despite low and falling rates during the year, unit sales for existing homes as of November were down 10.7 percent from the exceptional -- and unsustainable -- numbers seen in November, 2005.

Lower rates mean homes are easier to finance, but will rates remain low in the face of huge federal deficits and vast balance-of-payment shortfalls? It's difficult to believe that low interest rates will continue -- meaning fewer sales and more renters if interest rates climb.

• In many markets long-time rental properties have been converted to condo status and sold off unit by unit. The result is that fewer rental units are available in certain local areas.

• There has been a vast increase in the number of foreclosures. The November foreclosure level was 68 percent higher than a year earlier, according to RealtyTrac. Foreclosures are now producing huge numbers of households in need of rental property.

• The population keeps growing. Census figures show that in the 12 months between July 1, 2005 and July 1, 2006 we added 2,891,423 people, all of whom need housing.

Looking at all of these factors, 2007 is likely to be a joyous year for landlords, especially those who elected to buy and hold long ago.

For more articles by Peter G. Miller, please press here.