A leading magazine's end-of-2002 retort: "You'll sell your house and rent," may have had at least a grain of truth.

In some cases, fewer renters are buying homes than they were two years ago, according to the National Multi Housing Council (NMHC), but there's no indication yet that significant numbers of home owners are giving up the dream to become tenants.

In the NMHC's "Quarterly Survey of Apartment Market Conditions (April 2003)," 19 percent of surveyed CEOs and senior apartment firm executives on NMHC’s Board of Directors and Advisory Committee said fewer residents were leaving for homeownership than they have in the past two years and 54 percent said the pace is about the same. However, 27 percent said the pace of renters moving to home ownership had increased, but only slightly.

U.S. News & World Report's cover story "2003 Outlook" (Dec. 3, 2002-Jan. 6 2003 issue) predicted "You'll sell your house...and rent!" because, the article said, "Plummeting residential rents in big cities like New York and San Francisco will push some home owners to cash out the equity windfalls they've accrued in their homes. The smart money will rent until real-estate prices inevitably fall back to Earth."

Thus far, the magazine was only half right.

Rents continue to remain soft as renters enjoy a negotiating position of strength, but home buying statistics continue to rise unabated this year.

NMHC's Market Tightness Index, which captures rent increases and vacancy changes, rose slightly to 32, up from January’s index of 29. A Market Tightness Index of less than 50 indicates that market conditions are getting looser as rents fall and vacancies increase. The Market Tightness Index has hovered around 30 since hitting a record low of 4 in January 2002.

Meanwhile, riding on the back of persistently low mortgage interest rates, sales of existing homes rose 2 percent in March 2003, compared to sales in March 2002, and housing affordability rose to the highest level in 30 years, according to the National Association of Realtors.

New home sales rose even more in March, up by 7.3 percent, according to the National Association of Home Builders.

"The increase in home ownership is compounding the situation for rental housing providers," said Mark Obrinsky, chief economist at NMHC.

So is the supply. Multi-family housing permits and starts nationwide were both up in March as a two-year struggle in rent growth continues, according to M/PF Research, an apartment market research firm in Carrollton, Texas.

M/PF says suburban rental markets, home of a large population of laid-off high-tech workers, have been particularly hard hit. Renters who've managed to keep their jobs have been prime candidates for a home purchase, M/PF said.

Unemployment rose nationwide to 6 percent in April, 2003, up from 5.7 percent a year ago, as job losses in manufacturing, travel and retail continued, according to the U.S. Department of Labor.

Urban rental markets also are suffering their share of hard times.

"It’s all about jobs. Demand for apartment residences remains below normal levels in most metro areas and is likely to stay that way until we see a sustained pickup in employment," says Mark Obrinsky, chief economist at the National Multi Housing Council (NMHC).

Published: May 9, 2003

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.