When one piece of the market is doing poorly, look around. You'll probably find another part that's doing just fine.

Right now investors who want to side-step the carnage underway in the single family home segment should look hard at the flip side of residential real estate -- rental apartments.

While the home ownership rate is falling and foreclosures are at record levels, the apartment market is showing solid growth.

And you don't need to be a billionaire to participate -- you can invest in apartment real estate investment trusts or REITs -- stocks of large, publicly-traded companies that own, manage and often develop diversified portfolios of rental housing.

With hundreds of thousands of people leaving homeownership because they can't afford their mortgage bills, guess where they're heading: They're moving into rental apartments they can afford.

In fact, according to the chief economist of the National Multi Housing Council, Mark Obrinsky, last year rentals saw the biggest increase since 2000, when the housing boom was just beginning to warm up.

Given the surge in demand, vacancy rates are dropping and monthly rents are up -- by a whopping three and a half percent in the final quarter of 2007 alone. Obrinsky says real returns to apartment investors are averaging around 11 percent per year, well above most of the competition.

What about apartment REITs? Well, they offer a way to tap into all of this without really getting involved in the management hassles of rental property ownership. Shares are traded, returns are analyzed, companies are scrutinized daily -- and any competent stock broker can put you in touch with research.

Overall, apartment REITs are up by 15.6 percent for the year so far, according to the New York Times. That compares with the Standard & Poor's 500-stock index, which is down about 9 percent. All property-holding REITs are up by a composite 3.2 percent for the year -- so the apartment sector is hot even within the REIT world.

Now we are not in the business of touting stocks here, but apartment REITs like Avalon Bay, Camden Property Trust and Essex Property Trust are widely-acknowledged leaders in the field.

Bottom line: Not all residential real estate is hurting at the moment. Well-managed apartments are filling up and earning good returns -- even while the single family sector hits cyclical lows

Published: March 28, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.