Not enough renters

There's just too much supply out there, much of it the result of foreclosed homes being turned into rentals, condo reconversions, homeowners renting out space, flippers who become landlords, and builders changing their construction plans. Demand-wise, there has been some activity among folks who foreclosed on their properties, but it's being offset by would-be renters having to stay with parents or friends because they're short of funds. Suzy Frank, owner of Abbot Kinney Real Estate, tells Market News International that rents in her high-end location are off about 20 percent from a year ago.

The average home rents for $4,000 a month today, compared with $5,000 this time last year. "I just signed a house at $7,500 that last year would have gone for $10,000," she said. "Whenever we get something for $3,000 or $4,000, it goes right away. It used to be that way for $5000 to $6000 homes.

Scott Monroe, president of the South Coast Apartment Association, tells the OC Register's Jon Lansner much the same thing about rents. But he says there's more going on:

Our members are saying that they are competing quite a bit with what historically has not been a competitor for us - that's the gray market or the shadow market - which are condominium rentals and single family home rentals and things of that nature. There is just a lot of product on the market.

Apartment rents were down 4.4 percent in L.A. County during the fourth quarter and 4.3 percent in OC, according to Reis.