In the midst of the appreciation boom in Phoenix, one of the regular Chicken Little complaints was that investors would cause a glut of rental housing, which would then sit vacant until they sold the homes in desperation. This is the static-market fallacy: This change will cause a problem, after which no change will ever occur again. That kind of thinking is epidemic in economic analysis. What I said at the time is this: Would-be home buyers are going to have to live somewhere if they're priced out of the market. And, of course, by early fall all that vacancy had been absorbed.

Here's further notice from the Arizona Republic:

According to Pierce Eislen, a Scottsdale market-research firm for the apartment industry, metro Phoenix apartment rental rates were up 4.3 percent in October over the same period a year ago. The average base rent was $697, up from $670 the previous October.

Rents had not risen significantly since 2001, said Ron Brock, Jr., vice president at Pierce Eislen.

Moreover, the number of apartments offering rental incentives dropped from 80 percent in 2004 to 43 percent this year through October, Pierce Eislen reported.

Several factors are converging to put the rental market in a better position to raise rents and drop concessions.

First, condo conversions are diminishing the stock of conventional apartment units faster than new stock is being built.

Second, the high median price of homes in the Valley is keeping many from owning their own home. And third, high land and construction costs are keeping apartment developers from building as many units as they traditionally have.

Rents have been flat in the Phoenix market for a long time, but the same dyanmic--not static--market comes into play: If a 900sf three-bedroom apartment rents for $1,050 a month, how much more is a 1,400sf three-bedroom home worth? It's the competitive marketplace that 'decides,' ultimately, supply and demand. But through all of this, the supply of would-have-been home-buyers, tenants-for-now, is steadily increasing.