MR. STEVE ROBERTSThanks so much for joining us. I'm Steve Roberts, sitting in today for Diane Rehm. The foreclosure crisis and economic recession helped drive up demand for rental property, and at the same time, new construction of apartments dwindled. That sparked rent increases. Building permits for new units have rebounded, but demand is expected to outpace supply for the next few years.

MR. STEVE ROBERTSJoining me in the studio to discuss the rental market are David Crowe with the National Association of Home Builders, and Chuck Wehrwein of NeighborWorks America, on the phone from New York, our studios in New York, Wall Street Journal reporter Dawn Wotapka. Welcome to you all. We appreciate you being here.

MR. CHUCK WEHRWEINThank you.

ROBERTSAnd you can join us as well. 1-800-433-8850 is our phone number, email, of course, drshow@wamu.org. And particularly those of you who are in the rental market, have some experiences to share with our experts, we'd be eager to hear your comments and your calls throughout this hour. Dawn, why don't you start and give us a quick overview of this marketplace for rental housing? I know that there are 100 million renters in America. It's about one-third of America rents their housing. Give us a view of the details.

MS. DAWN WOTAPKAWell, renters are paying more than ever. And you know, as you said, part of the problem is there just hasn't been a lot of new construction since the housing crash. And, you know, people need a place to live. So there's all these people that were displaced by the foreclosure crisis, and it's just like a one-two punch. More renters, less supply is giving landlords total power in this market right now.

ROBERTSDavid Crowe, how do you see it?

MR. DAVID CROWEWell, I think the rental market is very vibrant. It's the bright spot in housing construction. It was at a low in the last couple of years, but most recently, we're trending towards producing about 300,000 units a year. So the industry is responding to this new demand. But, as been said, it is hard to keep up.

ROBERTSChuck Wehrwein.

WEHRWEINYeah, the -- I think the challenge is -- has been added to -- in addition to what Dawn had said -- was literally -- we're literally talking about all these folks who often doubled up and went back home to live and lived with relatives and friends. And they're now coming back out into the rental market. And some of these folks used to buy a home in the 2000s, and now they're out there renting. So the demand has increased. The supply hasn't kept pace. And we find ourselves in, you know, a very tight marketplace.

ROBERTSNow, all three of you have made the point that this is a function of a number variables here. There's supply and demand, class -- all of us took Economics 101. We learned that the first week, right? So let's talk about some of the elements on the demand side first. You know, Dawn, Chuck mentioned that there were a number of families who lost their homes during the economic crisis and perhaps are starting to, you know, are coming back or still in the rental market. I guess that's one element, right?

WOTAPKADefinitely. And some of these people who are foreclosed on, you know, they have a bad taste in their mouth about home ownership. And then some of them want to buy a home right now, but they just can't because their credit scores are low or they don't have the down payment.

ROBERTSSo one of the key variables here is that the -- not only are people -- you think people are a little skittish about getting back into home ownership, given the fact that there was always this assumption that values would keep going up? And for a lot of American families, it was, by far, their largest source of wealth. So do you think skittishness is part of this?

WOTAPKAI think there's definitely skittishness out there. You know, everybody knows somebody who was burned by this crisis, who bought the house, betting its value was going to go up and it didn't or saw their neighbors lose their home or read about it in the newspaper. And there's definitely some fear out there.

ROBERTSAnd, David Crowe, what role is playing the -- is -- we've already mentioned you do have people who would like to get back into home ownership who have been forced into the rental market. But what is the role being played on the availability of credit? It seems like -- that the rules are a lot tighter than they were and that folks who might have qualified for home ownership in an early era are finding it hard to get that.

CROWEYeah. There's no question that credit availability is a big issue, and it's a big reason why a lot more people are becoming renters rather than homeowners. Our polls show that a vast majority of potential renters or even potential homeowners want to become a homeowner, but they can't. Credit availability is a big problem, as well as their own employment, the security around their own employment.

CROWESo even some of those who could get credit are concerned about whether their job is consistent enough, sustainable enough to maintain a mortgage payment. So we got both of those holding back homeowners.

ROBERTSAnd then at the same time, you mentioned, Chuck Wehrwein, that during the depths of the recession, we we're all used to the -- maybe the folktales of kids living in their parents' basements and delaying going off on their own, simply because they couldn't afford it or didn't have a job. But as the economy rebounds again, one of the elements seems to be that some of these folks who were in their parent's basements are now finding jobs, and they're now flooding into the rental market, particularly younger people. So that's another factor.

WEHRWEINThey are indeed. And the number of folks -- and, of course, there's new family formation as well as the younger folks are graduating from college and the like. And, you know, I think we shouldn't forget either the fact that, with baby boomers retiring, you know there's also this coming need and demand for affordable housing for older adults as well.

WEHRWEINAnd, you know, I think I saw a statistic that suggested that the demand for affordable rental, which is what, you know, NeighborWorks America is focused on, the gap between the supply and demand has gone from 2.5 million 10 years ago to something on the order of almost 6 million today, 6 million people who can't find an apartment that they can afford or home situations they can afford.

ROBERTSYou know, and another factor, Dawn, that struck me is that the mobility of the workplace. Folks now understanding that they often have to move to find jobs, that there are boom places in America. We've all seen the tales of, you know, the gas boom in the Dakotas, for example, so, as people move more readily to look for work, that sort of adds to the people looking for apartments, I would think.

WOTAPKADefinitely. You know, the days of working for a job for 20 years, they're gone, in most cases. And, you know, the people I interview, they like the idea of being able to, you know, live in New York City and be offered a job in San Francisco, pick up and leave without having, you know, to deal with selling the house and, you know, missing a mortgage payment and all that type of stuff.

ROBERTSRight. And there's also, I gather, David, a mismatch. You know, people say, well, what about all these foreclosed houses? You know, you're talking about lack of supply. But one of the problems is, as Dawn says, if you're talking about a dynamic labor market, people are going to be drawn to places that are booming, where the jobs are. That's not where those foreclosed houses are. So there's a lot of housing stock that might help solve this problem, but they're not in places people want to live.

CROWEWell, there's certainly the issue of declining economic areas. You know, you -- like the auto-producing states, even though they're coming back, they probably will never have the level of employment they once had. So there perhaps is an excessive housing units in some of those places. But the conversion of single-family homes from owner into rental has been fairly successful. We've probably added about 2 million single-family rentals to the stock and essentially transitioning those folks who lost their home to foreclosure into a similar kind of house but renting it instead.

ROBERTSNow, Chuck, you mentioned your organization is particularly focused on the needs of lower-income folks, and it's always been true that new construction costs more than a lot of people can afford. And talk about the role played here by subsidy programs. We're in the midst of a budget crisis. We're in the midst of talking about reducing the federal role in all sorts of ways. Talk about that piece of it.

WEHRWEINWell, you know, and, Steve, I talked a little bit about the, you know, we talked at the outset about the supply-and-demand issues, and one of the challenges is that there isn't a lot of new -- there's basically a fixed amount of resources going towards the deeply affordable home programs. The low-income housing tax credit, for instance, is a terrific program that helps provide new -- that helps promote and provide new construction for low-income families and seniors. But it's only about 100,000 units a year.

WEHRWEINAnd so -- and that -- in the event that that doesn't increase very much, it doesn't really add to that gap that I was talking about, and further, that program is a subsidy program that is provided through the corporate tax system. And to the extent that that corporate, you know, tax code gets opened up, that is one of those benefits that could potentially go away.

ROBERTSNow, we've done talking about demand. Now, let's talk a little bit about supply. David, you mentioned that there -- this is a vibrant market, but it's still not meeting the demand. And as I read it, there are still problems for some builders in getting the kind of credit lines they need to fill the market.

CROWEThat's right, particularly in acquiring the land and developing the land. Most of the relatively small builders who build apartment buildings get their financing from local financial institutions, from smaller community banks. And those institutions were wracked by a lot of losses throughout this crisis. And so they're reluctant, not only sometimes on their own balance sheet, but also because the regulators have said, look, we're a little worried about real estate in general so don't lend to real estate. So that has been a problem.

CROWEAnd that process of bringing the land to full ability to build on takes time. So it isn't like we can turn on a dime in that industry. So we're still suffering from the fact that some of that financing process didn't take place two or three, four years ago and therefore hasn't led that pipeline to the point of having ground available for apartment buildings.

ROBERTSAnd I gather, Dawn, that -- and looking at the statistics, David mentioned that there has been an uptake in the construction of multi-family dwellings. But it struck me that a very large percentage have been supported and financed by federal agencies, Fannie and Freddie. They're playing a huge role in this market, right?

WOTAPKAThey definitely are. And then, you know, some of the real estate investment trusts are using their own money. And so, you know, it's kind of the same thing that went -- happened during the housing boom is people see the demand so they're rushing, rushing, rushing to build as many apartments as they can right now.

ROBERTSBut do you see the market -- do you see what David mentioned that there are builders who would like to construct more housing but are having trouble finding credit?

WOTAPKAI, you know, I mostly cover public companies, and, like I said, they use their own money. But I do know that, you know, finding financing can be very difficult. These are expensive projects. And lenders, you know, they've been burned, and they're just a little jittery right now.

ROBERTSThe whole market is a little jittery right now, obviously. We're going to come back with your comments and your calls. We want to know what your experience is in the rental market, so give us a call: 1-800-433-8850. I'll be back with Dawn Wotapka from The Wall Street Journal and Chuck Wehrwein from NeighborWorks America and David Crowe of the National Association of Home Builders. I'm Steve Roberts, sitting in today for Diane. We'll be right back.

ROBERTSWelcome back. I'm Steve Roberts, sitting in today for Diane. Our subject this hour: the rental market, the rise in demand, the shortage of supply, the impact on the one, you know, one-third of Americans who do rent their housing. And I have three experts with me: David Crowe of the National Association of Home Builders, Chuck Wehrwein of NeighborWorks America, on the phone from New York, Dawn Wotapka, who covers this subject for The Wall Street Journal.

ROBERTSAnd, Dawn, let's talk a little bit about how -- the supply and demand -- we've described this -- and the effect it's having on rent. You know, the cliché I always heard was you should spend a quarter of your income on rents. But I read that about a quarter of Americans spend more than half their income on rent. Give us a sense of that part of the picture.

WOTAPKAWell, you know, we reported recently that the average rent in America is more than $1,000. Think about that, $1,000. If you're working for a minimum wage, you have to work a lot of hours to pay that, and that's a significant chunk of anybody's income. And the increase keeps going up. So pretty much landlords have the upper hand right now, and tenants, you know, just have to pay it or find a cheaper place to live. And with all this demand, that's really hard.

ROBERTSAnd, Chuck, your organization, as we've said, focuses on low-income families and their needs. And what is that -- how does that impact a family? If their rent bill goes up, it has other economic implications.

WEHRWEINThat's exactly right, Steve. You know, folks, they do without health care. They do without quality food. They do without saving for their future, for their opportunity to potentially buy a home and for their ability to send their children to college. So all those things, you know, basically impact their ability when over 20 million folks in the United States of America are paying more than half of their income to -- just to be housed. And most of those folks are renters.

ROBERTSAnd you can also have -- it has an effect on the family. But then it has an effect on other economic activity, right? A dollar spent on housing is a dollar not spent at the grocery store or...

CROWEThat's exactly right. And, you know, they're not buying, you know, they're not buying, you know, new automobiles or even, you know, recent automobiles. They're not buying, you know, new appliances or new radios or what have you. So it does -- it has an absolute effect.

ROBERTSNow, David, in your world of the people who build these housing, is there a sense that there is a limit on how much you can charge for rents? Are people starting to see that -- the possibility of pricing units out of the market? Give us that perspective.

CROWEYeah. The industry is certainly concerned about being compressed from two ends. Number one, they have to pay for all the materials and labor necessary to construct an apartment building. And, in fact, oddly, even in the midst of this rather slow housing recovery, we're seeing spikes in many building material prices, in labor, in land. And so all of those...

ROBERTSAlthough interest rates are pretty low.

CROWECompensating...

ROBERTSIf you can get the money, yeah.

CROWEIf you can get the money. The cost of money is the only bargain in the bundle. And so obviously, that concerns that if you complete a project, given the cost of it is you have to be able to rent it to a marketplace that's able to afford it. In the past, one of the ways to afford housing has always been to move further away, that distance is a way to reduce the cost. Unfortunately, that also increases the cost of transportation. So there's an ugly tradeoff between the two. The difficulty...

ROBERTSParticularly when gas is -- the price as it is today.

CROWEAnd unlikely to go down. But the difficulty in moving out further is there continues to be a sense of NIMBYism against rental projects. And so trying to build an apartment building or apartment complex in a suburban area can be challenging as well because there's still some sense of unlikely residents in that location. So the builders have that tradeoff as well to compete with.

ROBERTSSo the areas where they might be able to purchase cheaper land and therefore build apartments that maybe have a somewhat lower rental structure, you run into some local zoning and other issues like that.

WEHRWEINThat's exactly right, yeah. And it's especially true of affordable apartments. And it's harder to do family apartments than it is to do apartment for seniors, for instance.

ROBERTSFinal question here, Dawn, and then we'll get to some of our callers. Is there advice that can be given to folks out there? Is there a point where -- as you've studied this market, where it makes sense for renters to start thinking about buying? You got any thoughts about that?

WOTAPKADefinitely. I mean, mortgage rates are at lows that we haven't seen. You know, they're below 3.5 percent. My dad said that he was really excited when he got 11 percent. So, I mean...

ROBERTSRight.

WOTAPKA...there are rates that are just, you know, it's almost free money. If you're going to be in that home for several years, if you can comfortably afford the mortgage payment -- I've interviewed people who are doing the mortgage on one income in case something happens, one of the partners, you know, gets laid off, loses their job. You know, if you're going to be in that home for several years, if you want to take care of it, if that's your dream, definitely now is the time to go for it.

WOTAPKALike, we've talked about lenders are very jittery, so you have to have pristine credit. If you're thinking about buying, pay all your bills on time, skip going out to dinner every so often, save up that down payment and then have a cushion in case something does happen. You know, owning a home, it's a little bit expensive. You have to have the lawnmower, the rakes, you have to have a rainy day fund for when things go wrong, but, you know, like I said, with rates this low, if you want to do it, many experts are saying to go for it.

ROBERTSYou know, one of the best advice -- piece of advice I got many years ago when we bought our first home was that stretch yourself in your first home, that your income is going to up and that mortgage payments become increasingly easier to handle. Is that good advice?

WOTAPKAI would disagree with that advice. Like I said, I -- I'm looking to buy, and I want to do it on one income because you don't know what the future is going to hold. I would say, think about what you want to do in your spare time if -- it's better to have more money for going shopping, going out to dinner, everything else than to be stretching yourself and putting too much money toward your mortgage.

ROBERTSOK. That just shows how old I am, and I'm giving outdated advice here. I want to read some emails from some of our listeners. A number of people want to join the conversation. Here's Joyce writing to us from Birmingham, Ala., "We helped our daughter buy a townhouse in a university town, Auburn, Ala. where they -- I hear they play some football -- and now, she has moved to another city, and we're trying to decide whether to sell the house or rent it.

ROBERTS"It's two hour away from our home, so we would need to have an agency manage it if we rent it out. What do we need to be aware of with property managers?" What do you think, David?

CROWEWell, you want somebody that's reputable. You want somebody that has been in this business before that understands that particular local market that get a tenant, keep a tenant and, of course, keep the maintenance going. And you also have to understand the tax complications of rental income. It's not simple. Our tax code is complex to start with. That particular area of it is even more complex.

ROBERTSWe have Ivan writing to us, who says, "If you have a mortgage, you are renting from your bank. The only advantage we have as owners is that a portion of that mortgage is an asset as we claim to extend our own credit. Renting, on the other hand, relieves the renter from any fiscal obligation beyond making their monthly payments. Whether you are talking about a car loan, credit cards or a mortgage, we are all beholden some bank for the rent." What do you think?

WEHRWEINWell, yeah. I don't know if I would agree with that entirely. I think, you know, clearly, you know, someone who's paying a mortgage and owning a home, they are, you know, paying down that mortgage, the principal on that mortgage and owning more and more of that home over time. And so it is a long-term investment for any family.

WEHRWEINAnd as David mentioned, you know, most folks still aspire to homeownership. It's just sort of doing it the right way. Currently, there are also tax advantages. As we all sort of know, there is, you know, there is a significant home mortgage interest deduction, you know, that's part of the current tax code. So...

ROBERTSAnd part of the current debate...

WEHRWEINRight. Absolutely.

ROBERTS...because this is one of the issues people talk about, limiting deductions as a way of saving federal money that that's very much in the discussion.

WEHRWEINBut clearly, there are, you know, there are benefits to renting, as Ivan mentioned, and, you know, some of them are flexibility to pick up and move, you know, if you're changing jobs, if your job situation changes. It's a much easier thing to move out of. And more and more people, I think, you know, as the echo boomers begin to, you know, to age out, I think, are going to be choosing rental over homeownership, you know, in the long run. And it also may allow them to move closer to the city to avoid some of the issues that David was talking about.

ROBERTSAnd move closer to their children and grandchildren. But also for so many people, particularly those of more modest means, it's always been true that their home is their greatest source of wealth. And I know this because it was my father's business for years in the rental area that he would get a lot of clients who sold their home as their kids left home, and in effect, lived on the wealth from that. Now, that theory has taken a bit of a hit in the last few years, but it's still out there.

CROWEWell -- and I think that's the missing equation in that comment is that you have both the risk and the reward of appreciation. That's a big difference in homeownership, and it has been the big difference recently where the risk was the downside, where a lot of people did lose money. And some of those, because of loss of income as well, then had to give up that home.

CROWEBut that seems to be a driving force behind many people buying a house is that they will eventually see some appreciation. It doesn't have to be wild appreciation, but if you own a home for 20 years and even at a modest appreciation rate, you have a tidy sum at the end of that ownership to either use for your retirement or to educate your children or some other reason.

ROBERTSAnd, Dawn, isn't there also a psychological dimension to homeownership, a sense of having made it, a sense of having achieved something important, particularly, say, for immigrant families and others who maybe lived in lesser circumstances? Isn't there a psychological benefit to homeownership?

WOTAPKADefinitely, definitely. I think that the notion of, you know, you having arrived when you have the white picket fence, you know, that may have taken a little bit of a beating during the crash, but that's never going to go away. We are a nation of homeowners. Sure, more people may be renting, but there is always going to be a group of people who want to own a home.

ROBERTSLet me read this email from Mark, who says, "My wife and I have had to rent for 15 years because homes in our area, large metropolitan area, are old and of poor quality or new and simply unaffordable. Renting gives us no home equity, but at least we can save money and live in dignified accommodations. Also, we can move quickly, either to share expenses with family or to move to another part of the country as circumstances dictate.

ROBERTS"With economic uncertainty and job insecurity and an unknown floor on the wages of those who might find themselves unemployed, renting and the flexibility to relocate and not lose your down payment in home equity is really the only economically rational solution for many people who rent today." This is an interesting email.

WEHRWEINYou know, and I think Mark's right. There's, as you said, there's a -- a third of the population has really made that choice.

CROWEAnd a growing number.

ROBERTSYeah.

CROWEYou know, almost all of the net additional households in the last eight years have been renters. We've added 6 million rentals to the number of households in our country and added almost no additional homeowners. Some have become, and some have unbecome, but the net numbers remain about the same.

ROBERTSYou know, what I'm hearing here is that any person listening to us or any person in this market has to assess themselves, their own situations. It depends on what you're valuing. If you're valuing flexibility, if you're valuing being able to save some money because rents are lower than the house payments, then renting is for you.

ROBERTSBut if you value the accumulation of wealth through, as you mentioned, Chuck, driving equity, then -- and the psychological benefits mentioned by Dawn -- then you make a different decision. Let's -- we're going to go to our calls in just a minute. But before I do that, I'm Steve Roberts, and you're listening to "The Diane Rehm Show." Let's go to some of our callers on the line, and let's start with Rebecca in St. Petersburg, Fla. Welcome. You're on "The Diane Rehm Show."

REBECCAHi. Thanks so much for having me. I wanted to just mention our situation. Over the last 12 years, my husband and I have owned two different homes and had to sell both of them at a loss to relocate for work.

ROBERTSMm hmm.

REBECCAThis last time, we moved from New York down to St. Petersburg four years ago, and because we were both starting our own businesses, renting seemed to make the most sense because, as you guys probably know, it's hard to get a mortgage when you're self-employed. And what we found is that we've kind of struck on what feels like a great well-kept secret, that, you know, we pay our rent and somebody else is responsible for the dishwasher, for the lawn, for anything that may break. So we feel like it's not such a bad deal.

REBECCAAnd so what -- one thing I wanted to ask your commenters is, what is the guideline as far as how long should you be staying in a home to make it worth buying? Because both times we did it, it was under five years, and we lost money both times. I know it depends on the situation, but it seems to me that renting can be a really great situation even though, like us, we could have afforded to buy a house, but it was -- this is a better situation, better situation for us.

ROBERTSThanks so much for your call, Rebecca. Dawn, what's your reaction?

WOTAPKAI've always heard between five and seven years, you should stay in a home to make it worth your while. Now, in Florida, you know, they've -- it's unprecedented what we've gone through in the past couple of years. So it'll be interesting to see what happens in the future. But definitely, Rebecca, you made renting work for you, and that's, you know, that's definitely worth listening to.

ROBERTSAnd the point she made about not being concerned and not being responsible for upkeep, that's one of the appeals of renting, isn't it, David, that...

CROWESure.

ROBERTS...you know, you turn the key, and let somebody else wash -- worry about the lawn and the dishwasher.

CROWEAbsolutely. It's a wonderful feeling to say all you have to do is make a phone call instead of hassling with who to call and how much it's going to cost or whether you have the sufficient money. I say the -- you know, the -- don't forget the fact that most renters are on a year-to-year lease. And so it's also -- the landlord is certainly allowed to raise the rent, those break points. So that's the one risk you still take with all the other responsibilities cast off on the owner of the property.

ROBERTSAnd the situation that our caller was describing has a particular appeal for some of those older folks who are trading in their family home. You know, the notion of not having to mow the lawn anymore, that's awfully good to a lot of folks.

WEHRWEINRight. That's right.

ROBERTSLet's turn to Silas in Saginaw, Mich. Welcome. You're on "The Diane Rehm Show."

SILASHello. Thanks for taking my call. I wanted to bring to light maybe a couple of points that I don't hear talked about. Those conversations are happening a lot, but a couple of factors that I don't hear people mention much, one reason for wanting to buy a home is -- me and my wife have wanted to since I got out of the Army in 2002 -- is stability. In the last 13 years, we've moved 15 times mostly because the place we were renting, they decided they didn't want to rent anymore. They were going to sell the house or, you know, this, that or the other, almost never because we wanted to.

SILASIt just ended up having to happen. And we've got four kids. We need some stability. But a reason why we don't buy is wages. You know, with minimum wage in the state of Michigan being $7.40 -- I make $9 an hour. So the wonderful company that I work for, it is really a great company, really great people. But they feel like, you know, $9 an hour, that's well above minimum wage. I should be happy of what I'm making, but what I'm making is not even enough to pay my monthly bills. There's no way I could afford, and that's with me living in a rent-controlled apartment complex.

ROBERTSYeah, these -- those are excellent points, and I'm glad you called us. That's very helpful. Quickly, Chuck, one of the points there is wage stagnation that we have not mentioned. Rents have gone up, but wages have generally not.

WEHRWEINRight. I think what Silas mentioned and the previous caller as well is that, you know, we've got rents that have been going up three to 5 percent in many markets per year. As Silas mentioned, you know, some folks will take their home out of the inventory, and it's a real risk for renters.

ROBERTSWe're going to continue this conversation, so keep calling us, keep emailing us, contribute your experiences in the rental market. I'm Steve Roberts, sitting in today for Diane, and I'm going to be back with your calls and your comments. So stay with us.

ROBERTSWelcome back. I'm Steve Roberts, sitting in today for Diane. Our subject this hour: the housing rental market. A 100 million of you, one-third of Americans rent their houses. So we have three experts who are joining me this morning to talk about this: David Crowe of the National Association of Home Builders, Chuck Wehrwein of NeighborhoodWorks (sic) America and Dawn Wotapka of The Wall Street Journal. And we have a blizzard of emails here, and let me read a couple more of them.

ROBERTSThis one comes from Andrew in Chapel Hill, N.C.: "Would your guests speak to the culture issue when it comes to buying/renting? My parents, my wife's parents and the culture shouted down the idea of renting. It's what is supposed to come next after getting a job and having a kid. I had a mortgage at age 23. I had to move from my career and ended up losing $50,000. I would like the country as a whole to stop looking as renting as a failure instead of a viable long-term solution especially in a job market which does not allow for putting in your 30 years in (word?)." Dawn, your reaction.

WOTAPKAI think, you know, that it's slowly changing. Renting -- I grew up thinking you rent, then you buy, but the housing crash upended all that. I've interviewed Wall Street analysts who are saying, you know what, for me, I'm going to rent. I'm not going to buy anymore. And more and more Americans are making that decision. Give it a couple of years, and I think we'll be having a different conversation, and more people will respect renting.

ROBERTSIn that -- the emailer used an interesting phrase, equating renting with failure, and we talked about that before. But do you sense that's changing?

WOTAPKADefinitely. And, you know, keep in mind that in some cases, you can rent a home that was foreclosed and, you know, rent a very nice three-bedroom house with a yard, and I don't know if that would be considered failure. I think some people would consider that getting a good deal.

ROBERTSRight. Let's -- here's another question from Maryn, (sp?) who writes to us, "One thing I don't hear your guests discussing is the impact of the technological revolution on population, housing patterns and, thus, the housing market. All of us history majors recall the enormous population shift from country to cities spurred by the industrial revolution. What do your guests see as the potential impact of this current revolution?

ROBERTS"My husband believes that it will drive down real estate values over time because communications advances will be -- make it less important for you to live near your work. We're good examples of this. We live in Austin, Texas, but my clients are in Washington, New York and Baltimore." David.

CROWEI think there's a good point to that. I think there is a certain amount of footloose employment situation so that you don't have to live -- for instance, the most classic situation is near a downtown area so that you could commute in and out every day. On the other hand, I'm not sure that technology completely eliminates the need or desire for interaction on a personal basis.

CROWESo I'm much more of the mind that you could have employment that's scattered throughout a metropolitan area, so you don't have to have the classic in and out transportation systems, and you do have the ability to perhaps live further away from the downtown area and not have a long commute. But I think this notion that you can live far distant and never contact the people you are working with, I'm not sure that'll ever come to be.

ROBERTSWell, but it does raise the interesting possibility, at least for some folks. We were discussing the fact that there is some good housing stock, and Dawn mentioned the ability to rent a three-bedroom house. But as we discussed, a lot of that is in areas where maybe the economy has tanked which is why these homes have been foreclosed.

ROBERTSBut if you are like our emailer, Chuck, basically with clients anywhere and dealing with them electronically, then there's the -- raises the possibility where you live in an area where you can get more house for your money.

WEHRWEINYeah. I think the emailer makes a good point for a segment of the population. However, a lot of moderate and lower income folks are working in the service economy...

ROBERTSRight.

WEHRWEIN...and they need to be where other people are, and they need, you know, they do need the transportation links in order to get them there, and I think that sort of remains a concern. And I guess, one of the things I'd like...

ROBERTSYou can't telework to a restaurant.

WEHRWEINNo, you cannot. And I think one other interesting point about the previous emailer's comment was that, you know, a lot of those rental homes might be available today, but they might not be available five and seven years from now as the investors who bought them up through this process are turning around and selling them off to make their profit. And so that will decrease the rental inventory further.

ROBERTSLet's turn to Mark in Dallas who sells property investors in a state that's both had a booming economy but also has some of its problems. Mark, thanks for joining us. What's on your mind?

MARKWell, I was curious about what you guys thought about some of the investors that were not only buying up for rental properties because you did talk about supply and demand, and I think that there is this huge opportunity missed by the government and not -- rather than doing a lot of the neighborhood stabilization programs, not finding good investors to lend to through some program to eat up a lot of that inventory. It eventually got eaten up anyway, which is where we're at today.

MARKBut I see a lot of investors leaning towards the owner-financed program where they're able to sell the house -- it's kind of a commercial play. They don't have maintenance of the property. The person buying the property has complete responsibility for it and ownership of it. And there's no bank involved to do the financing because, well, there's no banks that were leaping at the opportunity to finance these people. So that has been taken up by private enterprises. What do you guys see as a long term -- is that being a long-term viable solution?

ROBERTSWhy, thank you. An interesting perspective. What do you think, David?

CROWEA very good point. The private sector has stepped up to the plate, purchased a lot of these below market priced individual homes, seeing the bargain in them, seeing that they're basically paying for a building that is much below the cost of reproduction and in the interim, at least, are renting them as a means for cash flow, understanding that in any point in time, they can change that into a sale and to the extent that they have the ability to hold back that mortgage can also finance that sale.

CROWESo, you know, it's a private sector operating exactly like you'd expect it to do, stepping in and taking advantage of the situation and effectively softening the potential dramatic changes that otherwise would've occurred. I don't know if that's going to continue. I think eventually, enough of those people come around that they bid that price up. It's no longer the bargain it once was. We're going to eventually run out of foreclosed homes. We're working through that inventory pretty rapidly.

ROBERTSAnd you also see the possibility of this seems to be a solution that was spawned by the lack of being able to acquire mortgages in the -- from banks. And if that's loosening up a little bit, is that a factor to it?

CROWEWell, I don't know that the mortgage ability is loosening up much. I think that's still a difficulty and will remain until we've really worked out what we're going to do with Fannie, Freddie and even FHA.

ROBERTSLet's turn to Cameron in Boonsboro, Md. Cameron, welcome. You're on "The Diane Rehm Show."

CAMERONThank you for having me. I own a small business, and we're doing pretty well. We have about $1 million of revenue a year, and we employ five people. During the housing boom, I didn't buy because a lot of the rates around the D.C. metropolitan area were really high. And credit was available, but I didn't -- I know it wasn't a good buy.

CAMERONAnd so I'm ready to buy a house now, but as a small business owner, I couldn't get a loan because I take a lot of deductions. And although I have good credit and could put down a couple hundred thousand dollars, I couldn't get a loan from the bank in any way. And there isn't partial (word?) loans anymore. So I'm kind of locked out of the housing market in a certain sense because the house I would need for my family is something I would need a mortgage for, and I can't get a loan from the banks. So that's my problem.

ROBERTSCameron, thanks. We've heard several comments already. We had an earlier comment, Dawn, from a caller who said as a small business owner, she particularly had trouble getting credit. Is this something you're hearing in your reporting?

WOTAPKADefinitely. Definitely. Loans are hard to get, and the banks are scrutinizing every applicant. You know, I'm hearing that, you know, every little thing is looked at. They call your employer back to make sure you're still employed right before the loan closes, which actually kind of seems like a smart thing. And I've heard stories of people losing houses because maybe they go buy a suite of living room furniture while they're, you know, while they're in contract.

WOTAPKAThat changes their debt ratio, and the lenders get jittery. I mean, in their defense, we saw what could happen if they are too loose. But then many people I talked to, many of the home builders I cover tell me that the standards are just too tight, and that's keeping plenty of eager buyers out of the market.

ROBERTSInteresting. Let's turn to Bernie in Vienna, Va. Bernie, welcome. You're on "The Diane Rehm Show."

BERNIEHi. Thanks for having me on. I appreciate it. I just wanted to give the other perspective. I am a landlord who bought back in the early 2000 when everything was going to go in up and up and up. And I actually lose money every month. I own a small apartment building in North Jersey. And I think that, you know, you get -- there's a sense when I hear people talk about renters where you got, you know, these poor little renters and these big rich landlords. And my personal experience and the people I know is reverse.

BERNIEThe tenants really have a lot more power than they would understand because if you're charging market rent, even if you have the legal ability to charge 3 percent or 5 percent more, you can't because that's what the market is. Your tenants will walk. But when your tenants walk, it cost you thousands of dollars to get the place ready for the next tenant. So, for example, this year we had -- we have an apartment that we're renting now for $1,500 a month.

BERNIEAnd my tenant, you know, she, at the end of her lease, said, you know, I don't want to rent here any more. And so we -- well, you know, it needs to be repainted. The floors need to be redone. That's $5,000. It took me about four months to rent the place. So at $1,500 a month, that's $6,000. So I'm $11,000 in the hole. You know, and so a rent raise of, like, 3 percent or 5 percent, I'll hardly -- I'll never see that money again.

BERNIEAnd so being a landlord is, as far as I can tell, a terrible idea unless you have a lot of money upfront. You know, what we had done is we had -- I was 28 years old, and my wife and I, we'd scrape some money together and put 5 percent down on apartment building. You really need to have a rent ratio of 25 percent or 35 percent above what you think your monthly expenses are going to be just to break even. So I just want to...

ROBERTSIt's a very useful perspective, Bernie, and we appreciate your call. Chuck, respond to Bernie's is one of the variables here where the building is and how desirable it is to rent.

WEHRWEINWell, it is, and, of course, you know, in Bernie's example, it's, you know, it's sort of when you bought it and what you paid for it. And obviously, you know, investors, you know, come in and take risks. And there is risks and rewards out there, you know, for them. I would say that, you know, at a macro level, clearly, you know, rents have gone up and values of multi-family rental apartment buildings have gone up pretty dramatically.

WEHRWEINAlmost to a point where there -- I think they maybe, you know, they maybe flattening out a little bit in terms of the value equation. That is -- that does tend to drive up rents if the market will have it. But obviously, you know, as they say, all real state is local, so the, you know, the experience that Bernie is having, you know, may not be the experience on -- at the macro level.

ROBERTSI'm Steve Roberts, and you're listening to "The Diane Rehm Show." Let me read another email here because this is a perspective we haven't heard. It's from Edward in Columbus, Ohio. He says, "The market is not vibrant for 48 to 58-year-olds." He says, "Housing for this age group is a serious issue because of their underemployment or who have been out of work for the past couple years. They represent a significant number of folks on the backside of the baby boomer peak." David.

CROWEWell, that is a condition. Unfortunately, I think coming from Ohio puts an extra emphasis on that. Ohio was particularly hit by unemployment because of the industrialization of its local economy. And those people who, perhaps, have aged out of their expertise that somebody else has replaced them, some other knowledge-based industry is more popular, it's a top position to be in. You know, that usually calls for retraining or switching slightly in where you live.

ROBERTSLet's -- time for a couple of more quick calls. Randy in Washington, D.C. Welcome. You're on "The Diane Rehm Show," Randy. Randy?

RANDYYeah. I'm here.

ROBERTSOK. You're on the air. Please go ahead.

RANDYYes. I wanted to provide a different perspective. I'm originally from Utah, which is the state that was not hit as hard as some of the others that commentators have been talking about. But I also was a real estate agent before attending law school here in the District. One of the perspectives I continue to see from my age group, which is the mid-20s to mid-30s, both when I sold as an agent myself, then still as I see among other grad student is to take time off of heading back to graduate school and in the interim buying a home that then can be rented while others are attending grad school.

RANDYSo a lot of my clients seemed to be those that were a married couple with no children but had enough income to qualify for a loan, then neither bought home that had been refurbished or a new construction home and then continue to rent that home throughout grad school and leave that as an asset. So I think if you understand your local market, there are definitely investors that are both using those as assets and also as hopeful homes for once they're done with their transitory or nomadic state, you know, whether it'd be between jobs or grad school plan.

ROBERTSSo you're talking about folks who actually own a home, rent it to others while they're renting their -- the place where they actually live.

RANDYExactly. And that's exactly what I'm doing. I own property in Utah, but I'm renting at a much higher rate. And the hard thing about being a real estate agent living in the District is that I know the $1,900 I pay for a 750-square-foot bedroom could get me in a seven bedroom house in...

ROBERTSYeah. Well, there's always that problem.

RANDYYeah. Exactly.

ROBERTSThanks for your call. Dawn, do you have a reaction?

WOTAPKAI think, you know, everybody has a strategy. And if that's working for him, I mean, I think that investing, it can be very risky. The, you know, as we've said, there's a risk, there's a reward. Some people make it work. And we saw, you know, investors are part of what led us into the housing crash. So I would just be careful with something like that.

ROBERTSFinal world from each of you. There are lot of folks out there who are listening to this broadcast and say, OK, what's the takeaway here? What does it boil down to? If I'm in the rental market, what shall I take away from this, David?

CROWEWell, demographics is the key to housing. And we have a very solid demographic future. We have the echo boom of children that will have to live somewhere. Some of them will be renters. Some of them will be owners. But the bottom line is we will have a strong demand for housing likely to be in the warmer climates of this country, as the country itself transitions towards this other half of the country.

ROBERTSChuck.

WEHRWEINYeah. And I think like an earlier caller said, you know, home ownership is not the do-all and end-all for everyone. Rental should be considered a viable alternative. I just think that the nation needs to consider what it needs to do to continue to build rental housing. And I think when people are preparing for home ownership and getting ready to leave rental, they need to work very hard, maybe get some coaching and counseling to make sure that they're financially prepared.

ROBERTSFinal quick word, Dawn.

WOTAPKAI think that, you know, it's a personal decision for everyone, and you have to make the move that works for you. Renting is definitely gaining respect in our country, and don't feel bad if that's what you decide to do.

ROBERTSExcellent. Really good discussion. Thank you. That was Dawn Wotapka from The Wall Street Journal. Also, Chuck Wehrwein from NeighborhoodWorks (sic) in America, and David Crowe, the National Association of Home Builders. I'm Steve Roberts, sitting in today for Diane. And thanks for -- so much for spending an hour of your morning with us.

ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Denise Couture, Susan Nabors, Rebecca Kaufman and Lisa Dunn. The engineer is Tobey Schreiner. Natalie Yuravlivker answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales. Call 202-885-1200 for more information. Our email address is drshow@wamu.org, and we're on Facebook and Twitter. This program comes to you from American University in Washington, D.C. This is NPR.