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Good explanation of the microeconomics of the housing market. As supply of rental units increases without concurrent increases in demand, rental prices drop.

Another indication of a bubble is the growing disconnect between housing prices and rents. One reason demand for housing is so hot is that nearly one quarter of all buyers are investors. They're creating an unprecedented glut of vacancies that is driving rents down. Starting last year, for the first time since the Census Bureau started counting in the 1950s, the share of units that were vacant topped 10 percent annually. As a result, median rent in the United States dropped from $620 last spring to $608 in the first quarter of this year.

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