Trulia: Home Prices Falter While Rents Soar

In step with a disappointing jobs report, asking prices held steady while rents continue to creep up.

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Trulia Price Monitor - May 2012 - Line Graph.jpg
Asking prices flattened in May after 3 consecutive months of gains.

In virtual lockstep with the flagging jobs market, asking prices for homes flattened out in May after three consecutive months of increases, according to a new report.

Nationally, prices remained virtually the same in May month-over-month according to the latest Trulia Price Monitor, which tracks asking prices—a leading indicator of sales prices—based on listings in Trulia's database.

"The slowdown in asking prices mirrors the slowness in the jobs market," says Jed Kolko, chief economist at Trulia, adding that specific price data varies across different markets. "Prices are rising where job growth is faster—some of the markets with strong price increase have strong job growth."

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Those metro areas that have seen steady job growth and asking price increases include Phoenix, Denver, Austin, and San Jose, he says.

But where asking prices have leveled off, rent price increases have picked up the slack and then some. In May, rents were 6 percent higher than they were a year ago. Some metro areas saw an even bigger increase. San Francisco renters have seen an uptick of more than 14 percent year over year, while those in Miami, Oakland, and Denver saw increases of more than 10 percent.

Of the largest 25 metro areas, only Las Vegas renters got a break in rent rates.

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Despite upward pressure on rents, the underlying weakness of the broader economy is discouraging and in some cases preventing some renters from making the jump to homeownership.

"Rent increases are making it more expensive [to rent], but to become homeowners you still have to have enough for a down payment and qualify for a mortgage," Kolko says. "The economic recovery is still young and many people may not be confident enough in their job prospects to commit to buying."

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.