Yet those former homeowners still need somewhere to live--and with the added demographic of new households being formed by young adults--it's all a boon for the rental apartment market, which is seeing demand rise. Indeed, the ownership rate for households between the ages of 18 and 34 years old sunk to 40.3% from its peak of 43.6% in mid-2004. The current ownership rate for young households is below that of 2000, and closer to what it was in early 1995--38%.

Over the first half of this decade, 1.2 million young households--80% of which were under 30--entered the for-sale market. Conversely, just 350,000 young households became new renters. By the end of 2008, the number of owner-occupied housing units headed by 18-to-34 year-olds had dropped to 10.6 million, while renter households had grown to 15.2 million.

These demographic trends and the continuing downward spiral of the overall housing market may have been one of the factors encouraging developers lately. The construction of properties with five or more units rose by some 80% in February to a seasonally adjusted 583,000 units, according to the latest results from the Department of Commerce.That helped to push overall US housing starts up by 22%, representing the first uptick in eight months, and the largest percentage gain in 19 years. Still, February 2009 starts were 47.3% lower than the prior year, and multifamily starts last month were 40.4% lower than in February 2008.

While trends do look promising, Richard Moody warns that demographics alone don't mean much when the economy itself is in the tank since most households are cutting back on expenses. Particularly, would-be renters are increasingly opting to live with their parents or double-up--and even triple-up--with roommates.

"By no way is it smooth sailing in the current economic and credit market environment," he relates. "While a smaller share of new households will either opt or qualify to become homeowners, the reality is that, at least for the near term, there will be fewer new households formed."

The number of overall households in the US rose by less than 1%, or 772,000, last year. That is less than half of the new households formed in 2007 and is the smallest yearly increase since 2004.

And, Moody adds, "Given the severe erosion in labor market conditions that has already occurred since the onset of the recession, and that there is little hope of material improvement until sometime in 2010, the increase in households in 2009 could be smaller still than that seen in 2008. So while the homeownership rate will drop further, the smaller net increase in the number of households means that growth in demand for rental housing will be smaller than would otherwise have been the case."