The market is likely to be hampered, however, by the high number of vacant homes on the market, 11.1 million mortgages currently underwater, and a backlog of roughly two million loans in foreclosure. The report says a sustained increase in employment will be necessary to bring household growth back to its long-term pace.

The rental sector continues to carry the rest of the market, as the number of renters surged by 5.1 million in the 2000s; the housing crash, bad economy and an aging population led to the largest decade-long increase in renters in nearly a century. Multi-family starts were also strong, more than doubling from the trough to a 225,000 unit annual rate in early 2012, but still well below the nearly 340,000 annual average in the decade before the bust.

Demand for rentals has pushed rental vacancy rates down and rents up. The Harvard report cited data from MPF Research that shows that rents on investment-grade multi-family properties outpaced inflation in 38 of the 64 markets it tracks. Of the remaining metros, all but one (Las Vegas) posted at least nominal rent increases in 2011.

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