One factor that will continue to depress both construction and house prices is the still near-record vacancy rates. The current vacancy rate is down by more than a percentage point from its peak in 2010, but it is still far higher than any vacancy rate recorded in the years preceding the housing bubble.

This huge number of empty units will not be absorbed quickly, even if the economy were to create jobs at a pace more typical for a recovery from a severe recession (300k-400k a month). While most of the vacancies are for rental units, it is important to remember that rental units can easily become ownership units (almost one-third of rental units are single family houses) if sales prices started to rise relative to rents.

For more, check out the latest Housing Market Monitor.