==It is not as if there are tons of empty homes out there.
Actually, if the following assessment is correct, there are indeed a ton of empty homes out there.
http://www.financialsense.com/fsu/editorials/2005/0731.html
By the way, rental rates of homes in Orange and LA County have gone up substantially. I know. I rent out an 1100 square footer in LA now for $2600 a month (and probably could get $2750). The house if worth about $650,000. 3 years ago it was $2000 a month. A partner of mine is renting out is 1800 square footer in Mission Veijo for $2700 a month. It is also worth about $650,000, which is a cap rate of about 3.5% assuming a sale, and a Prop 13 prop tax increase to 1.1% of market value - not a bad return for a rental of a single family house. Rising rents is putting a floor on the amount of further decline in housing prices. It will take a rescession or substantially rising interest rates to push cap rates up, and prices down.