Apartment lessors requested average rents of $872 during the first quarter, a 4.3 percent increase over the $836 sought in the first quarter of 2006. That's a bit of a break for tenants because landlords were seeking a 6 percent increase a year ago, according to local research firm Applied Analysis.

The rising rents lowered occupancy to 94.1 percent in the first quarter. It stood at 95.4 percent during the fourth quarter.

Competition from condos and single-family homes, many with rental prices that have been attractive, have had an impact as well, said Applied Analysis Principal Brian Gordon.

"The escalation of prices has been challenging for some consumers to afford in certain portions of the valley," Gordon said. "They are moving to more affordable parts of the valley or out of the market in some cases."

The rental rate growth of 4.3 percent outpaces the rate of inflation, but it is better for consumers than the increase of 5 percent to 7 percent in recent years, Gordon said. He said rental growth should remain steady at 4 percent for several quarters.

Despite the drop in occupancy and slowdown in rent growth, the dynamics of the market will improve for apartment owners because of the large number of construction jobs and casino jobs being created in the next two to three years with development along the Strip, Gordon said.

In addition, many residents who lose their homes through foreclosures will also be moving into apartments, he said.

Among highlights of the report:

Housing report: National housing analyst John Burns said in his most recent report that the national housing market has softened much more than has been reported. Burns said national reports about existing and new home sales are misleading and that policy makers shouldn't rely on it. The Census Bureau calculation of new home data doesn't consider cancellations, which are running higher than normal.

"If you compare sales over the last 12 months to the prior 12 months, on a straight year-over-year comparison, the decline is much more," Burns said.

D.R. Horton and Lennar are reporting that orders have declined 27 percent to 33 percent. Both have dropped prices significantly in many markets to generate sales, Burns said.

"The Fed should know that the housing market correction has been quite steep and is also not showing signs of bottoming out," Burns said. "While the Fed has far more to consider than housing, they should know that the housing market could sure use some lower interest rates to help achieve stability soon."

"The question is will there be enough activity to fill the large volume of space coming on line," said Brad Peterson, a senior vice president for CB Richard Ellis. "Higher demand will have to continue for the market to stay healthy."

Rising construction prices and increased cost of land hasn't stagnated the red-hot office market, said CB Richard Ellis' Randy Broadhead.