A year ago, Brian Skutta and his wife were moving out of their Woodstock home, headed for a bigger one down the road in Canton.

But selling the first place was a problem.

The once-hot residential market was glutted with homes for sale — many of them new construction like the houses around Skutta's. Worse, tighter credit was making it hard for many potential buyers to get mortgages.

"As far as my timing goes, it couldn't have been worse," Skutta said.

A few people came back for a second look at the Skutta's house. No one made an offer. Yet he had an option that — until recently — few homeowners considered.

"I decided I'd put my toe into the rental market," Skutta said.

He is far from alone in the pool.

With the sag in housing sales, some sellers look at the prices they are offered — if they get any offers at all — and decide instead to put their homes up for rent.

"I put more people into rentals last year than all my previous years in real estate combined," said Jamie Hook, a Realtor with Metro Brokers GMAC Real Estate in East Cobb. "I think the rental market is pretty good now. And I think we'll see the rental market improve."

The main reason the rental market has gotten better is that the sales climate has gotten worse. The quick turnovers and healthy price hikes of three years ago are gone.

Now, the market is huge and complex; some sellers, in some neighborhoods, do quite well, thank you. But many — especially those who bought homes in the past few years when the boom was at its peak — have been disappointed. Some readjust their hopes and lower prices dramatically, some doggedly hold to their target price and some pull the home off the market to await a turnaround.

But many people are selling because they themselves are moving. The house represents an extra mortgage that they do not want to carry.

But if they rent the house, that mortgage payment will be at least partly subsidized and, when things change, they can pop the house back on the purchase market.

Landlord's remorse?

Still, some people who now choose renting will regret it, said Tal Kramer, Realtor with ReMax Communities. "They end up with vacancies. They don't like their tenants. Then, in a year or two, they have to install new carpet in the house or make other repairs. Most people do not have the temperament or the desire to own rental property."

Few thought of renting as the market surged between 2002 and 2006.

Mortgages were stunningly easy to obtain, interest rates were low and prices were steadily rising. Atlanta saw less spectacular price increases than other cities because builders were adding more than 50,000 new homes a year.

Economists said it was a bubble — and bubbles eventually burst.

Demand did not disappear, but inventories soared: The balance had shifted. Prices stopped climbing and in some places, they have dropped. In 28 Atlanta-area counties, home prices dropped 4.8 percent from January 2007 to January this year, according to the S&P/Case-Shiller index.

Many owners who didn't have to sell, decided not to. For some, renting was the logical out.

"People who rent rarely do it as their first choice," Kramer said. "Most often, if people decide to rent their homes, it's because they tried and failed to sell it first."

Kramer argues that a sale can be had, "if the property is priced right, conditioned right and marketed right, it's going to sell. Period."

But if someone purchased near the top of the market or took too large a mortgage, they may be unable to sell the home for enough to pay what they owe their lender.

Renting offers a waiting room and a stream of money that covers the owner's costs.

Except, of course, when it doesn't.

Waiting for a rebound

Lola Okatore did not expect to be an absentee landlady. Thinking that she would soon return to Atlanta from Toronto, she bought a condo at Atlantic Station.

Then plans changed. She stayed in Canada — and the condo stayed in her name.

"I couldn't sell it. I didn't get an offer for a long time. And then, the offers I got were too low. Way too low."

To sell, she would need to slash the asking price in half, she said.

So she rented it, she said. "I really had no choice. We've done the math, and selling it makes no sense."

The monthly rent was $450 less than her mortgage payment, she said. "I will rent it until things get better. I am just going to ride it out and see how it works."

When will it improve enough to sell either of the properties?

"I am thinking next spring," she said.

Higher demand, prices

For the overall market, the switch of some homes into rentals offers a cushion through a painful transition.

Because of rentals, the backlog of unsold homes isn't quite as deep as it would be. That keeps prices from falling fast.

Meanwhile, renting keeps some homeowners with more than one mortgage from being crushed.

But it's not just the supply of rental houses that has been growing. Demand for them is up, too.

Many former homeowners have lost their houses to foreclosure. They — and anyone with blemished credit — are not as likely to get mortgages as they were a couple years ago, thanks to changes in credit requirements.

They are all potential renters, said Eleanor Matthews, principal in Marketek Inc., a real estate analysis firm.

The pool of renters is likely to grow faster than the pool of buyers, she said. "It's going to have an effect that many more people will be renting."

Moreover, most of the jobs being added to the Georgia economy now are service sector positions that do not pay well. In fact, demand may be growing faster than supply — and that would push rents up.

"We are setting the stage in the Atlanta rental market for significant improvement," said Alan Wexler, president of Databank Inc., a real estate investment firm.

First, because of the "foreclosees," but also because a growing number of empty nesters are looking to downsize, he said. Also, people are still moving to Atlanta. They often can't quickly sell the homes they are leaving, he said.

Occupancy rates up

Occupancy rates have edged up to about 92 percent, Wexler said. "That means that the owners are in a stronger position compared to where they have been. And it looks like they are going to get stronger."

Skutta has had two tenants, each for six months, each paying $1,750 a month rent. The next time he rents, he is probably going to charge $1,900, he said.

Not that he wouldn't sell the house now if the right price walked through the door.

It's important to be flexible, he said. "Given the market, you have to take what it gives you."

BY THE NUMBERS

What happens in housing affects rents as people move into rentals rather than buying. More homes have been added to the rental market — that would tend to lower rents. But at the same time, more people are becoming renters — which would tend to raise both occupancy rates and rents. Lately, it looks like the balance is tipping toward demand.

Rental occupancy:

2000 — 96.8 percent

2004 — 89.4 percent

2008 — about 92 percent

Average rents (last quarter of year):

2007 — $771.75

2006 — $771.09

2005 — $771.36

2004 — $749.60

2003 — $775.14

2002 — $776.94

2001 — $776.59

2000 — $750.18

Source: Databank