Reversing a trend from three years ago, many Las Vegas residents are finding it more financially advantageous to rent than own a home these days.

With declining home prices, larger down payments and higher monthly mortgages, the dream of home ownership has faded for a large portion of low- and moderate-income population.

The cooling housing market could push people back into apartments, particularly those who can't afford their payments when adjustable-rate mortgages are reset.

"What's interesting is that Nevada has the highest foreclosure rate in single-family homes. You would think that the vacancy rates for apartments would be going down," said Carl Sims, apartment broker with Hendricks & Partners in Las Vegas. "In reality, it has increased from 4 percent to 6 percent to 7 percent in the last year."

Sims said higher vacancy rates are partly due to new development and "shadow rentals," or condominium conversions that have been purchased by investors and put back into the rental pool.

New construction added 1,228 apartment units in 2006, up from 1,040 units in 2005, he said. Most of the new units are concentrated in North Las Vegas. Other submarkets with high growth in apartments are Spring Valley-Enterprise and Green Valley-Henderson.

Sims said he checks with Chicago Title and finds 80 to 100 foreclosure filings coming in daily.

"I speculate people are going to have to move out of their house, but not necessarily into an apartment. They may move into another rental house because they need the backyard for the kids and for the dogs to run," he said.

With all of the investor homes on the market, renters can find a three-bedroom home for $1,275 a month, about the same as a three-bedroom apartment, Sims said.

The average monthly apartment rent in Las Vegas is $858, a 4.5 percent increase from a year ago, Hendricks & Partners reported in its 2006 review.

Las Vegas ranks No. 4 on the 2007 National Apartment Index compiled by Marcus & Millichap brokerage firm, down one place from a year ago.

Strong economic fundamentals and robust job growth will keep Las Vegas in the top five this year, the firm's national apartment report said.

"Las Vegas apartment owners are in a very favorable position, as nation-leading employment growth coupled with diminished rental inventory due to recent condo conversions have resulted in robust improvement in fundamentals," the report said.

Marcus & Millichap expects vacancy to remain below 4 percent this year, although both Sims of Hendricks & Partners and Spence Ballif of CB Richard Ellis are showing vacancy closer to 7 percent.

Ballif, who conducts a monthly survey on 85,000 of approximately 165,000 apartment units in Las Vegas Valley, said he's also seeing a lot of foreclosures, which probably means more people are becoming renters.

"You've got all the investors who bought here," he said. "We've probably got 6,000 or 7,000 homes out there that are being leased. Over time, those will go away."

Apartment construction is expected to increase this year with 2,500 new units, following delivery of 1,300 units in 2006, Marcus & Millichap reported.

Ballif estimates 4,500 units in the construction pipeline, much of it in North Las Vegas where land remains more available and less expensive.

Multifamily building permits, including both condos and apartments, rose to 8,420 units in 2006 from 7,320 units in 2005, Hendricks & Partners reported.

Investor sentiment will remain "resoundingly positive" in the Las Vegas metro area this year as fundamentals continue to improve, Marcus & Millichap said in its apartment report.

Condo converters and speculators have almost entirely left the market, leaving most buyers focused on potential cash flow from rental operations for years to come.

Chris Bentley of The Bentley Group, which specializes in the multifamily market, said his company brokered $288.5 million in sales volume in 2006, accounting for 2.43 million square feet.

Among the noteworthy properties brokered by Bentley were the 357-unit Princess by the Lakes complex on Durango Drive that sold for $44 million and the 540-unit Wildflower Apartments on Washington Avenue that went for $36.6 million.

Average sales price per unit has jumped from $56,800 in 2004 to $73,700 in 2005 to $86,100 in 2006, according to Marcus & Millichap.