Rents are up across the country, but foreclosures continue to take the air out of home values, according to the February Zillow Real Estate Market Reports.

The Zillow Rent Index rose 2% from February 2011 to February 2012, but the Zillow Home Value Index fell 4.5% during the same time period. Meanwhile, foreclosure re-sales challenged their previous peak, with 20.3% of all sales during February being foreclosure re-sales. The previous high was in March 2011, when 20.2% of all sales were foreclosure re-sales.

The rental market remains especially strong in areas that continue to experience consistent home value declines. Chicago metro rents, for example, increased 8.6 percent over the past year, in comparison to an 11 percent fall in home values over the same period. In the Philadelphia metro, rents are up 14.8 percent annually while home values have fallen 5.4 percent year-over-year.

While we here at Zillow believe we’ve made it through the worst of the housing recession, obstacles like a deep backlog of foreclosures and high negative equity still remain. But the burgeoning rental market is good news for everyone, since rising rents attract investors who buy up distressed homes. That drives down inventory, which will eventually have a positive effect on the value of all homes.

Further analysis from Zillow Chief Economist Stan Humphries and interactive data for this month’s report can be found on Zillow Real Estate Research.

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