Metropolitan rent prices have been climbing for months. New population figures from the U.S. Census Bureau shed light on one reason why: Most of America’s big cities are suddenly growing faster than their outlying suburbs.

Boil that down, and what do you get? Higher rental demand.

Reporting on the latest Census figures, The Associated Press said this type of shift in population growth has not been seen since prior to 1920 and comes as today’s young adults “shun homebuying and stay put in bustling urban centers” to boost their odds in a fragile job market.

In nearly two-thirds of 51 large U.S. metro areas, city population growth equaled or outpaced that of nearby suburbs, the AP found. The report said the trend was driven by 18- to 29-year-olds — so-called “generation rent” — and noted that a mere 9 percent of 29- to 34-year-olds were approved for a first-time mortgage from 2009 to 2011.

At the same time, rents have been on the rise from Baltimore to San Francisco. The Zillow Rent Index for May shows a correlation of rising rent prices in nearly all 15 cities with the greatest population influx.

The median rent in Austin, TX, which overtook San Francisco as the country’s 13th largest city, climbed 10.8 percent for the year to $1,398. Charlotte, NC added 19,663 to its population and 11.4 percent to its median rent, now $1,106. The stories were similar in San Antonio, El Paso, TX, Washington, DC, Los Angeles and San Jose, CA.

Higher demand, higher rents

Demand for rentals has swelled for several reasons. Mortgage lenders have grown more restrictive. Foreclosures have increased the national pool of renters, and many who can afford to buy are opting to rent instead, fearing a home purchase could lose value and remain hard to sell for years to come.

“The biggest driver of rental demand has been the enormous foreclosure crisis set off by the housing recession,” said Zillow Chief Economist Stan Humphries. “The homeownership rate has plummeted from its high in 2004, and these foreclosed households have to live somewhere. What will keep rental demand high is the fact that many of these foreclosed households will still have impaired credit quality even after the economy has improved.”

Big city rents have risen swiftest in Philadelphia, Pittsburgh, Baltimore, Chicago, San Francisco, and Minneapolis–St. Paul, according to Zillow data. From May 2011 to May 2012, the steepest rise was in Philadelphia, where the median rent climbed 13.1 percent to $1,481. Nationally, rents were up 4.6 percent, even as home values have skidded along near 2003 levels.

“It used to be the dream was graduate college, get a job, start a family, buy a house,” James Halverson, CEO of Halverson and Blaiser Group in Bloomington, MN, said in an interview recently. “Now the younger generation is OK graduating from college, even starting a family, and renting.”

And many of them choose the city.

Chicago’s population, for example, inched upward by 11,522 to top 2.7 million after a decade of steady losses. Zillow figures show the median rent there has risen more than 9 percent in the past year to $1,476.

Chicago property managers said the increases have been fueled by the popularity of luxury high-rise rentals. Tenants who can afford to buy a condo are instead renting to avoid being saddled with a home that may prove difficult to sell. Meanwhile, landlords have scaled back on incentives like offering a free month’s rent to new tenants.

“Two or three years ago, it was still a renter’s market — that’s all gone,” Bryan Pritchard, principal of the apartment management and leasing firm Tricap Chicago, said. Pritchard said in April that downtown occupancy rates were around 95 percent. “If you offer a listing agent less than the asking price, he or she will erupt in laughter.”

Centers of population change

The Census report examined population estimates from April 2010 to July 2011. Larger cities grew at a rate of 1.3 percent, faster than the national rate, with Southern cities growing fastest.

Texas dominated the list of growing places; 8 of the 15 fastest growing large cities — those with a population above 100,000 — were in the Lone Star State. Topping the list was New Orleans, which suffered a population exodus after Hurricane Katrina in 2005. Its population rose 4.9 percent to 360,740.

The fastest growing large cities from April 1, 2010 to July 1, 2011

1. New Orleans, LA  +4.9 percent to 360,740
2. Round Rock, TX  +4.8 percent to 104,664
3. Austin, TX  +3.8 percent to 820,611
4. Plano, TX  +3.8 percent to 269,776
5. McKinney, TX  +3.8 percent to 136,067

The fastest shrinking large cities from April 1, 2010 to July 1, 2011

1. Detroit, MI  -1 percent to 706,585
2. Flint, MI  -0.9 percent to 101,558
3. Hampton, VA  -0.8 percent to 136,401
4. Cleveland, OH -0.8 percent to 393,806
5. Newport News, VA  -0.6 percent to 103,931

Not only are short sales nearly as prevalent as foreclosures in many markets today, they also are selling at discounts almost as great as foreclosures. Both forms of distress sales are selling at discounts greater than six months ago.

Even though both short sales and foreclosures are hard to find these days and selling quickly, (See Move-in Ready Foreclosures Dry Up), discounts for short sales rose to a national average of 22 percent in April, up from 18 percent in April 2009. National average discounts for foreclosures rose to 25 percent, the same level as April 2009 and a one point increase above January, according to new data from Lender Processing Services.

Though inventories of both foreclosures and short sales are generally low, move-in ready properties, which sell at the least discount from normal listings, are the most difficult to find today. The LPS numbers may reflect a greater percentage of deeply discounted damaged properties that require significant expenditures to restore to move-in conditions.

Lengthy delays in processing foreclosures in the wake of Robogate scandal, new federal rules designed to speed up the short sale process, the prevalence of software platforms for short sales and a gradual acceptance of short sales by lenders has made the process of selling homes for less than their mortgage principal easier and more popular. Bank of America is even offering some struggling homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure.

Once a rarity, pre-foreclosure sales, almost all short sales are expected to rise this year, to as many as 400,000 by the end of 2012, about the same level as foreclosure sales.

In its report on April transactions, LPS also said that home prices have risen 2.5 percent so far this year, a faster rise than the nation has seen since October 2005. The increase in LPS’ Home Price Index since the recent low seen in January 2012 has been the most significant since the market peak in 2005. This increase represents an annualized rate of 13.1 percent per year.

Prices increased in 563 of the 579 metropolitan statistical areas (MSAs) covered by LPS data during April, and in the remaining 16 MSAs, prices fell less than 0.2 percent. Only two major MSAs saw a slight price decrease – Los Angeles and Hartford, Conn. – declining 0.04 and 0.03 percent, respectively.

It’s still a buyer’s market for properties selling for more than half a million as tight inventories driven by negative equity and slow foreclosure processing and rising prices are having much less impact on luxury homes than on less expensive homes.

According to the Institute for Luxury Home Marketing’s weekly market report, the average days on market was 186 for luxury homes. Inventories for the luxury segment are about the same as they were in November. Median prices in the 31 markets that ILHM tracks have stayed fairly stable. Days on market range from a low of 111 days in Silicon Valley to 268 in New York.

By contrast, the national median age of all homes in the June Realtor.com inventory dropped to 84 days in June, down -9.67 percent on an annual basis. The size of Realtor.com’s inventory of homes for sale was 19.35 percent below a year ago. Prices are up 2.68 percent on a year-over-year basis, according to the Realtor.com Trend Data released today. Of 146 markets covered by Realtor.com, while list prices increased in 101 markets, held steady in 26 markets, and declined in just 19 markets. (see Prices Rose 2.68 Percent in June).

Several factors are causing the inventory drawn down among lower price properties. Negative equity is keeping many potential sellers out of the market, which keeps a lid on inventory and complied with the reduced flow of REO properties has led to much tighter market conditions for lower priced properties, particularly in the hardest hit markets, according to CoreLogic Economist Sam Khater. Khater estimates that lower tier properties are appreciating three times faster than expensive homes as a result of tighter inventories. (See Less Expensive Homes Appreciate Three Times Faster)

Luxury brokers around the nation report little change in their markets in recent months, unlike the tight inventories and rising prices among entry-level homes found in almost market in the country.

In Denver, the 204 days is the average time on market for luxury properties today. The average reflects five sales that remained on the market for over a year. One home that was new construction in Lone Tree was on the market for 1458 days., reports broker Joan Cox.

Silicon Valley is the tightest luxury market in the nation, averaging 98 days on market during the 12 months endng July 1, according to John Souerbry of Luxury Homes and Land.

In Seattle, the luxury home market has actually shifted from a sellers’ market in January of 2012 to a strong buyers’ market. The average market time for home sales was at its lowest in September 2011 250 days, reaching the high-water mark of 366 days in April of 2012 and since has steadily been trending downward reports Adrian Willanger of Coldwell Banker Greater Seattle.

In Fort Collins the luxury market is doing better than most. Average days to get an offer for the homes that sold has been 133 days, with an average days on the market of 167. This year, 39 homes sold for an average of 96.1 percent of listing price.

Suffolk County Long Island is experiencing an average days on the market for luxury homes at 186 days. These closed and sold luxury homes from $1,000,000 and up ranged in price from $1,100,000 for a 5 bedroom 4 bath Contemporary in Westhampton to $3,500,000 for a 4 bedroom 3.5 bath Post Modern Style House in Westhampton. Nearby Nassau County is virtually the same, at 183 days.

In Cary, NC the current months of supply is the lowest level since 2007 and is a return to the historical norm for the segment. The lowest supply based on 2011 closings is found in Cary/Morrisville/Apex , according to Tracy Santrock.

In Solon, Ohio luxury sales are up slightly, from 13 to 15 and 11 more luxury homes currently under contract, which means that Solon luxury sales will be at least 26 even if no more luxury homes sell the rest of the year. Solon sold 29 luxury home sales in all of 2011. The average days on the market for a luxury home in Solon has drastically decreased, from 224 days in 2011 to only 168 so far this year.

In Phoenix, properties have been on the market for an average of 199 days. In Scottsdale the number of homes on the market in this price point continues to decline. There was an 11 percent drop in inventory between May and June and pending home sales saw a pretty sharp drop in June.