While homes prices continue to be on the decline, rent prices are actually on the rise and showed a 3 percent increase from January 2011 to January 2012, as opposed to home values, which dropped 4.6 percent during that same period, according to the January Zillow Real Estate Market Reports released today.

“While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals,” said chief economist for Zillow Dr. Stan Humphries in a release.

To clear out the excess of unsold properties, the federal government announced an REO Initiative in August 2011 to sell homes owned by government agencies to investors with the purpose of converting them into rental units. The first block of 2,490 REOs went to sale in February.

When looking at rent prices on a month-over-month basis, January’s median rent prices actually declined slightly, falling 0.3 percent to $1,218, according to the Zillow Rent Index (ZRI). During the same period, home values fell 0.5 percent to $146,200, according to the Zillow Home Value Index (ZHVI).

The states that saw the greatest year-over-year decline in home values were Nevada (-10.3), Illinois (-9.4), Georgia (-9.3), Washington (-7.8), and New Jersey (-7.2), according to the ZHVI.

Based on the ZRI, the states with the greatest increases in median rent over a year were New Jersey (+16.5), New York (+13.7), Kansas (+10.2), Indiana (+10), and Michigan (+10.0).

The ZRI also showed year-over-year gains for 69.2 percent of metropolitan areas covered by the index. For the ZHVI, only 7.3 percent of metro areas saw increases in home values.

For some metros, the increase in rent and drop in home prices were closely matched. In the Chicago metro, the ZRIwent up 9.1 percent year-over-year, while home values fell 10.4 percent during the same period. In the Minneapolis-St. Paul metro, rents rose 11 percent as home values dropped 8.1 percent.

“The flourishing rental market is the silver lining to the nation’s housing downturn,” said Humphries. “We haven’t had a good way to quantify what is happening with rental rates until now, and the inaugural Zillow Rent Index shows us a healthy and growing rental market across the majority of the country, even as home values continue to fall.”

Nationwide, foreclosures decreased by 0.3 percent compared to the year before in January 2011, but went up 0.3 percent on a monthly basis compared to December, with 8.4 out of every 10,000 homes foreclosed upon in January 2012.

Foreclosure re-sales went up by 2 percent over a year ending in January 2012 and rose by 1.4 percent compared to the month before. Overall, foreclosure re-sales accounted for 19.46 percent of all home sales in January, and Nevada had the highest percentage of foreclosure re-sales at 49.65 percent. The state also saw a yearly increase of 12.6 percent for foreclosure re-sales.