with the dwindling renters and increasing supply of rental units

some rental unts must be empty all time. Just like Silicon valley's commercial real estate, a lot of buildings have been empty for few years now.

The scenario happened once to Texas prior to 1990. Lots of houses had been empty, since no renters come forwards to rent those houses.

If the flow of lower priced houses continue, more people of good renters (having stable jobs and good credits) can afford houses. They will buy their own houses and move off the renter lists. It will leave "bad" people to rental markets, which would translate to higher operating costs of running rental properties for property owners. It needs handyman skills and gut mentality to deal with them.

If you believe there is a population growth at certain areas, you must find a reason behind it. Silicon Valley has benefited the huge influx of chinese and indian immigrants for the internet age. Now, due to outsourcing and off-shoring to India and China, the demand for skilled workers at Silicon Valley is not there. If there is no population growth at Silicon valley, a few of property owners may not find renters to fill the houses, no matter how low the rent would be, just as those empty commercial buildings around Silicon valley. One pigeon is for one nest, if you buy off all bank-owned properties and turn them into rental units, do you know if there are enough pigeon to fill them?

Just like any other businesses, if everyone sees the money and run to it, there will be not enough money to go around.