Housing vacancies in San Jose, Calif., fell by more than 24% in July 2012 compared to the same month a year ago, according to Trulia, the real-estate website. That was the single biggest year-to-year decline among the country’s top 100 metros. But San Jose’s vacancy rate, at only 1% in July, was never that high to begin with. And therein lies one of the challenges in trying to assess the ever-shifting housing supply in America’s largest urban centers.

Trulia thinks it has come up with a better gauge of market conditions using monthly data from that oft-maligned government agency, the U.S. Postal Service. Trulia compares the difference between the national gain in number of occupied households receiving mail (970,000 added from mid-July 2011 to mid-July 2012) and the total gain in housing units that could receive mail (760,000). The difference of 210,000 units is the number by which vacant inventory was reduced, a 5% drop nationwide and a decline in the vacancy rate to 3.4%, from 3.6% in July 2011.

(The U.S. Census Bureau, which released its quarterly Housing Vacancy Survey last week, reported a significantly higher vacancy rate, based on a monthly national sampling of 70,000 housing units that are contacted in person or by phone, says Census spokesman Bob Callis.)

The good news is that a number of markets that have been overwhelmed by foreclosures, including Las Vegas and Phoenix, also showed double-digit year-to-year percentage declines in vacancies. Trulia observes that vacancies are dropping where household formation is growing faster than the number of housing units available, which itself is “closely linked” to employment growth in those markets. So it’s not surprising that job centers like San Jose, Denver, and Seattle have low vacancy rates, as do Vegas, Phoenix and Bakersfield, Calif., where new-home construction has fallen well below pre–housing bust levels.

“Vacant homes are a key part of the actual listed inventory and of the ‘shadow inventory' of homes that could come onto the market in the future,” writes Jed Kotko, Trulia’s chief economist. “In fact, vacancies are better than inventories as a measure of whether there’s a housing shortage or housing glut.”

However, Kotko also sees vacancies declining “in many of the wrong places”—such as San Jose, Austin, Los Angeles, Washington D.C., and Long Island, N.Y., which have low vacancy rates anyway—making it harder for buyers and renters to find affordable housing.

The markets with the highest vacancy rates, on the other hand, include cities such as Detroit and Cleveland, which have incurred severe losses in jobs and residents; but also Florida metros Palm Beach and Fort Lauderdale, which are only now climbing out from under a surfeit of residential construction from the last housing boom.

“If Detroit could ship some of its vacant homes to San Jose, both markets would be better off,” quips Kotko. “But that’s not how the housing recovery works. A real housing market recovery needs household growth and construction to stay in balance, not just nationally, but in each local market.”

It’s worth noting, too, that Las Vegas still ranks among the 10 highest-vacancy cities in the country, an indication that even markets seemingly in recovery have a long way to go before they normalize.

John Caulfield is senior editor for Builder magazine.

Learn more about markets featured in this article: Las Vegas, NV, San Jose, CA.