Tuesday, February 03, 2009

Q4: Homeownership Rate Declines to 2000 Level

by Bill McBride on 2/03/2009 10:01:00 AM

So much for the homeownership gains of the last 8+ years. Gone.

This morning the Census Bureau reported the homeownership and vacancy rates for Q4 2008. Here are a few graphs ...

Homeownership Rate Click on graph for larger image in new window.

The homeownership rate decreased slightly to 67.5% and is now back to the levels of late 2000.

Note: graph starts at 60% to better show the change.

The homeowner vacancy rate was 2.9% in Q4 2008.

Homeowner Vacancy RateA normal rate for recent years appears to be about 1.7%. There is some noise in the series, quarter to quarter, so perhaps the vacancy rate has stabilized in the 2.7% to 2.9% range.

This leaves the homeowner vacancy rate almost 1.2% above normal, and with approximately 75 million homeowner occupied homes; this gives about 900 thousand excess vacant homes.

The rental vacancy rate increased slightly to 10.1% in Q4 2008, from 9.9% in Q3.

Rental Vacancy RateIt's hard to define a "normal" rental vacancy rate based on the historical series, but we can probably expect the rate to trend back towards 8%. According to the Census Bureau there are close to 40 million rental units in the U.S. If the rental vacancy rate declined from 10.1% to 8%, there would be 2.1% X 40 million units or about 820,000 units absorbed.

This would suggest there are about 820 thousand excess rental units in the U.S.

There are also approximately 150 thousand excess new homes above the normal inventory level (for home builders) - plus some uncounted condos.

If we add this up, 820 thousand excess rental units, 900 thousand excess vacant homes, and 150 thousand excess new home inventory, this gives about 1.87 million excess housing units in the U.S. that need to be absorbed over the next few years. (Note: this data is noisy, so it's hard to compare numbers quarter to quarter, but this is probably a reasonable approximation).

These excess units will keep pressure on housing starts and prices for some time.

I'll have some more later today ...