Thursday, October 29, 2009

Q3: Record Rental Vacancy Rate, Homeownership Rate Increases Slightly

by Bill McBride on 10/29/2009 10:00:00 AM

This morning the Census Bureau reported the homeownership and vacancy rates for Q3 2009. Here are a few graphs ...

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

The homeownership rate increased slightly to 67.6% and is now at the levels of Q2 2000.

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

The homeownership rate increased in the '90s and early '00s because of changes in demographics and "innovations" in mortgage lending. The increase due to demographics (older population) will probably stick, so I expect the rate to decline to the 66% to 67% range - and not all the way back to 64% to 65%.

The small increase in the homeownership rate in Q3 might by related to the first-time home buyer tax credit, but I expect the rate to decline further.

The homeowner vacancy rate was 2.6% in Q3 2009.

Homeowner Vacancy Rate A normal rate for recent years appears to be about 1.7%.


This leaves the homeowner vacancy rate about 0.9% above normal, and with approximately 75.3 million homeowner occupied homes; this suggests there are close to 675 thousand excess vacant homes.

And as expected, as a result of the first-time homebuyer tax credit ...

The rental vacancy rate increased to a record 11.1% in Q3 2009.

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 11.1% to 8%, there would be 3.1% X 40 million units or about 1.25 million units absorbed.

These excess units will keep pressure on rents and house prices for some time.

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