Monday, April 26, 2010

Q1 2010: Homeownership Rate Lowest Since Q1 2000

by Bill McBride on 4/26/2010 10:00:00 AM

The Census Bureau reported the homeownership and vacancy rates for Q1 2010 this morning. Here are a few graphs ...

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

The homeownership rate declined to 67.1%. This is the lowest level since Q1 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've been expecting the rate to decline to the 66% to 67% range - and not all the way back to 64% to 65%.

Homeowner Vacancy RateThe homeowner vacancy rate was 2.6% in Q1 2010.

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

This leaves the homeowner vacancy rate about 0.9% above normal. This data is not perfect, but based on the approximately 75 million homeowner occupied homes, we can estimate that there are close to 675 thousand excess vacant homes.

The rental vacancy rate was 10.6% in Q1 2010.

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 41 million rental units in the U.S. If the rental vacancy rate declined from 10.6% to 8%, there would be 2.6% X 41 million units or over 1 million units absorbed.

This suggests there are still about 1.7 million excess housing units, and these excess units will keep pressure on housing starts, rents and house prices for some time.