by Bill McBride on 7/27/2010 10:00:00 AM
Tuesday, July 27, 2010
The Census Bureau reported the homeownership and vacancy rates for Q2 2010 this morning. Here are a few graphs ...
Click on graph for larger image in new window.
The homeownership rate declined to 66.9%. This is the lowest level since 1999.
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%.
I'll have to revisit this now that the homeownership rate has fallen back to the top of the range I expected!
The homeowner vacancy rate declined to 2.5% in Q2 2010.
A normal rate for recent years appears to be about 1.7%.
This leaves the homeowner vacancy rate about 0.8% 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 500 thousand excess vacant homes.
The rental vacancy rate was steady at 10.6% in Q2 2010.
Other reports have suggested that the rental vacancy rate has declined slightly. This report is nationwide and includes homes for rent.
It'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%, then 2.6% X 41 million units or 1.07 million excess units would have to be absorbed.
This suggests there are still about 1.6 million excess housing units. These excess units will keep pressure on housing starts, rents and house prices for some time.