Monday, July 25, 2011

Be careful with the Housing Vacancies and Homeownership report

by Bill McBride on 7/25/2011 03:58:00 PM

This is more technical for analyst and reporters: On Friday the Census Bureau will release the Q2 Housing Vacancies and Homeownership. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. Unfortunately the report is based on a fairly small sample, and does not track the decennial Census data.

Economist Tom Lawler has pointed out the discrepancies in the homeownership rate before, and he points out that the vacancy rates are "silly" too.

From economist Tom Lawler: HVS Rental Vacancy Rate Silliness: The Case of Richmond, Virginia

In early 2009 the Richmond, Virginia press wrote numerous articles after quarterly HVS data on metro area rental vacancy rates “showed” that the rental vacancy rate in the Richmond, Virginia metro area in the fourth quarter of 2008 was 23.7%, the highest in the country. This shocked local real estate folks, including folks who tracked rental vacancy rates in apartment buildings in the area. The Central Virginia Apartment Association, e.g., found that the rental vacancy rate based on a survey of 52 multi-family properties in the Richmond, VA metro area was around 8% -- above a more “normal” 5%, but no where close to 23.7%. And while the HVS attempts to measure the overall rental vacancy rate (and not just MF apartments for rent), the data seemed “whacky.”

When I talked to Census folks back then, they said that there quarterly metro area vacancy rates were extremely volatile and had extremely high standard errors, and that folks should focus on annual data.

However, “annual average” data from the HVS showed MASSIVELY different rental vacancy rates in Richmond, Virginia than did the American Community Survey, which also produces estimates of the vacancy rate in the overall rental market.

Here are some annual data comparisons of the HVS rental vacancy rate and the American Community Survey (ACS) rental vacancy rate (which is also for the overall rental market) from 2006 through 2009, as well as the Census 2010 rental vacancy rate for April 1, 2010.

HVS Rental Vacancy Rates: The Case of Richmond, VA Metro Area
 HVS (annual average)ACS (annual average)Census 2010 (April 1)
201013.5% 8.8%

I am showing Richmond not because it is the most “outlandish,” but rather because the HVS data “mistakes” create huge confusion in the local press. Census analysts had no clue why the HVS data produced such outlandish estimates relative to the ACS – it could be massive sampling errors, significant non-sampling errors, or both.

There are several other MSAs where the HVS rental vacancy rates just look plain “silly.” Some Census analysts agree that the HVS MSA data aren’t reliable, and even that several state data aren’t reliable, but, well, er, the national data are probably “ok” – which they are not.

From CR: Media and Analysts: There are serious questions about this report. Here are some previous post by Lawler on the HVS:
Census Bureau on Homeownership Rate: We've got “Some 'Splainin' to Do”
Lawler: Census 2010 and the US Homeownership Rate
Lawler: Census 2010 Demographic Profile: Highlights, Excess Housing Supply Estimate, and Comparison to HVS
Lawler: The “Excess Supply of Housing” War
Lawler: Census Releases Demographic Profile of 12 States and DC: Confirms Bias of HVS
Lawler: Census 2010 and Excess Vacant Housing Units
Lawler: On Census Housing Stock/Household Data
Lawler: Housing Vacancy Survey appears to massively overstate number of vacant housing units
Lawler: US Households: Why Researchers / Analysts are “Confused”