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Wednesday, April 27, 2011

Q1 2011: Homeownership Rate at 1998 Levels

by Calculated Risk on 4/27/2011 10:00:00 AM

The Census Bureau reported the homeownership and vacancy rates for Q1 2011 this morning.

Homeownership Rate Click on graph for larger image in graph gallery.

The homeownership rate declined to 66.4%, down from 66.5% in Q4 2010. This is the same as in 1998.

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. Some of the increase due to demographics (older population) will probably stick, so I've been expecting the rate to decline to around 66%, and probably not all the way back to 64%.

Homeowner Vacancy RateThe homeowner vacancy rate decreased to 2.6% in Q1 2011, down from 2.7% in Q4 2010. This has been bouncing around in the 2.5% to 2.7% range for two years, and is slightly below the peak of 2.9% in 2008.

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

This leaves the homeowner vacancy rate about 0.9 percentage points 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 increased to 9.7% in Q1 2011 from 9.4% in Q4 2010.

Rental Vacancy RateThis increase doesn't fit with the Reis apartment vacancy data and the NMHC apartment survey. However 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 42 million rental units in the U.S. If the rental vacancy rate declined from 9.7% to 8%, then 1.7% X 42 million units or about 700 thousand excess units would have to be absorbed.

This suggests there are still close to 1.4 million excess housing units.

Note: Some analysts also add in the increase in "held off market, other" units to track the excess housing units - and that has increased from 2.6 million units at the end of 2005 to 3.861 million units in Q1 2011 - or another 1.26 million excess units. That would suggest over 2.6 million excess units. Either way, this survey suggests there is still a large number of excess units.