Rental Vacancy Down But Homeownership Rate Continues to Slip

The Census Bureau’s fourth quarter Housing Vacancy and Homeownership Report released today showed lower rental vacancy rates.

National rental vacancy rates fell to 9.4% down from 10.3% in the third quarter and down from 10.7% a year earlier. This is the first time the rate has been below 10% since third quarter 2008 when it stood at 9.9% and is the lowest it has been since the 9.4% rate recorded in first quarter 2003. With the exception of the Northeast, the rental vacancy rate was down in each of the regions from a year earlier—the Midwest at 9.6% vs. 11.2%, the South 11.5% vs. 13.7%, and the West at 7.9% vs. 8.9%. The Northeast at 7.5% was statistically no different from its year earlier reading of 7.2%.

Meanwhile, the homeowner vacancy rate at 2.7% was unchanged from fourth quarter 2009 and from a statistical point of view, no different from third quarter’s 2.5%. All of the regions were unchanged on a statistical basis from their year earlier readings.

The seasonally adjusted homeownership rate continued to slide, falling to 66.6% from 67.3% a year earlier, and down from its peak of 69.4% in second quarter 2004. However, the measure was essentially (and statistically) unchanged from third quarter’s 66.7%.

The number of occupied housing units rose by just under 1.1 million to 112.5 million units from fourth quarter 2009. The increase was all in rental units which increased from 36.6 million units to 37.7 million units. The number of owner occupied units was unchanged at 74.8 million units.

The number of year-round vacant for sale only homes remained constant at 2.1 million units from a year earlier.

Implicit in the survey’s number of occupied units is the change in the number of households from quarter to quarter. The increases in the implicit number of households in the second and third quarters of 2010 were essentially the same, but were up from the first quarter. The increase jumped in the fourth quarter. This is an indication that some of the pent up demand for household formations built up over the last few years may be beginning to be unleashed, turning into an increase in actual household formations. From fourth quarter 2009 to fourth quarter 2010 there were 1,081,000 additional occupied housing units, indicating that the number of households increased by that amount over that period. Almost half of that increase— 537,000—occurred in fourth quarter 2010.

This is an early indication that the improving economy and rising employment (though still too slow by most economists’ standards) are having a positive effect on household formations. Implied in the numbers, as indicated above, is that most of the new households appear to have moved into rental units. This is to be expected when the economic circumstances of people forced to double up with others improve and they are able to move out on their own. Eventually, we expect that some renters will feel comfortable enough with their economic situation to purchase a home. These may be people who have had the ability to purchase a home all along but were hesitant to do so given the uncertainty in the economy and their own job prospects. Further, foreclosures are probably putting downward pressure on the number of owner occupied units and adding to the number of occupied rental units.



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