Good News-Bad News: Rental Vacancy Down As Homeownership Rate Slips


The Census Bureau released its third quarter Housing Vacancy Survey today, providing mixed news on the rental and homeownership front.

In the good news column, national rental vacancy rates fell a bit to 10.3%, down from 11.1% a year earlier. However, since first quarter 2008, the measure has only been below 10% one time (third quarter 2008).

In the neutral news column, the homeowner vacancy rate held steady from the second quarter at 2.5%. That was down a bit from the 2.6% rate a year earlier—though from a statistical point of view, the rate may be unchanged.

In the negative news column, the seasonally adjusted homeownership rate continued to slide, falling to 66.7% from 67.4% a year earlier, and down from its peak of 69.4% in second quarter 2004. This marks the fourth consecutive quarter of decline, and returns the homeownership rate to its second quarter 1999 rate.

Some positive news is found in the decline in the number of year-round vacant for sale only homes. That inventory has fallen to 1.93 million in the third quarter from its peak of 2.3 million in first quarter 2008.

Implicit in the survey’s number of occupied units is the change in the number of households from quarter to quarter. The number has been rising for the last four quarters and accelerated in the second and third quarters of this year, suggesting 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 third quarter 2009 to third quarter 2010 there were 692,000 additional occupied housing units, indicating that the number of households increased by that amount over that period. A little over 500,000 of the increase occurred in the second and third quarters of this year.

The increase in occupied units has been in rental units while the number of owner occupied units over the past year has fallen until the most recent quarter. This suggests, as we were expecting, that most of the new households have moved into rental units. 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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