The latest Census data show that the vacancy rate remains elevated, and an unusually high share of vacant homes are being held off the market. This vacancy overhang is holding back construction activity.
The 2013 Q3 Census Homeownership and Vacancy survey shows that the vacancy rate is still above its pre-bubble level and remains unchanged from one year earlier. This might come as a surprise to house hunters, who have struggled with limited inventory when trying to find a home to buy or rent, but an unusually high share of vacant homes today is being held off the market. The elevated vacancy rate discourages new construction activity and is therefore one of the major hurdles to a full housing recovery.
To understand why vacancies are still widespread and what impact they have, we dug deeper into the Census data as well as other data sources that report vacancies at the metro level. Here’s what we found.
Nationally, Vacancy Rate Still Above Pre-Bubble Level
In the third quarter of 2013, 10.2% of housing units were vacant, excluding vacant homes that the Census classifies as “seasonal,” such as beach homes. Vacant homes include those for sale or for rent, as well as homes “held off market” for various reasons. This vacancy rate of 10.2% – the share of homes that are empty – was unchanged from 2012 Q3 and well above the pre-bubble level. In fact, the vacancy rate today (10.2%) is closer to its peak during the recession (11.0% in Q3 2010) than before the bubble (8.8% in Q3 2000).
But wait – aren’t homes hard to find? Buyers (and renters, too) have had little to choose from because the listed inventory is low. The share of the overall housing stock that is listed for sale, based on National Association of Realtors (NAR) and Census data, rose slightly in 2013 Q3 compared to last year but is lower than at any other point during or after the bubble. In other words, the for-sale inventory is back down to its 2000 level, and tight inventory has helped fuel sharp price increases across the country over the past two years. That means there’s an inventory shortage, but not a housing shortage:
How can the for-sale inventory be relatively low while the vacancy rate is high? Because the share of vacant homes being held off the market – that is, neither for sale nor for rent – is rising. In 2013 Q3, 53.5% of vacant homes were held off market, up slightly from 52.9% in 2012 Q3 and from a low of 45% at the height of the housing bubble in 2006.0 comments
To celebrate All Hallows’ Eve, Trulia looked at which U.S. metros have the greatest concentration of old, vacant homes – the homes where we suspect you’re more likely to find ghosts lurking.
For Halloween, we wanted to find out which metros are more likely to keep the Ghostbusters in business. However, it would be way too scary to go door to door since not all ghosts are as friendly as Casper. Instead, we put our skulls together and came up with another way to find them. Which homes do we think might be haunted? Old homes, of course: old homes with creaky bones have a history of previous residents whose spirits might return, or maybe never left. Our other hunch is that ghosts would prefer not to be disturbed, so they haunt vacant homes more than homes occupied by pesky mortals.
Putting on our Ecto-Goggles, we scared up the American Community Survey 2006-2010 Public Use Microdata Sample to identify homes that are both (1) vacant for any reason and (2) built before 1939.
Ghosts Like Capes
From the looks of it, ghosts have a thing for capes. No, silly, not ghosts wearing capes – ghosts on capes: Cape May, NJ and Cape Cod, MA. Those two metro areas have the highest share of housing units that are both old and vacant. Long-established vacation areas, like Cape May and Cape Cod, as well as Portland, ME and Lebanon, NH, are one of the two types of metros with the most old, vacant homes. The other type of metro with old, vacant homes is older cities that have had rough economic times, such as Utica, Buffalo and Albany in upstate New York, as well as nearby Scranton, PA, Detroit and Providence.
Most markets have fewer vacant homes than a year ago. A drop in vacancies is good for overbuilt markets such as Las Vegas and Phoenix – but a challenge for tight markets in coastal California.
Vacancies are one of the best measures of how the housing market is really doing. Vacant homes depress neighborhood home values and discourage new construction. During the housing bubble, new home construction ran ahead of demand: there were more new homes than people to live in them, and some stayed vacant. As prices dropped and foreclosures rose, people lost or left homes they couldn’t afford, creating more vacant homes. Then, construction nearly stopped. Since then, it’s remained below normal levels and way below bubble levels. As a result, the vacancy rate has been moving back down toward normal.
As always, it’s not the national picture that matters: housing is local. Unfortunately, the main up-to-date source of vacancy data is the quarterly Census Housing Vacancy Survey, which is based on too small a sample of homes to provide reliable data at the state or local level. With this post, we present a new measure of vacancies, based on U.S. Postal Service (USPS) monthly data on the number of addresses that are and are not receiving mail. (See the end of post for how the USPS collects these data.) Here’s what we found.0 comments
Looking at the 2010 Census report on U.S. housing characteristics, what do today's vacancy rates tell us about long-term economic recovery?
Vacancies are an essential measure of the state of the housing market. Vacant units represent the supply of homes that exceeds demand, and vacancies depress prices and discourage new construction. The effect of vacancies on nearby home prices is strong: one academic study estimates that a vacant home can lower the price of nearby homes within 500 feet by as little as 0.7% and as much as 10% — depending on whether the vacant home is a foreclosure or just neglected.
Today the Census Bureau released its report on housing from the 2010 Census. Because the Census attempts to survey nearly everyone living in the U.S., it lets us see vacancy rates, homeownership levels and other measures for local housing markets. The differences in vacancy rates across metro areas is huge: among the largest metros, the vacancy rate when the Census was conducted in April 2010 ranged from 3.9% in San Jose to 13.9% in New Orleans; the U.S. average is 7.9%.
How are we defining the vacancy rate? It’s the total number of vacant homes divided by all homes that exist in a given area. What we don’t count as “vacant” are vacation homes (i.e., homes that are seasonal, recreational, or occasional-use homes) because they’re not part of the excess housing inventory in the same sense as for sale, for rent or other vacant units are. (In case you were wondering, summertime second-home states like Maine, Vermont, and New Hampshire have the highest share of vacation homes. Florida and Arizona have high shares, too.)
|Top 10 Metros with Lowest Vacancy Rate|
|Rank||U.S. Metro||Vacancy Rate|
|1||San Jose, CA||3.9%|
|3||San Diego, CA||4.9%|
|4||Los Angeles, CA||5.1%|
|5||Minneapolis-St. Paul, MN||5.1%|
|7||Salt Lake City, UT||5.3%|
|Top 10 Metros with Highest Vacancy Rate|
|Rank||U.S. Metro||Vacancy Rate|
|1||New Orleans, LA||13.9%|
|2||Las Vegas, NV||12.3%|
|10||Tampa-St. Petersburg, FL||10.0%|
*Among metropolitan areas with at least one million population
The areas with the highest vacancy rates are in the South, Southwest and Midwest, and this includes markets with some of the largest drops in home prices (think Las Vegas, Phoenix and several Florida cities) and longer-term slower growth (such as Detroit and Cleveland). Meanwhile, the continued recovery from Hurricane Katrina has boosted the vacancy rate in New Orleans.
On the other hand, the areas with the lowest vacancy rates include three of the four major California metros – San Jose, San Diego and Los Angeles. The fourth – San Francisco-Oakland – has the 11th lowest, just after Denver, at 5.7%. What’s going on here? Wasn’t California the epicenter of the housing bubble? Yes – but despite the big price declines and high foreclosures in California, there still aren’t enough homes in coastal California for all the people that want to live there, so even with the housing crash, vacancies are among the lowest in the country. Even in the inland California metros of Stockton, Merced and Modesto – the Central Valley cities where home prices fell more than anyplace else in the country – vacancy rates are in the 7-9% range, lower than many big cities in the rest of the country.
Looking across all metropolitan counties, the pattern is clear: vacancy rates are lowest (shaded the darkest green on the map) along the West Coast, Northeast and upper Midwest (Wisconsin and Minnesota), and highest (lightest green) across the South, the rustbelt Midwest (Michigan, Ohio and Indiana), and the Southwest (Nevada and Arizona). Bottom line: Where vacancy rates are low, housing markets will recover sooner and prices will start to rise; areas with high vacancy rates will wait longer for a home price rebound.