by Calculated Risk on 10/26/2007 01:57:00 PM

From the Census Bureau on Residential Vacancies and Homeownership

National vacancy rates in the third quarter 2007 were 9.8 percent for rental housing and 2.7 percent for homeowner housing, the Department of Commerce’s Census Bureau announced today. The Census Bureau said the rental vacancy rate was not statistically different from the third quarter rate last year, or the rate last quarter. For homeowner vacancies, the current rate was higher than a year ago (2.5 percent), but was not statistically different than the rate last quarter (2.6 percent). The homeownership rate at 68.2 percent for the current quarter was lower than the third quarter 2006 rate, but was not statistically different from the rate last quarter.

Click on graph for larger image.

The first graph shows the homeowner vacancy rate since 1956. A normal rate for recent years appears to be about 1.7%. There is some noise in the series, quarter to quarter, but it does appear the vacancy rate has stabilized.

This leaves the homeowner vacancy rate almost 1% above normal, or about 750 thousand excess homes.

The rental vacancy rate has been trending down slightly for almost 3 years (with some noise). This was due to a decline in the total number of rental units in 2004, and more recently due to more households choosing renting over owning.

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%. This would suggest there are about 600 thousand excess rental units in the U.S. that need to be absorbed.

This suggests there are about 1.35 million excess housing units in the U.S. that need to be worked off over the next few years. These excess units will keep pressure on housing starts for some time.