by Calculated Risk on 7/27/2008 08:26:00 PM

This week the Census Bureau reported the homeownership and vacancy rates for Q2 2008. Here are a few graphs and some analysis ...

Click on graph for larger image in new window.

Although the homeownership rate increased slightly (just noise), the homeownership rate is now back to the levels of the summer of 2001. Note: graph starts at 60% to better show the change.

The second graph shows the homeowner vacancy rate since 1956. The homeownership vacancy rate decreased slightly to 2.8% (from a record 2.9% in Q1).

A normal rate for recent years appears to be about 1.7%. There is some noise in the series, quarter to quarter, so perhaps the vacancy rate has stabilized in the 2.7% to 2.9% range.

This leaves the homeowner vacancy rate almost 1.1% above normal, and with approximately 75 million homeowner occupied homes; this gives about 825 thousand excess vacant homes.

The rental vacancy rate decreased slightly to 10.0% in Q1 2008, from 10.1% in Q1. The rental vacancy rate had been trending down slightly for almost 3 years (with some noise).

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 35.5 million rental units in the U.S. If the rental vacancy rate declined from 10.0% to 8%, there would be 2.0% X 35.5 million units or about 710,000 units absorbed.

This would suggest there are about 710 thousand excess rental units in the U.S.

There are also approximately 200 thousand excess new homes above the normal inventory level (for home builders) - plus some uncounted condos.

If we add this up, 710 thousand excess rental units, 825 thousand excess vacant homes, and 200 thousand excess new home inventory, this gives about 1.75 million excess housing units in the U.S. that need to be absorbed over the next few years. (Note: this data is noisy, so it's hard to compare numbers quarter to quarter, but this is probably a reasonable approximation).

These excess units will keep pressure on housing starts and prices for some time.