by Calculated Risk on 10/25/2008 03:12:00 PM

Christopher Thornberg of Beacon Economics recently estimated the excess housing units in the U.S. at 3 to 4 million.

Click on graph for larger image in new window.

Credit: Dr. Thornberg. See this presentation at the California Self Storage Association (CSSA).

Note: the entire presentation is interesting!

The underlying data is available from the Census Bureau.

It makes sense that there are more housing units than households due to the normal frictions of households moving, normal vacancy rates, and second homes. As an example, according to the Census Bureau, there were 1.145 million housing units rented or sold in Q2 but not yet occupied. This is normal as households move.

Some of the recent increase in the ratio of housing units to households is due to excess housing units (overbuilding), and apparently Dr. Thornberg believes this ratio should decline from about 1.17 to 1.14 or so. With approximately 111 million households in the U.S., and a ratio of 1.14, the U.S. only needs 127 million housing units compared to the almost 130 million housing units currently in the U.S.. That gives 3 million excess housing units.

However I think Thornberg's estimate is too high. In an earlier post, Q2: Homeownership and Vacancy Rates, I estimated the excess rental units, vacant homes, and new home inventory, and calculated that there were "about 1.75 million excess housing units in the U.S." at the end of Q2. I think this is a better estimate.

The Q3 numbers will be released this week.