A deep dive into the gritty data and formulas of the vacancy rates by the Census Bureau.
By Wolf Richter for WOLF STREET.
The Census Bureau estimated that in Q4 2022, the rental vacancy rate dipped to 5.8% and that the homeowner housing vacancy rate dipped to 0.8%, matching the record low earlier in 2022. These vacancy rates – particularly the homeowner vacancy rate – have been cited as evidence to support the claim that there is a “housing shortage.”
The homeowner vacancy rate fell from 1.6% in 2018 to 0.8% now. I have joked for a while that at this trend, the vacancy rate will become negative in 2026. Having to explaining a “negative vacancy rate” to the unsuspecting American public would be a hoot.
It’s only partially tongue-in-cheek. In reality, the Census Bureau uses formulas to figure these vacancy rates that do not include all vacant units, and in fact exclude huge categories of vacant units, depending on why the units are vacant.
The actual total vacancy rate was 10.1% in Q4, homeowner and rental combined, as per the same report by the Census Bureau. On page 1, it shows the rental vacancy rate (5.8%) and the homeowner vacancy rate (0.8%), and then on page 4, it shows the actual total vacancy rate (10.1%).
“Approximately 89.9 percent of the housing units in the United States in the fourth quarter 2022 were occupied and 10.1 percent were vacant,” the Census Bureau report says.
On page 4, we see that in Q4, 2022:
- Total number of housing units: 143.95 million.
- Year-over-year increase in housing units: +1.34 million
- Total number of vacant housing units: 14.55 million.
- Total vacancy rate: 10.1% (14.55 million divided by 143.95 million).
How 10.1% compares to vacancy rates in prior decades.
When we look at the data going back a few decades we see that the annual total vacancy rate ranged from 8.9% in 1981 and 1982 to a high of 14.5% in 2009. Here are the lowest annual vacancy rates and the highest annual vacancy rates per decade:
- 1980-1989: 8.9% – 11.6%
- 1990-1999: 10.9% – 11.7%
- 2000-2009: 11.6% – 14.5%
- 2010-2019: 12.0% – 14.3%
Annual vacancy rates, 2015 – 2021:
- 2015: 12.9%
- 2016: 12.8%
- 2017: 12.7%
- 2018: 12.3%
- 2019: 12.0%
- 2020: 10.6%
- 2021: 10.8%
Type of vacancy, Q4 2022:
Of the total vacant units in Q4, 2022 (14.55 million, 10.1% of total housing units):
- Vacant year-round: 10.95 million (7.6% of total housing units)
- Vacant seasonal: 3.60 million (2.5% of total housing units).
Of the 10.95 million year-round vacant units:
- For rent: 2.76 million, 1.6% of total
- For sale only: 0.72 million, 0.5% of total
- Rented or Sold: 0.81 million, 0.6%
- Held off Market: 6.66 million, 4.6%
- For Occasional Use: 2.01 million
- Temporarily Occupied by persons “usual residence elsewhere” (URE): 1.11 million
- Other: 3.54 million
These 3.54 million “other” units under “Held off Market,” were held off the rental or sale market for these reasons (Census Bureau definitions):
- Foreclosure: units under foreclosure, bank owned, bankrupt, up for auction, sheriff’s sale, repossessed, have a lien, or taken for taxes.
- Personal/Family Reasons: owner does not want to rent/sell, owner is deciding what to do, owner is keeping for family use, owner is staying with family, or owner is in assisted living or other type of care situation.
- Legal Proceedings: units held for the settlement of estate, in probate, involved in divorce or eviction proceedings, or where the owner is deceased, units with code violations.
- Preparing to Rent/Sell: units that will be placed for rent or for sale this month or where the owner is meeting with a listing agent/agency this month to prepare to put the unit on the market.
- Held for Storage of Household Furniture: units that are vacant and used to store excess household furniture or other household items.
- Needs Repairs: units that are in need of repair, renovations, or cleaning, but are not currently being repaired, renovated, or cleaned.
- Currently Being Repaired/Renovated. units that are being repaired, renovated, refurbished, or cleaned.
- Specific Use Housing. units that are vacant and only used by a specific group of people at one or various times throughout the year, such as military housing, employee/corporate housing, transient quarters, units held by a church, student housing (dorms and school-sponsored housing), model home/apartment, or guest house.
- Extended Absence. units where the owner is on extended work or military assignment, temporarily out of the country, or in jail.
- Abandoned/Possibly to be Demolished/Possibly Condemned: units that are abandoned, units that are said to be demolished or condemned, but where there is no positive evidence such as a sign, notice, or mark on the house or in the block to indicate the unit is to be demolished or condemned.
- Other Write-in/Don’t Know: units where the knowledgeable respondent and/or field representative does not know why the unit is other vacant.
Formulas for the vacancy rates.
Homeowner vacancy rate (0.8%) is calculated this way:
- Vacant year-round homeowner inventory for sale
- divided by the sum of
- Owner occupied units + vacant year-round units sold but awaiting occupancy + vacant year-round units for sale only.
Excluded from the formula: You see what this formula does? It excludes large categories of vacant homeowner units — the units that are “held off the market” and the units that are “vacant seasonally.”
Rental Vacancy Rate (5.8%) is calculated this way:
- Vacant year-round units for rent
- divided by the sum of
- Renter occupied units + vacant year-round units rented but awaiting occupancy + vacant year-round units for rent.
Excluded from the formula: And sure enough, the formula excludes the rental units that are “held off the market” and the rental units that are vacant seasonally.
Whether or not the formulas that get us to vacancy rates of 0.8% or 5.8% make any sense, or are useful, it is important that we know what they mean when someone says there is a housing shortage because the homeowner vacancy rate is 0.8%.
The key: the 6.6 million homes “held off the market” – and this includes homes that, as I have pointed out many times before, are vacant because the homeowner bought another home and moved out but chose not to sell the old and now vacant home in order to ride up the housing boom all the way to the very tippy top of the spike, which has now broken off. Those homes are in the shadow inventory that will sooner or later emerge from the shadows.
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This article is beyond awesome, Wolf. Very sorely needed to counter all the false narratives about “housing shortage”.
I don’t know if you are also aware of a close cousin of the above discussed fake vacancy rate narrative:
How the Census Bureau has a non-census-year PEP (Population Estimate Program) that estimates population by assuming that any newly built housing units are all occupied at the same rate as the existing housing stock was at the last census (as long as 10 years ago!). The PEP gets endlessly cited as a need for more housing units fake population increase!). These units also end up empty, of course, resulting in 10+% real vacancy rates.
I 100% agree this article is beyond awesome. The laser focus attention to truth and detail characteristic of Wolf Richter’s work with the absolute absence of bias creates powerful information.
Pure wisdom dispensed daily.
Yes, this one is a rare Gem!
Do these data segregate further by geographical region?
Not the base 10.1% configuration. The 0.8% and 5.8% come with geo data.
Eviction moratoriums due to COVID-19 and other tennent’s ‘rights’ laws on properties they Don’t own, caused many potential landlords to abandon any thought of renting…
Hmmm… Watched some very interesting you tube videos on recent squatting activity around the country..
I mean if you remove another myth of housing shortage, what else does the house humpers have left to bloster their housing will always go up argument? Oh I know, the millennial will save the day, if not Gen Z and if not Gen Alpha will and if that doesn’t work, FED will pivot and 2% mortgage will cause shortage again.
There’s not enough mental gymnastic I can do to convince myself of their stupid narrative of housing shortage..
In part of Canada there is now a tax surcharge on an empty house. Either fill it or pay up. Requires an annual declaration form to be submitted. Also 15% house value tax or outright ban on foreign buyers.
But based on this data vacancy rates are indeed record low now in 2022 and have been steadily falling. So how can house prices fall when vacancy rates are record low, inventories are record low and construction costs are through the roof limiting new inventory?
“…are indeed record low now in 2022”
NO, THEY’RE NOT. READ THE ARTICLE.
The were MUCH LOWER in the 1980s.
For additional detail:
2022, Q4: 10.1%
I understand what you are saying, but how have landlords been able to bluff out very high rent hikes in the face of higher-than-historical vacancy rates?
I understand it comes down to price elasticity (if price hikes can more than offset occupancy drops) but the textbooks (and history) suggest that enough empty landlords break ranks to abort this sort of thing.
So what the heck happened over the last 2 years?
Btw, Wolf, you are well on your way to becoming a national treasure – few others are penetrating the public murk the way you are.
It is disappointing that some of the most important/useful posts from Wolf get the fewest comments.
Since Wolf has to churn out articles every single day (“Gotta make the donuts”, “A blog is a harsh mistress”) unless he gets positive feedback (views, comments, etc) he has to focus on the post types that do.
The number of comments has zero to do with how many people read the article. Zero. There are a few 100 active commenters on this site, but the site gets between 1.1 million and 1.7 million visits per month. Some topics stimulate the few hundred commenters more than other topics. That’s all.
“I understand what you are saying, but how have landlords been able to bluff out very high rent hikes in the face of higher-than-historical vacancy rates?”
Because if a dwelling is not being offered for sale or rent, what are people going to do? Entities that have a lot of cash and can afford to let properties sit vacant are doing just that and artificially limited supply. The enemy (and this is a common theme we can see in a LOT of different data points) is too much money sloshing around at the upper echelon of society. The rest of us are along for the ride. What else are we supposed to do, be homeless? Crushing the giant corporations and mega-rich who are doing this so that they are FORCED to stop sitting on properties is the solution, but that will absolutely not be on the menu.
This is not surprising to me at all. In most major metro areas I’ve been to they’ve been building properties like gang busters for the last 7 years or so. It seemed absurd with so much being built that there would be low inventory. Econimica did an article on the (not really a) shortage of inventory as well, sometime last year. However, he deleted all of his articles again so I can’t link to it, but he looked at inventory in every state of the Union, and determined it was BS.
I agree this is an awesome article.
But I reach the conclusion that housing is clearly becoming more scarce from your data. The 10.1% is (1) continuing a steady decline the last decade and (2) is the lowest point outside of the early-1980s. That’s a very long time ago as it relates to housing economics.
I’ve been looking for data that disproves the housing scarcity claims. I feel this article both helped and hurt on this front. Helped detail the silliness of the 0.8%, but shows a continued decline on a truer metric.
There is another issue that I think causes vacancy rates to be understated that I haven’t yet tried to figure out. But I see it in the data, I just don’t know where it comes from. I believe it comes from the way the Census Bureau tries to get information about vacant units; it’s either in the questions of the surveys, or the surveys aren’t getting to the owners of the vacant units.
So here is the issue: During the housing bust – 2005 through 2011 – vacancy rates shot up to 14.5%. Why is this possible?
1. These are rental and homeowner vacancies combined. People who let the home go back to the lender and had to move out, they moved into a rental. So in terms of the total vacancy rate, it should have no impact.
2. There is no way that suddenly millions of households vanished and their housing units became vacant. During that time, the number of households kept growing.
I think what happened is that the Census Bureau didn’t capture these units as vacant (due to how the survey question was worded or the survey questionnaire didn’t get to the owner of the vacant unit), and when the housing bust set in, those units turned up on the market (forced selling?), and suddenly they became part of the for-sale vacancies. So I think there are lots of units that are vacant that are systematically undercounted until the forced selling sets in. And then they show up as for-sale.
Look at these numbers, and how during the housing bust (forced selling – meaning a ballooning for-sale inventory), the vacancy rate jumped – though the number of households actually increased:
Wolf, thanks you for an excellent article.
I think there are 2 variables not accounted for. 1. Not all families who underwent foreclosure moved into rentals. I think the number of homeless drastically increased during the GR. Recently homeless families that are somewhat functional (rather than dysfunctional addicts etc) are always very much under counted. They don’t want to be known as homeless and will go to great lengths to not appear or be identified as homeless. They will temporarily live in campgrounds, motels etc or get gym memberships to take showers etc. (there seems to be tons of them in state and national park campgrounds these past 2 – 3 years, BTW)
2. There may be a much much greater percentage of foreign and out of state owners plus owners listed as opaque LLCs now, which started around 2010 – 2011 or so. As a group, these owners are much more difficult to contact, so may not be in the data.
My late partner and I were looking at houses in 2011 and saw a huge amount of vacant homes. Lots of them everywhere. Many of which were empty for years while the banks just held them. Incredible amount of them vandalized and very cheap – we missed being able to pay cash on the market by about 3 – 5 months.. then it was too late. All good houses scooped up wholesale sometimes in bulk lots by foreign and large buyers in our area in a matter of a few months. It was like a feeding frenzy – banks only allowed all-cash buyers to make bids. Needless to say, we were really pissed..
In Kunal’s world 10%<8% FTML and this explains a lot in his thought process..
Even if your claim is true, tenant does not automatically equal positive cash flow.
Tenants can also lose their jobs which in a weak job market (not there yet) means landlords need to cut rent (which can equal negative cash flow) or need to sell.
Tenants can also choose to leave because they can’t afford the rent or it’s stupidly high, moving into their parent’s basement or whatever. Same result as above.
Prices are set at the margin meaning in
a declining housing market, some landlords will eventually sell to avoid losing equity or future losses.
It’s a lot more complicated than your simplistic assumption.
or he/she can rent it to somebody with a job. Most landlords don’t care if you lose a job and will start eviction process right away (and to be fair rightly so).
I was referring to an economy that isn’t fake like the one we’ve had since at least 2008.
Depending upon the circumstances, they might have to lower ask rent which I directly addressed.
The primary reason rents are so high is because of fake economy and “printing”.
I was referring to an economy that isn’t fake like the one we’ve had since at least 2008.
Depending upon the circumstances, they might have to lower ask rent which I directly addressed.
The primary reason rents are so high is because of fake economy and “printing”.
Down in actual swamp land (not DC, which is a metaphorical swamp), there are literally hundreds of mega-apartments going up that are certainly not 100% rented (I know this for a fact). Competition will be heating up, what if the landlord can’t find anyone to pay what he needs to get?
The other piece is Air-BnB-ers who think they are geniuses leveraging up on short term rentals.
Augustus Frost said: “The primary reason rents are so high is because of fake economy and “printing”.”
Is the economy fake, or is it the new normal for an economy engineered to run on faked into existence dollars?
“printing” is mis-tensed. The word is printed. The dollars are in the system and QT aside, which for a limited duration will only reduce a fraction of those dollars, those dollars will stay in the system along with the inflation they created.
How did this post slip past the moderator I wonder?
“How can house prices fall….” Your question seems to me like you’re debating whether or not house prices can fall. Just look at the data. Most of the data aggregated by many sources are showing you prices HAVE ALREADY FALLEN. The question is not “How can house prices fall?” The question you should ask is “How much further can they fall.” That question will be debated until the bottom is found. By the way, how do you know you found the bottom? AFTER it has passed.
Just out of curiosity, are you in the market to buy a home or sell a home or a real estate agent or a mortgage broker or an appraise or a landlord or something else? Or, do you just like to fire up Wolf?
Kunal simply paid way too much for a shack and is in the denial stage of grief. He’ll likely move to the anger stage later this year, then probably back to denial then anger again since a person going through grief typically revisits each stage multiple times.
We’ll probably see him in the bargaining stage by sometime next year. That may last another 18 months or so as shack prices continue their long road down. At that point so prices will be so low that he’ll enter the depression stage. All bets are off as to how long that lasts. Finally, Kunal will reach acceptance.
Kubler-Ross/Kunal… pretty close.
“…how can house prices fall when vacancy rates are record low, inventories are record low ….
In my estimate, the “affordability index” exerts greater influence on price of a house than scarcity. As mortgage rates increase fewer buyers qualify, hence price of the house adjusts down.
Low inventory – is probably the function of buyers’ feeling less secure in their employment and prefer to remain in current housing vice moving up to more expensive homes. Also, current high mortgage rates probably exert downward pressure on potential buyers’ inclination to assume greater amount of debt.
For final/authoritative response, I defer to Wolf.
This article just goes to show the narrative put out by the housing industry is fake in order to get people to panic and buy homes at inflated prices. According to Wolf’s data, the closest the U.S. has came in a few decades to a housing shortage was sometime during the 1980s.
From Housing Shortage to Buyer Shortage in 6 months.
I know what a negative vacancy rate looks like. I see it in east San Jose: streets packed vehicles and RVs; cars parked on the lawn; garages converted to bedrooms; curtains hanging from the living room ceiling to segregate off little sleeping places; the tool shed in the backyard is a ramshackle ADU. Welcome to the million-dollar neighborhood.
1) The irony of the geographical beating heart of “making the world better through tech” being like this.
2) The irony of a “work from anywhere” technology somehow insisting upon a concentration of geographic demand that yields such absurdities.
How did this goofiness persist as long as it did?
Austin has existed for decades…
Why do the people stay there?
I’ve seen exactly what you describe in that area, 1000 sqft 60’s ranch houses, cars filling the streets and yards.
Housing is crazy there, but incomes are not.
Why wouldn’t you move?
People follow the jobs.
The insanity was in the “smartest employers in the world” absolutely insisting on working locally when *their own frigging products* allowed people to work remotely (for at least 15-20 *years*).
It is hard to grasp the goofiness of the situation.
And when things don’t make this much sense, I start looking for corrupt motives.
It is at least possible that some people in those “great companies” with decision-making power, bought up tons of local real estate years ago…and then used their insider power to insist upon absurd levels of completely localized workforces.
(“DIY Company Towns” – Maybe no company store selling ramen blocs for $10 a shot, but guess who is your landlord)
An apartment manager used to count mattresses on the living room floor, or the number of tooth brushes in a bathroom to determine if an apartment was over occupied. She said even if it was, she could not do anything about it.
This is a *long* standing issue in CA – but it used to be concentrated among illegal immigrants.
Silicon Valley stupidity brought it to the allegedly upper middle class.
Basically, the CA of Americans’ fantasy is really just parts of a 20 mile coastal strip along the Pacific. Everything else inland has a mixed climate (deserts, mountains, forests, lava plains…) that nobody in their right mind would pay a “sunshine premium” for.
And that 20 mile “paradise strip” is stuffed to the gills with maybe 32 million people (out of 40 million Californians).
So RE is absurdly expensive in a well paved “paradise”.
And that is before you get to restrictions upon new construction.
And it has taken *decades* for CA to allow greater densification.
For decades the controlling ethos of CA government has been RE speculation (freeze property taxes, restrict supply, exploit ZIRP, etc).
Those “held off the market” homes are playing who will flinch first. Going to be an interesting spectacle over the next few years.
This is the precise dynamic – it is odd that landlords with higher vacancies are willing to hold out…so other landlords can get higher rents.
That is not the historical dynamic in the US.
And it isn’t localized to pits of economic depravity like SF/NYC…this go round, rents have soared in almost *every* metro in the US.
In order words it doesn’t make a lot of sense for NYC to see a 25% rent rebound at the exact same time Jersey City is hiking rents 25% – people can only be in one place at a time.
And one look at the Zumper National Rent Survey shows that most places in the “back of beyond” (circa 2019) have seen 15-25%+ rent hikes in 2021-2.
Unless the G is importing huge numbers of illegal aliens (from space) this simultaneous surge in nationwide prices is just weird.
Some of it may be landlords try to “recoup” pandemic freeze “losses” (but, ahem, see $45+ billion in DC make good payments to said landlords) but it is hard to see how they can succeed for long.
Some of them will never be rented out. They’re just money holders for the world’s wealthy and optimistic techs etc. They’ll be sold if and when the stock market or bit coins go down and margin calls go up. Or the housing market crashes quickly at some point. Or if sometime in the future FINCeN goes rampant on them starting by tracing Russian money and getting other properties caught up in that.
Someone on here, I think it was Wolf, said we can’t possibly build enough to accommodate holding units for the world’s wealthy. The country is just going to go down the tube unless they take care of that. Then, I guess, the problem may take care of itself.
“10.1 percent were vacant” excluding squatters.
Squatters lie when asked if they have permission/renting though.. I wonder if that could have also skewed the data?
I can only observe by just watching, usually at the speed limit and includes areas where I first drive a half century ago.
Go to Realtor dot com, etc.
Go to Chicago (include Riverdale, Gary, etc. burbs) Go to Cleveland (include East Cleveland etc. burbs). Detroit…
Screen existing single family home.
Screen less than $100,000.
Now, tell me how many would you buy? Rehab and property tax on you.
How about if it was gifted to you, again rehab and prop tax on you?
How about if the place was razed, and lot was given to you, but you had to build another new in 3 years?
Not disputing the stats, but there is a lot to this. Also effects nearby properties which are decently kept up.
Don’t know how much it would cost in total throughout the country to raze, dispose and plant trees or gardens, but those properties would not then have lead paint, asbestos, mold or lead water supply line issues. No uninsulated house, no inefficient HVAC.
Who loses? Who pays? Who benefits? That’s another story.
I know where I could have found about a $100,000,000,000 a month ago.
Same with many $T,000,000,000,000s about 3 years ago and again 13 years ago, however.
But Ukraine needs more tanks
Actually, they do.
Thanks for stripping off the veneer of the oft highlighted housing shortage.
Out of curiosity, where do short-term vacation rental homes or apartment units sit on the list? Are they counted as vacant? Are they even considered residential units or are they business property?
I’m wondering whether the rise of STVRs account for the approximately three-point rise in the average vacancy between the 1980s and the 20-teens.
Otherwise, thanks for shining a light, Diogenes.
Vacant seasonally seems as it legitimately should be left out, no? The upper Midwest and Northeast both abound in people who have one home in Michigan or New York and one home in Florida or Arizona, etc. etc.
Very common among the white collar and union blue collar folks to do that. Those houses aren’t unused stock.
What people want to know is how many houses could I buy today, if I had the money?
There are no housing shortages , only shortage of affordable homes.
But the inventory is low indeed.
Anyway, mortgage rates are going down big time. Let’s see..
Nice analysis of a pretty dry subject.
“….Whether or not the formulas that get us to vacancy rates of 0.8% or 5.8% make any sense, or are useful, it is important that we know what they mean when someone says there is a housing shortage because the homeowner vacancy rate is 0.8%….”
That was a great closing statement. Housing data = propaganda most of the time.
Also, not only is the whole housing shortage b.s. useful for the various realtor pitches, it’s also enormously helpful for developers and anyone who agrees with radical densification (e.g., Cali’s SB9 and ADU bonanza).
Thanks for this piece. I have been wrestling with this question and this has never been so obvious as you’ve presented it here. I’ve heard this housing shortage b.s. for years, mostly from realtors, but also commonly from multifamily investors. I like the caveat thrown in at the end re: shadow inventory. And what about all of the rental inventory that corporate real estate investors scooped up at top dollar over the last four years? At prices that cannot even service debt with the rents they can get. Will they just sell them to bigger fools to hold at a loss, or start unloading it slowly, into the open market? Thanks again for this piece.
Hello Wolf from the other side of the Atlantic Ocean.
I cannot find such an informative website for housing in Europe such as the ones here.
Do you have any data or do you know where to look for such data?
I am only finding real estate agents articles who describe the situation in European housing as not very healthy but with no such problems as I read here for the US. They say that prices will brake for a while but they will accelerate again in the near future.
I haven’t even tried. I get enough of a headache digging into US housing data, LOL.
Akis, Google @NipseyHoussle for starters. He is from UK.
Akis, correction, the one from UK is @HousePriceMania
What happens in the USA always happens in Europe. That’s why I also follow these articles and find out what will come here in Europe
1) Can we breach the 1980’s low vacancies rates : no, because in the 80’s
mortgage were 15%.
2) Can we breach the highest vacancy rate of 2009 – Dec 2007/June 2009 recession was 5.1% – if we get a big one : yes !
3) The difference between the two extremities is :
14.3% – 8.9% = 5.4%.
4) We are not in recession. We are right in the middle.
5) The vacancies rates might rise above : 10.1% + 5.4% = 16.5% if we deflate.
I haven’t read the article yet. Briefly skimmed thru it and comments. Hope to read it in some detail soon.
Just a comment here regarding inventory… how I have typically seen it used. This is not prompted by Wolf’s article but by a few comments that followed it.
I read wolfstreet.com quite a bit, listen to various housing utube people.
My memory isn’t great but I believe a lot of real estate utube producers define inventory relative to active listings and number of homes sold per unit time. If I’m wrong here let me know but I believe that is true. So if there are 50 active listings and 25 homes have sold per month (on average recently) then inventory is taken to be 2 months supply of homes for sale.
And as some have pointed out many home owners that might have been tempted to sell under different circumstances have not (last 2 years in particular) because:
1. they don’t want to give up their low interest rate loan, 2. they liked riding the wave up in home appreciation.
So i believe home listings (and inventory levels as just described) in 2021 and early 2022 were at low levels historically. Maybe (?) very low levels.
They have increased somewhat over the last months. But I have to say I’m not impressed when a utuber informs us of a 30% increase in active listings… and doesn’t cite absolute numbers… over what was a very low number before. Seriously if an NBA player were to improve his free throw shooting from 50% to 60% (wow 20% improvement) nobody is going to get very excited.
FWIW. I’m a renter not looking to buy a home.
I like pro and con arguments. They tend to be in the minority.
And we are told (excitedly) by those advocating for buyers that there will be a lot more homes for sale this spring ! More supply is great !
And we are told (excitedly) by those advocating for sellers that there will be a lot more people looking to buy homes this spring !
More demand is great !
US. Both sides are excited and win !
Example of inventory use:
Last spring I started to watch RE utube videos.
Summer started reading wolfstreet.com.
One of the videos I watched somewhat regularly was by Santo Sessa in Toronto. No I’m not Canadian and I live in Washington state.
He gave very good presentations covering the Toronto RE market. Comprehensive and concise.
(west, central, east Toronto; SFH, semis, townhouses, condos).
Anyhow at that time I was just getting familiar with the RE jargon.
Sometime late spring or maybe summer Mr. Sessa gave figures for number of listings, sales and inventory. Memory not great here but listings maybe average or slightly below average.
Sales at that time still occurring pretty quickly (the market was about to change).
So homes sold per month still pretty high. That coupled with average or maybe below average listings made the inventory number historically quite low. On this episode (he updates weekly or biweekly I think) I believe he stated the inventory was around 2 months. See my previous post for its definition.
He went on to say that neutral inventory was like 4 to 6 months (I believe). Greater than 6 months was generally considered a buyers market, less than that a sellers market. So assuming that historically those figures are pretty much “accepted wisdom” within the RE community then Toronto was still in a sellers market.
This changed. Toronto (as Wolf has duly noted) had a very large run up in prices. Summer 2022 sllers became more scarce and so the inventory number increased. However listings didn’t really grow that much if at all so the inventory figure still was like 3 maybe 4 months. Going by memory here. As with most expensive US RE cities sellers didn’t want to list and buyers mostly couldn’t afford to buy. Or simply chose not to.
Well I’m not sure what the Toronto market has done recently… I’ll have to check back just out of curiosity. I know sales prices are down considerably (20% or so though varies considerably depending on where in Toronto and the type of shelter SFH vs.condo say).
Don’t get me wrong… I’m not a fan of AirBnBs. Definitely not pleased investors bought so many homes. Its quite bad if they sit empty for long periods of time.
But that said, just from a buyers perspective the quoted low inventory numbers by utubers (some but not all real estate agents) back in 2021 and early 2022 probably accurately reflected the bad circumstances buyers found themselves in.
“All Real Estate is Local” or so the saying goes…
Looking at the *immediate* suburbs of Boston (which are small cities like Cambridge, Somerville, Revere, Chelsea, etc.) – the share of housing units “Held Off Market” is at a historically-high and monotically-increasing level – IF the input I’m being given by realtors is correct (and I’ve known realtors to spin yarns).
Anecdotally, I’m told this is due to price optimization strategies. I.e. if I’m a large owner/renter of real estate (e.g. Equity Residential) – it’s more profitable (for example) to delist 2% of my units to support a 10% annual increase in rents on the remainder. You can always point to a shortage of available labor to manage & maintain those units for your air cover.
And there’s very little new construction being undertaken. There ARE new units being completed BUT permits for most of these (particularly in Cambridge and Somerville) were issued PRIOR to the pandemic and construction was delayed until this past year due to labor shortages and supply chain constraints. Neither of those have really improved much, btw, but the demand picture has softened sufficiently to alleviate the squeezes. For now.
The housing market is complex and there are various mysteries out there.
In the modest 1960s high rise (in Chicago) where I live, the adjacent (condo) studio unit has been vacant for at least 15 years. Crain’s Chicago Business recently featured a story about a vintage three-story apartment building on the Gold Coast that has stood unoccupied for at least 25 years.
I have a friend who moved into a “prestige” condo building in downtown Chicago around ten years ago. She reports that even now four of the units of the twelve on the floor where she lives have never been occupied. An acquaintance reported that after moving into a new 67 unit mid-rise condo building in Florida, only eleven of the units were ever lived in. For both of these examples, the carrying costs (taxes and assessments) would be quite substantial; who are these investors who don’t have anything better to do with their money?
The Census recently reported that the Illinois population dropped by 105,000 over the last year; shouldn’t there be empty housing units as a result? Meanwhile, surveys of the vibrant “central city” housing market show declining vacancies and increasing rents, along with a continuing stream of proposals for new residential towers. At the same, in the “less fortunate” neighborhoods and suburbs, landlords have a hard time finding tenants able to pay rent on a recurring basis, and housing values are very low.
Perhaps it doesn’t take a Nancy Drew or Hercule Poirot to point out that, like politics, all housing markets are local.
It made sense to carry on these un occupied properties when the home prices were going up like crazy
I guess gone are those days and these kind of people would wake up and put it out in the market.
I have friends who owns properties, don’t rent out because paper value is going on every month.
Now home prices are going down, they are hopeful for reversal in nnext few quarters because home prices never go down in so cal per them.
I have purchased dozens of distressed property’s since 2009, either to flip or convert to a long term rental while prices recovered and this all makes a lot of sense. Note that it takes years for a distressed home to be lived in again. Every one I ever saw was abandoned for 9 months to a year before the owner could list as a short sale or the bank could start repossession. Add up to another year or more for a bank repossession or probate to get it back on the market or up to 6 months to get the short sale approved by the lender. And another 4 months or more depending on the condition to get it renovated and rented out or sold. I assume that helps explains the high vacancy rates during the financial crises. The owners had died while underwater on the mortgage or abandoned a second home or short term rental. Only once have I seen a long term rental in a distressed state. I wonder how many homes have been converted to short term rentals in the last few years ? I’m not really in that business but I see a lot of lenders have sprung up to service those kinds of purchases as travel boomed post covid. Just food for thought.
An interesting statistic might be how many “formerly rented”, or “formerly for rent” that are now “for sale”. Might indicate the level of concern among those who bought for rental but are unable to realize the rental income desired.
There is some local reporting for the corollary: formerly for-sale inventory now in the for-rent inventory (because it didn’t sell)
Vacancies are in the bottom quartile for the last 40ish years so there’s no reason to believe they’ll go dramatically lower and flood the market. If anything, more houses are likely to become vacant based simply on the numbers cited – 8.9% low vs.14.5% high. I do expect a lot to get rented to take advantage of the high rental returns.
As for the wishful thinking all these owners will suddendly list their houses for sale and crush the market – not likely. For example, I have 2 vacant properties at the moment. One is a second home I will never rent and don’t plan to sell for many years, if at all. The other will be rented soon and producing income. Another rental property that was recently vacant was sold quickly after a 6% price reduction.
Housing prices are much more likely to drop as a result of higher mortgage rates and outrageous insurance premiums.
Also, from my experience brokering real estate, very few sellers convert their for sale homes to rentals if they don’t sell. They either stay put or lower their prices until they sell.
Another month of declining active home sale listings was reported this week @ Housing Inventory: Active Listing Count in the United States, (FRED – Federal Reserve Economic Data)
NAR (which is where FRED gets its data), January:
NEW listings: +33% mom, -5% yoy
ACTIVE listings: -9% mom, +65% yoy
I live in a semi-rural area in the upper Napa Valley. On properties within a half mile of me there are five vacant houses. All sit empty because wealthy owners don’t want to bother renting them out.
Hmm, held off market 4.6%?
One missing ingredient is RV living. My understanding is before Covid you could decide where to stay the day you needed to stay there. After Covid you need to make a reservation years in advance or even buy your own space.
And then there are the people who decide to live on a boat. Much the same story as with the RV crowd.
Wolf, If you are still sailing, have you noticed a change in the marinas around you?