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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