Saturday, October 28. 2006
Even yet more vacancy rates
For-sale-only and for-rent total vacancy rate, 1965-2006
I have been puzzling about for-sale-only vacancies. The chart above takes the broader view of looking at for-rent and for-sale-only vacancies as a rate of all owner-occupied, rented, and for-rent and for-sale vacant units. The numbers as ever are very high, and while rental vacancies had been easing, even that reversed a little lately.
For-rent vacancy rate, 1965-2006
Over at Dean Baker's house, bahko suggests that rates are the culprit; a friend, that increasing homeownership rates have changed the composition and qualities of the residential markets.
Color me puzzled.
FD: short one residential REIT
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Nice to know that you have a website wcw.
This 'for rent only/ for sale only' distinction worries me for the obvious reason that it can be quite fickle, yes?
Are you studying this fickleness? ~should rents fall faster than housing, or should housing prices be aided by attractive ( ok,unguided lending) rates, the renting/vacant and mortgaging stock will reflect this?
I recall the stat (Calculated Risk?) that 40% of last year's housing was to people already with more than one residence. This strikes me as a more important note (speculation: new and old money) than the increased (miniscule, no?) homeownership rate that is allegedly (although I do respect bakho) affecting the residential markets. The very wealthy can afford to wait out the housing price decline. The generation Xers who were not as well placed financially as the boomers (and who according to CR IRRC, are the folks who are inforit) cannot afford to wait, and who may have already been renting (the down tick). As the inventory builds the number of houses to rent should increase, no? (the last uptick)
So color me unpuzzled.
This 'for rent only/ for sale only' distinction worries me for the obvious reason that it can be quite fickle, yes?
Are you studying this fickleness? ~should rents fall faster than housing, or should housing prices be aided by attractive ( ok,unguided lending) rates, the renting/vacant and mortgaging stock will reflect this?
I recall the stat (Calculated Risk?) that 40% of last year's housing was to people already with more than one residence. This strikes me as a more important note (speculation: new and old money) than the increased (miniscule, no?) homeownership rate that is allegedly (although I do respect bakho) affecting the residential markets. The very wealthy can afford to wait out the housing price decline. The generation Xers who were not as well placed financially as the boomers (and who according to CR IRRC, are the folks who are inforit) cannot afford to wait, and who may have already been renting (the down tick). As the inventory builds the number of houses to rent should increase, no? (the last uptick)
So color me unpuzzled.
"For-rent" numbers include all the fickle for-rent-or-sale vacancies. The for sale numbers are for-sale-only-not-for-rent. I don't see a lot of switching in an eyeball of the data, but I am not sure how I would measure it.
Rents and housing prices need not move in tandem. Over the last half-decade, rents are down fractionally in real terms, housing up 6% a year.
Ownership rates have changed quite a bit. From '65-'94 they ranged from 63-65%. Now they are 69%. Given preposterously generous tax subsidies, demand for owner-occupied housing should be very high. If you want more of something, subsidize it.
What puzzles me is that long-term uptrend in vacancies from 1970 on. For-rent and -sale vacancies are economic drags. We have historically low inventories in all other industries; why not homebuilding?
Rents and housing prices need not move in tandem. Over the last half-decade, rents are down fractionally in real terms, housing up 6% a year.
Ownership rates have changed quite a bit. From '65-'94 they ranged from 63-65%. Now they are 69%. Given preposterously generous tax subsidies, demand for owner-occupied housing should be very high. If you want more of something, subsidize it.
What puzzles me is that long-term uptrend in vacancies from 1970 on. For-rent and -sale vacancies are economic drags. We have historically low inventories in all other industries; why not homebuilding?
Thanks for the reply and puzzlin. The condo conversions to rental units was on my mind and that segment might be significant in places like Florida, yes? Maybe more.
I also think that one needs to discard the national data streams and focus on the local markets to say something about rents and housing prices moving (or not) in tandem. Sorta. (The nation-wide mortgage rates making inroads against this point.)
I agree (preposterously so) with the efforts to fulfil The American Dream and look at that 4% "ownership" shift that zillions of dollars worth of Preposterosity has bought. Not to mention the near zero shift in black ownership.
I find this engaging:
"What puzzles me is that long-term uptrend in vacancies from 1970 on. [And I do want to see the 60yr scope and the international one too.] For-rent and -sale vacancies are economic drags. [But is extortionate rent occupancy also a drag?] We have historically low inventories in all other industries [in office and industrial real estate?]; why not homebuilding?"
And despite record housing price increases and modest income gains for the last decade, that vacancy rate has not budged very much...only our deficit. The house-building capacity is apparently larger than the income capacity to pay for it?
Can we correlate industrial capacity to residential vacancy rates and see ~5% vacancy rates as a better performance than those 'other industries' that have lower inventories?
Thanks for making me think.
I also think that one needs to discard the national data streams and focus on the local markets to say something about rents and housing prices moving (or not) in tandem. Sorta. (The nation-wide mortgage rates making inroads against this point.)
I agree (preposterously so) with the efforts to fulfil The American Dream and look at that 4% "ownership" shift that zillions of dollars worth of Preposterosity has bought. Not to mention the near zero shift in black ownership.
I find this engaging:
"What puzzles me is that long-term uptrend in vacancies from 1970 on. [And I do want to see the 60yr scope and the international one too.] For-rent and -sale vacancies are economic drags. [But is extortionate rent occupancy also a drag?] We have historically low inventories in all other industries [in office and industrial real estate?]; why not homebuilding?"
And despite record housing price increases and modest income gains for the last decade, that vacancy rate has not budged very much...only our deficit. The house-building capacity is apparently larger than the income capacity to pay for it?
Can we correlate industrial capacity to residential vacancy rates and see ~5% vacancy rates as a better performance than those 'other industries' that have lower inventories?
Thanks for making me think.
I don't know how much rental conversion there is, or where to get data on them. I do know that if you buy on spec, then your target market usually is an owner-occupant who gets the mortgage-interest deduction. Without the subsidy, fair value for the unit should be lower, all else equal.
On capacity, the US economy is rarely capacity-constrained these days. Given demand, we usually can make another widget, service another client or build another home. I am focusing on vacancies as a backwards way of looking how supply is matched to demand. If not for the long-run uptrend, I'd say it's prima-facie mismatched, and supplies need to shrink. Since there is that uptrend, I am not as certain, though the charts still speak to oversupply if you ask me.
I don't have more data than I am posting and linking. If you know where I can find it, let me know.
On capacity, the US economy is rarely capacity-constrained these days. Given demand, we usually can make another widget, service another client or build another home. I am focusing on vacancies as a backwards way of looking how supply is matched to demand. If not for the long-run uptrend, I'd say it's prima-facie mismatched, and supplies need to shrink. Since there is that uptrend, I am not as certain, though the charts still speak to oversupply if you ask me.
I don't have more data than I am posting and linking. If you know where I can find it, let me know.
Agreed:
"If not for the long-run uptrend, I'd say it's prima-facie mismatched, and supplies need to shrink. Since there is that uptrend, I am not as certain, though the charts still speak to oversupply if you ask me."
If only because the technology marches on providing those supplies (houses here) with decreasing amounts of labor (the economist's salute to the engineers) and makes those supplies increasingly attractive despite the wonders of last year's model (the economist's salute to the marketers).
Additionally, that decreasing amount of labor is free to provide new products and services (lookit all those tattoos and rings people) which sadly appear to have an increasing amount of foreign labor (Those Mexicans, those electronic gadgets, those tradeables and that trade deficit).
So there is this cry for additional education from some economists (Mark Thoma for one) and what they mean is more training: more engineers, not so much more marketers.
More skills and less mindless (this could be some) consumption.
Ok, "mindless" --I fumble for the right word here: "thoughtless", "uncritical", "parasitic", "impulsive", "unreciprocating"...
Recall The President's message after 9/11: spend.
To ensure a functioning economy such as ours, this was both important and superfluous (like ensuring the dog barks).
'Ask not what your country can do for you, but what you can do for your country' --strip the nationalism out of it (like the Transnationals),
'Ask not what it can do for you, but what you can do for it.' --reverse it, (like the marketers),
'Ask not what you can do for it, but what it can do for you.'
And "Enjoy." --as the waitress says after leaving your order in front of you.
Pretty soon you're not asking, just enjoying the good life and the unaccountably good luck and kindness of strangers.
"If not for the long-run uptrend, I'd say it's prima-facie mismatched, and supplies need to shrink. Since there is that uptrend, I am not as certain, though the charts still speak to oversupply if you ask me."
If only because the technology marches on providing those supplies (houses here) with decreasing amounts of labor (the economist's salute to the engineers) and makes those supplies increasingly attractive despite the wonders of last year's model (the economist's salute to the marketers).
Additionally, that decreasing amount of labor is free to provide new products and services (lookit all those tattoos and rings people) which sadly appear to have an increasing amount of foreign labor (Those Mexicans, those electronic gadgets, those tradeables and that trade deficit).
So there is this cry for additional education from some economists (Mark Thoma for one) and what they mean is more training: more engineers, not so much more marketers.
More skills and less mindless (this could be some) consumption.
Ok, "mindless" --I fumble for the right word here: "thoughtless", "uncritical", "parasitic", "impulsive", "unreciprocating"...
Recall The President's message after 9/11: spend.
To ensure a functioning economy such as ours, this was both important and superfluous (like ensuring the dog barks).
'Ask not what your country can do for you, but what you can do for your country' --strip the nationalism out of it (like the Transnationals),
'Ask not what it can do for you, but what you can do for it.' --reverse it, (like the marketers),
'Ask not what you can do for it, but what it can do for you.'
And "Enjoy." --as the waitress says after leaving your order in front of you.
Pretty soon you're not asking, just enjoying the good life and the unaccountably good luck and kindness of strangers.
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