May 01, 2012
Every quarter the Census Bureau puts out data on vacancy rates and homeownership. For some reason, this release is almost always ignored.
This is unfortunate because it often contains very useful information on the housing market. One of the reasons that I could be so sure that we were seeing a bubble when house prices started diverging sharply from historic trends was that the vacancy rate was reaching record levels as early as 2002. As we learn in advanced economics, excess supply is supposed to lead to lower prices, not higher prices.
Anyhow, yesterday’s release deserved special attention. It had both good news and bad news. The good news was that vacancy rates declined sharply from both the fourth quarter and the year ago levels. The rental vacancy rate fell by 0.9 percentage points from its year ago level, while the vacancy rate for ownership units fell by 0.4 percentage points. The levels are still much higher than normal, but this was by far the biggest quarterly drop since the recession.
The bad news was that the homeownership rate also plunged. It fell by 1.0 percentage point from its year ago level to 65.4 percent. This is 3.6 percentage points from its bubble peak and the lowest level since the first quarter of 1997. The homeownership rate for African Americans fell by 1.7 percentage points from its year ago level to 43.1 percent. That’s the lowest level since the 4th quarter of 1995.
By age group, the homeownership rate for households headed by someone between ages 45-54 was down 1.8 percentage points from its year ago level to 71.3 percent. For the 35-44 age group it was down by 3.0 percentage points to 61.4 percent. This suggests that a unusually large number of near retirees will reach retirement without any equity in a home as an asset. Perhaps the younger group will be able to make up their loss, but the current economic picture does not make this look likely.
Anyhow, this release was big news that warranted some attention. The data are sometimes erratic, and these numbers may be partially reversed in next quarter’s data, but the trends indicated in the release are a big deal.
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