Near Record Home Vacancies in US
This is an astonishing datapoint:
“There were 18.7 million vacant homes in the U.S. during the second quarter as the steepest recession in 50 years sapped demand for real estate and banks seized properties from delinquent borrowers.
The number of vacant properties, including foreclosures, residences for sale and vacation homes, was little changed from 18.6 million a year earlier, the U.S. Census Bureau said in a report today. Households that own their own residence stood at 67.3 percent, seasonally adjusted.
Home values dropped 33 percent since 2006, according to the S&P/Case-Shiller index, and the unemployment rate in June rose to the highest in almost 26 years. Tumbling home prices and rising job losses have thwarted government efforts to reverse the housing decline at the heart of the longest U.S. recession since the 1930s.”
Note that the recent record in April of this year was 19.2 million in April 2009.
As Peter Boockvar points out, Commerce just released Q2 Home Ownership rates. Its now at 67.4%, way off the record high of 69.2% in the last quarter of 2004. For comparison’s sake, in 1965 the rate was 65.3%.
For those people looking for a bounce back, we may still be reverting back towards the long term mean.
With little or no pent up demand for housing, it’s hard to see how vacancies or ownership point are a bottom stat . . .
[Note: I updated the headline to reflect the higher Q1 data released in April '09]
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Source:
U.S. Home Vacancies Hit 18.7 Million on Bank Seizures
Kathleen M. Howley
Bloomberg, July 24 2009
http://bloomberg.com/apps/news?pid=20601110&sid=an17jgiccivM
CENSUS BUREAU REPORTS ON RESIDENTIAL VACANCIES AND HOMEOWNERSHIP http://www.census.gov/hhes/www/housing/hvs/qtr209/files/q209press.pdf
July 24th, 2009 at 11:40 am
Let me guess – this will be treated as positive “better than expected news”? Green shoots, if you will.
July 24th, 2009 at 11:43 am
wonder what percentage of this number are second homes and investment property. There doesn’t seem to be a shortage of rental property and apartments around the country so I’d imagine the number is pretty high.
July 24th, 2009 at 11:56 am
So is it wrong for me to feel giddy as a young, first-time homebuyer to sign on the dotted line in the next month as I close on the house I’m getting? I mean, I get to take advantage of someone else’s mistake (short-sale, couldn’t make their payments), $8,000 of other people’s money (well, it’s partially mine), and a mortgage interest rate at all time lows that I easily qualify for because I haven’t utterly destroyed my credit? Oh, what gets me more excited is the fact that I’m buying the house at a 35% discount from what the owner originally bought it for in 2005.
Finally, I’m getting rewarded for not leveraging myself, being responsible and knowing how to balance a checkbook. I feel bad for those who lost their jobs and their house, but I don’t feel bad about taking advantage of it. Afterall, I’m helping these people avoid foreclosure by buying now.
July 24th, 2009 at 11:57 am
alright- been out of town- outerbanks NC- no computer-
looks like a bit happened this week- sure am glad I put a stop on the only trade i had- QID- saved a few bucks- although still lost on that trade-
assuming AAPL came in with monster #’s on top of intel’s #’s from last week
July 24th, 2009 at 12:00 pm
Keith-
you did it all right the right way- pat yourself on the back- what you as a buyer are doing and what the seller is doing is exactly how is supposed to work-
not a better feeling than getting a great deal
July 24th, 2009 at 12:03 pm
How does your wife feel about renting now Barry?
I think that was you on Kudlow right? That comment made me a follower.
keep it up BR.
July 24th, 2009 at 12:06 pm
@Keith D:
Looking to do the same in the next year, so I can relate.
My only quibble is I wouldn’t get too happy about a “35% discount” because those were funny-money bubble prices anyway — and because there’s a pretty decent chance your FMV will go down a bit in the next couple of years, depending where you live.
July 24th, 2009 at 12:11 pm
About 35-40% of home purchases in the boom years were vacation/investment homes, thats when home resales were averaging almost 7M per year, I’d guess there were about 10-12 million reported purchases thru 2002-2007 they’ve all got to be way underwater now and they are probably concentrated way beyond the 35-40% average in the bubble states. None of the US programs is designed to keep investors from defaulting on their properties. I think this category will undercut US attempts to stabilize RE values in the hardest hit areas. I have a feeling a lot of these were bought with creative financing too.
I was shaking my head when I saw people buying vacation investment homes here at the Jersey shore with a gross rent roll of 2-3%.
July 24th, 2009 at 12:12 pm
Much better to have “invested” in “big, comfortable homes” for the “lifestyle you deserve” rather than technology and marketing improvements, right?
All this talk about “incentives” not coming out of the Obama administration makes me laugh…. since look what we got with the last set of “incentives.”
July 24th, 2009 at 12:19 pm
I know for a fact that several people I know are sitting on investment properties (likely with Option ARM loans that will reset in the coming years) right now waiting for prices to come back up so they don’t have to take a loss. They’re merely delaying the pain. Hhhhmmm, delaying pain. Sounds familiar. Who else is doing that? More shadow inventory.
July 24th, 2009 at 12:22 pm
Barry, a while back you said at sometime in the future you’d explain “terminal velocity”. Are we anywhere near it yet?
July 24th, 2009 at 12:24 pm
Keith D:
“what gets me more excited is the fact that I’m buying the house at a 35% discount from what the owner originally bought it for in 2005.”
What are you paying per square foot compared to new construction? That’s a better guide.
July 24th, 2009 at 12:33 pm
Buy a home, get a greencard!
http://www.minyanville.com/articles//3/23/2009/index/a/21772
July 24th, 2009 at 12:48 pm
@Manny
I agree with your shadow inventory point re; Option Arm loans. But I want to point out, that’s only one subset in the shadow inventory waiting to come online.
@Keith D.
You shouldn’t “feel bad about taking advantage of it” because you were astute. “To the victor goes the spoils.” Now, if we could only convince the USG of that…
July 24th, 2009 at 1:12 pm
@Keith:
1) Do you like the house?
2) Can you pay for it without stretching your budget?
Those would be my criteria…
July 24th, 2009 at 1:23 pm
Well, the home builder is actually still building new units around there (saw 2 that were recently built and I believe they were sold). For the same model as mine, their starting price for a brand new one is $102 per square foot. The one I’m buying (3-4 years old) $76.50 per square foot. The $76.50 seems to be about the going rate for most homes in the area. Occasionally you’ll find better, but those are foreclosures with a lot of work needed to be done. This one is move-in ready, just a steam cleaning and some paint.
Now if I could figure out how to get rid of these damn student loans…. don’t even get me started on how f’ed up that whole system is. I’m sure there are lots of other former students like me out there saying they’d be able to spend more if they didn’t have them. Where’s our handout? Forgive me for trying to get an education to contribute to the workforce. Ok… that’s getting too political now.
July 24th, 2009 at 1:24 pm
@Pete
1.) Yes, perfect for us.
2.) Yes, it’s only about $40 more than my rent payment right now which is not a big deal.
July 24th, 2009 at 1:36 pm
Once the $8000 credit ends and the 10 year finally explodes, say hello to deflation. Lots of cash will by flowing by and nobody will want any unless it’s free, except for the ones who put it in oil and oil prices also explode as a result. The slush fund at the Fed will give money to GS and others to continue the pump, so a few computer may be gainfully employed. The rest will just be holding on. No spending. No real investment (as opposed to daytrading, which is now considered investment). Cash will be king once again.
BTW, did anyone notice on ZH yesterday where someone bought 122000 puts for Dec SPY at $95. Notional amount $1.2trillion. Somebody is a tad pessimistic for later this year.
July 24th, 2009 at 1:39 pm
@dh: The feds will just keep issuing credits and bailouts until the whole thing blows up. They have no choice. They’re in the excrement up to their eyeballs and have no way out any time soon without this thing completely falling apart.
July 24th, 2009 at 2:08 pm
To be more precise, by possibly the end of the year, you may see the following
1. The price of oil and other commodities with long only index investment activity will continue to rise. This inflation will be ignored because it is not core inflation. People will hunker down as a result.
2) The $8000 housing credit expires.
3) At some point, the 10 year explodes due to massive debt sales and the Fed is overwhelmed, no longer able to monetize it and still be taken even a little seriously. This kills the rest of the housing market as mortgages are now expensive.
4) Due to inflation in assets and ‘core’ components, people spend less and less. This ripples through the economy, causing a double dip recession. Nobody borrows anything. People are happy just to stay above water. Housing really tanks.
5) The lack of spending has a deflationary effect on everything except commodities, which are bubbled up real good. This is the start of the subsistence economy. For everything not commodity driven in price, anyone who has cash will be in good shape and able to get bargains.
6) This will last for lots of years.
The End.
July 24th, 2009 at 2:11 pm
[...] — for 3 months, but there’s still a lot of inventory in most of the country, lots of vacant homes, low rental occupancy, and continuing local issues with foreclosures. Notice in that last link they [...]
July 24th, 2009 at 2:12 pm
DH-
as I said before- this just may be as good as it gets
July 24th, 2009 at 2:13 pm
Census numbers show:
• More than 14 million housing units are vacant. That number does not include an estimated 4.8 million seasonal or vacation homes, most of which are occupied part of the year. The combined vacancy rate of almost 15% is higher than during previous recessions: 11% in 1991 and 9.4% in 1984.
• About 3% of owned homes are vacant. In normal times, “maybe 1% should be vacant,”
• More than 9% of homes built since 2000 are vacant compared with about 2% for older homes.
• Homes priced at $500,000 or more are just as likely to be empty as homes that cost less than $100,000.
I think the surge in empty houses, condominiums and apartments is creating a wave of problems for communities desperate to shore up property values and tax revenues that pay for services. Vacant homes create upkeep and safety problems that ripple through neighborhoods.
Read More :
http://www.housingnewslive.com.php</a
July 24th, 2009 at 2:14 pm
@dh: But Goldman will make a lot of money, no doubt, so all will be well. They’d better be careful. If what you lay out happens even in the remotest sense, we could get much ugliness, assuming that the masses will indeed start paying attention at some point. That might be assuming a lot though.
July 24th, 2009 at 2:15 pm
http://www.housingnewslive.com.php
July 24th, 2009 at 2:15 pm
DH – why are you assuming that the 8K housing credit won’t just be renewed rather than expire?
July 24th, 2009 at 2:15 pm
@ahab: I think you might be right. We could be at a new lower level of economic activity for years and it could get much worse if the Fed tinkers too much and the law of unintended consequences results. Where exactly is the growth going to come from? What’s the new bubble? Cap and trade?
July 24th, 2009 at 2:17 pm
@Thor: I think they’ll not only renew that, but will expand it to investment properties and vacation homes. Until there are dire consequences (e.g. our currency completely melts down), the Feds will simply do more and more. There are no limits now. Only a major catastrophe will force their hand.
July 24th, 2009 at 2:19 pm
Manny – do you really think they’ll expand it to investment properties? That would be very very good for me, I’m planning on buying (cash) a condo as an income property sometime this year.
July 24th, 2009 at 2:21 pm
@Thor: It’s just a hunch but why not? There’s no stopping them now. Like I said, they’re up to their eyeballs in it and will keep tinkering until their hand is forced to stop.
July 24th, 2009 at 2:24 pm
Thor Says:
July 24th, 2009 at 2:15 pm
DH – why are you assuming that the 8K housing credit won’t just be renewed rather than expire?
reply:
——–
You might be right. GWB pioneered the concept of live on borrowed money and stick someone else with the bill. The $8000 could become an inside joke and be doubled or more next year. After all, they can just print the stuff up to pay for it later.
July 24th, 2009 at 2:27 pm
Mannwich Says:
July 24th, 2009 at 2:15 pm
What’s the new bubble? Cap and trade?
reply:
———
Probably not. The economy won’t be strong enough to worry about excess carbon emissions. Maybe on eBay.
July 24th, 2009 at 2:30 pm
@dh: Maybe we’ve run out of bubbles then, unless they can blow up the “alternative energy” industry? Probably not. I think the jig is up. Devalue the crap out of the dollar until they can no longer do so seems to be the game here.
July 24th, 2009 at 2:39 pm
If anyone hasn’t read through the site Ben sent last night I highly recommend it.
http://www.frontlinethoughts.com/article.asp?id=mwo071709
July 24th, 2009 at 2:39 pm
Mannwich Says:
July 24th, 2009 at 2:30 pm
@dh: Maybe we’ve run out of bubbles then, unless they can blow up the “alternative energy” industry? Probably not. I think the jig is up. Devalue the crap out of the dollar until they can no longer do so seems to be the game here.
reply:
———-
I think this is the beginning of the end game. The only way things might turn around is if asset bubbles are removed from the economy. This means commodities and equities. Then make the markets safe for normal investors. Then wait for people to slowly get back in the water via real investment in the economy. This will never happen.
July 24th, 2009 at 2:57 pm
Buffett says stocks are still a buy at Dow 9000:
http://finance.yahoo.com/news/Buffett-to-CNBC-Invest-in-cnbc-2854963522.html?x=0&sec=topStories&pos=1&asset=&ccode=
Kind of interesting as CNBC quoted him in recent months as saying the economy was in a shambles…
July 24th, 2009 at 3:04 pm
Keith, In what area are you buying your home? Does the $100/sq ft incl land? Maybe I’ll move!
July 24th, 2009 at 3:06 pm
@Eric: You don’t think Buffet is talking his book, do you? I’m not blaming him. Everyone does it. Just sayin’.
July 24th, 2009 at 3:11 pm
19 million vacant units is enough to house the population of France. Just need to retrofit the bidets. Build a better bath and they will come!
July 24th, 2009 at 3:13 pm
@jc: Why would the French come here? Overall, I’d take their quality of life over ours right now. They at least have a decent health care system that’s probably among the best. Still flawed indeed, but seems to work among the best of the systems out there. What do we have? A racket run by parasitic health insurance companies which allow greedy scumbags like Dr. Bill McGuire at United Health to make over a billion dollars denying people health care.
July 24th, 2009 at 3:24 pm
@ Keith D: Be careful, don’t feel giddy! You are young, leveraged with a student loan, leveraged in someone else’s misfortune which in turn could become yours. Read/Learn.
July 24th, 2009 at 3:26 pm
Mais oui.
A lot of the 10% of Americans out of work will also be losing their employer paid healthcare. They’ll be running naked without healthcare til they find a job with coverage. Anybody in the family that gets sick before then sends them into BK real quick (can someone without a job afford private healthcare?)
July 24th, 2009 at 3:36 pm
@jc: There’s something highly immoral (and absurd/incomprehensible)/obscene) about spending trillions to bail out the very bad (and obscenely rich) actors on Wall Street who got us in this mess while those average people are forced to beg for the scraps like health care for all in some form. I’m simply amazed that more citizens aren’t more upset by this. If this doesn’t piss people off, nothing will.
July 24th, 2009 at 3:46 pm
@mainstreet
I know it’s a risk, luckily the other degree I had was in personal finance. I wouldn’t enter into a mortgage unless I felt secure. I work for a department in a bank that’s expanding and my wife works in health care and actually makes money for the hospital.
@jc
I’m in Columbus, Ohio, so there’s part of your answer why price per square feet is so low – lots of foreclosures! I invite everyone to move to Ohio and spend money, just don’t drive 55mph on the highway and we’ll get along
July 24th, 2009 at 4:07 pm
@dead hobo
“BTW, did anyone notice on ZH yesterday where someone bought 122000 puts for Dec SPY at $95. Notional amount $1.2trillion. Somebody is a tad pessimistic for later this year.”
—
I’m getting to this post late, but I’d be careful in assuming that those PUTS are a “bearish” signal…In fact, it may be just the opposite…
Back in March, when they wanted to “floor” the market, before they started calling up the S&P they started by buying a lot of protection in the June contracts (60, 65, 70)…Basically this tells me that they want to ride this market up with cheap protection (as the VIX is down around 22 now)…
Funny that I should have read your post, I was stuck in a crazy traffic jam for 3 hours this afternoon because they were doing road construction on a one lane bridge over the Potomac River that I had to cross…I was spending my time idly thinking about what to do (because being OVER 956 on the S&P has me a bit flummoxed)…The VERY thought occurred to me to GO LONG the S&P but have PUTS in place in the EXACT same way as you describe)…
July 24th, 2009 at 4:53 pm
“BTW, did anyone notice on ZH yesterday where someone bought 122000 puts for Dec SPY at $95. Notional amount $1.2trillion. Somebody is a tad pessimistic for later this year.”
On the other side, someone sold 122000 puts, indicating counterbalancing optimism. Always think about both sides of the trade.
July 24th, 2009 at 5:05 pm
@ Eric- Warren Buffett has long stated that the stock market and the economy are 2 different things. The economy is in shambles, as Buffett said. But also, he said the stocks were a better long term investment than government treasuries and other asset classes. He is once again proving to be the oracle of omaha.
People knocked the man for paying $115 for warrants on Goldman Sachs that pay him a 10% dividend…now that their shares are up in the 160 range or so, he’s made a paper profit of 2 billion and is getting a 500 million dividend off of it. He hasn’t done as well on the GE warrants, but is taking home a 10% dividend and I’m sure he’ll cash out at a higher profit when the next bubble (alternate energy) helps out GE.
July 24th, 2009 at 5:16 pm
@everyone…as an experienced residential and commercial real estate investor, I can tell you first hand there are a LOT of vacant homes. A ton out there. One of my friends has over 100 units and is actively looking at buying short sale properties in blocks of 20 at a time. He recently wrote about what some of these properties were like and the squatters that were inside at the time and having to enter with a loaded gun ready to fire. A good tale of what’s out there in homes that are “vacant” but not really: http://contraryriches.blogspot.com/2009/07/i-saw-some-really-crazy-shit-today.html
July 24th, 2009 at 5:31 pm
@matt (4:53)
Exactly
July 24th, 2009 at 5:48 pm
A few weeks ago I registered realtyassetmanagement.com domain. It seemed timely I guess.
And just this morning I’ve got an email from a Cali RE firm inquiring about buying the domain. LOL
Anyone got any idea what such a domain name is worth??
July 24th, 2009 at 5:49 pm
PS….Reading PA has ALWAYS been a shithole.
July 24th, 2009 at 6:35 pm
Christopher,
Agreed…Reading is a dump. He had looked at those 20 due to the prices being cheaper than that of a new car. Most likely will opt for some other areas, but I thought it woudl give some good insight into what’s out there.
July 24th, 2009 at 11:50 pm
Manny,
The new bubble is what we’ve all been bitching about-government debt. Spending and backstopping $23T dwarfs the sum of all the bubbles in all of history stacked on top of one another. The next bubble after that is the Asian consumer. They are about 10x our population, so the collapse is far into the future. Some of us luckily won’t be here to see it. Read Doug Noland at Prudent Bear, and make sure to skip to the bottom of the page for his analysis. The numbers will make your eyes pop.
July 27th, 2009 at 3:18 pm
[...] Home values dropped 33 percent since 2006, according to the S&P/Case-Shiller index, and the unemployment rate in June rose to the highest in almost 26 years. Tumbling home prices and rising job losses have thwarted government efforts to reverse the housing decline at the heart of the longest U.S. recession since the 1930s.” read more [...]