The vacancy rate for single-family homes increased in 2013 and remains well above bubble and pre-bubble levels.
What? Too much new single-family construction? It sounds hard to believe, with only 618,000 single-family housing starts in 2013, heading toward 622,000 in 2014 – far below the pre-bubble average of 1.1 million per year in the 1990s. Even when adding in multi-unit building, which is booming, construction remains a laggard in the housing recovery and is contributing less than it should to employment and economic growth.
Of course, the historical norm doesn’t tell us what the just-right level of construction is now. That depends on the rate at which new households are formed. If new construction runs ahead of household formation, more homes sit empty and the vacancy rate rises. In 2004 and 2005, during the bubble, construction of single-family homes soared to over 1.5 million units. Then, during the bust, household formation slowed, in part because more young people lived with parents. Too much housing and too few households were a dangerous cocktail during the housing bust and recession, causing the vacancy rate to climb until 2010. Since then, the vacancy rate has fallen, but single-family construction has continued to wallow near all-time lows.
Newly released data from the Census Bureau’s American Community Survey (ACS) show that the vacancy rate for single-family homes actually ticked up a bit in 2013. That’s a big surprise. It suggests even today’s low level of single-family construction might still be too much, too soon. To determine whether we’re building too many homes, we need first to understand household formation, and then the vacancy rate.
Single-Family Rentals Increased Despite Low Household Formation Rate
To understand what’s happening with vacancy rates, let’s start by looking at changes in households and housing units in the past year broken down by owner-occupied and rented, and single-family and multi-unit:
|Type of unit||Change, 2012 to 2013, ‘000s||Change, 2012 to 2013, %||Change, 2006 to 2013, ‘000s||Change, 2006 to 2013, %|
|Owner-occupied multi-unit (i.e. condos)||18||0.5%||-269||-6.4%|
|Renter-occupied multi-unit (i.e. apartments)||263||1.0%||2259||9.7%|
|Total single-family units, incl. vacant||226||0.3%||4701||5.5%|
|Total multi-family units, incl. vacant||199||0.6%||2131||6.5%|
|Total housing units, incl. vacant||356||0.3%||6496||5.1%|
|Note: total housing units and total households include mobile homes, boats, RV’s, vans, etc. and their occupants.|
11.7% of Americans moved in the past year, unchanged from the previous year. But more people moved in search of cheaper housing.
Yesterday, the Census released the Current Population Survey (CPS) data, giving an up-to-date picture on how many Americans are moving, how far they’re going, and why they’re making that move. (See note.) The mobility rate remains at a low level: 11.7% of Americans moved in the year ending March 2014, unchanged from the year ending March 2013.
At this mobility rate, the typical American stays put eight and a half years between moves. Remember the old rule of thumb that people move every seven years? Well, that was true until around 2003. In fact, the mobility rate has been falling for decades, as we pointed out in this post last year. Back in the 1950s and 1960s, Americans moved every five years on average. That rose to every seven years by the turn of the century and has since increased to the current eight-and-a- half year rate.
In today’s post, we look at the 2014 data to highlight the most recent mobility trends.
No Reversal in the Long-Term Mobility Decline
With the percentage of Americans moving stuck at 11.7% in 2014, mobility remains near the all-time low of 11.6% in 2011. That’s considerably below the 14% rate from the early 2000s. The housing bust and recession offer possible explanations why people are stuck in place – things like negative home equity and few job opportunities to move for. Still, mobility also declined both before and during the housing bubble. Furthermore, mobility has barely budged since 2011 despite a significant drop in the percentage of borrowers with negative equity and a modest recovery in the job market.
Although slightly fewer young adults are living in their parents’ homes, don’t get too excited. Fewer are heading their own households, and the true young adult homeownership rate slipped in 2014.
This morning, the Census Bureau released 2014 data that show whether Americans own, rent, or live under someone else’s roof. (See note.) As we’ve pointed out before, the published homeownership rate is often a misleading guide to what’s really happening in the housing market. For instance, suppose young people move out of their parents’ homes into rental apartments. That would lower the published homeownership rate because the number of renters has increased – even though the number of young homeowners is unchanged.
Using these fresh 2014 data, we update several key measures of housing and living arrangements, including:
These three measures are closely related. If young people move out of their parents’ homes and become either renters or homeowners, the share of young adults living with parents goes down, while the headship rate for young adults goes up. Furthermore, the true homeownership rate equals the published homeownership rate times the headship rate – and therefore takes into account whether people are dropping out of or entering the housing market. Thus, it gives a clearer picture of whether the housing market is recovering. With that overview, here’s what the new 2014 data show.
True Young-Adult Homeownership Rate Falls in 2014, Reversing 2013 Increase
Let’s start with those millennials in the basement. They’re still there, but, ever so slowly, more are moving out. In 2014, 31.1% of 18-34 year-olds lived with their parents, down slightly from 31.2% in 2013 and from the peak of 31.6% in 2012.
In a reversal, asking home prices are now rising faster in hard-hit markets in judicial states, where the foreclosure process takes longer than in non-judicial states.
The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed.
Prices Rose 1.0% Month-over-Month in August
Nationally, the month-over-month increase in asking home prices rose to 1.0% in August, up a bit from 0.7% in July. Asking prices rose 7.8% year-over-year, slower than one year ago, in August 2013, when asking prices were up 9.9% year-over-year. At the local level, asking prices rose year-over-year in 96 of the 100 largest U.S. metros.
|August 2014 Trulia Price Monitor Summary|
|% change in asking prices||# of 100 largest metros with asking-price increases||% change in asking prices, excluding foreclosures|
|*Data from previous months are revised each month, so data being reported now for previous months might differ from previously reported data.|
Three times as many people moved from Los Angeles to Houston, and from New York to West Palm Beach, as the other way around. Most movers are toward counties with lower density, lower unemployment, and cheaper housing.
Yesterday, the Census released new data on how many people moved between counties in the U.S. from 2008 to 2012.
We’ve analyzed the data at both the county and metro level, combining it with data on home prices, unemployment, density, and distance. (We focused on domestic moves, but the Census also reported moves from abroad.) There are a million ways to look at these data, but here are the three themes that stood out to us:
1. Most Moves are Short-Distance
Nearly half – 49% — of between-county moves are less than 100 miles (see note). Most of these, in fact, are very short moves: 38% of between-county moves are less than 50 miles. Another quarter are 100-500 miles, and the remaining quarter are more than 500 miles. Remember that these are among between-county moves only, not within-county moves, which are two-thirds of all domestic moves.
People who move (“movers” from now on) to expensive, central counties like San Francisco, Los Angeles, or Manhattan tend to come from farther away than movers to more affordable, more residential counties like Contra Costa (north and east of Oakland), San Bernardino (east of Los Angeles), and the Bronx – who often come from a neighboring expensive county. While the typical mover into Manhattan comes from 67 miles away, the typical mover into the Bronx comes from just 13 miles away – often from Manhattan, in fact. Movers into San Francisco come from 223 miles away, on average, compared with 31 miles among movers into Contra Costa County. Movers into Los Angeles come from 290 miles away, but movers into San Bernardino come from 56 miles away.
2. Top Moves Favor the Suburbs and the Sunbelt
The top between-county moves are all short-distance within a region or metro. Of the top 10 between-county moves, in fact, seven are among the large counties of Los Angeles, Orange, Riverside, and San Bernardino in southern California. Los Angeles to Orange and the reverse move, Orange to Los Angeles, are #1 and #3, respectively:
|Top 10 Between-County Moves|
|#||From||To||Region or metro||# of Movers|
|1||Los Angeles, CA||Orange, CA||Southern California||40,760|
|2||Los Angeles, CA||San Bernardino, CA||Southern California||38,495|
|3||Orange, CA||Los Angeles, CA||Southern California||31,676|
|4||Los Angeles, CA||Riverside, CA||Southern California||25,575|
|5||Miami-Dade, FL||Broward, FL||South Florida||23,952|
|6||San Bernardino, CA||Los Angeles, CA||Southern California||23,181|
|7||Wayne, MI||Oakland, MI||Detroit||22,937|
|8||San Bernardino, CA||Riverside, CA||Southern California||22,705|
|9||Cook, IL||DuPage, IL||Chicago||20,476|
|10||Riverside, CA||San Bernardino, CA||Southern California||19,761|
|Note: differences in number of movers may not be statistically significant.|