U.S. housing vacancy rates are beginning to fall, despite the ongoing headwinds from foreclosures.
O ur Daily Insights service recently highlighted that there are finally positive developments in the U.S. housing market. U.S. homebuilders are feeling more optimistic, and the inventory of existing homes for sale declined substantially in January.
A further piece of good news is that the total inventory of vacant homes (which includes properties for rent and for sale) is also falling. True, the level is still very high, but the number of empty units relative to population trends, i.e. equilibrium, is no longer that excessive. Put simply, the number of empty homes available should not deviate from the level implied by the population growth over a long period of time. In the U.S., the “equilibrium” level of housing inventory has risen for decades, reflecting strong population growth.
The level of vacant homes is still above 10 million units, but since 2007, the U.S. population has grown by 12.5 million. Thus, once the number of empty homes began declining in the second half of 2011, the excess inventory relative to equilibrium began to rapidly shrink.
Bottom line: The U.S. housing market still has a significant foreclosure problem, but recent positive data is not a mirage. There may still be some near term weakness in house prices but price stabilization is imminent.