just read that there are 15.9M empty housing units in the u.s., currently. and of course there are millions more being constructed now. the correction has already begun.

There're in the wrong places.

cjm: In 2000, there were 116 million housing units in the US, of which 10 million were vacant. 34% were vacant because they were seasonal, recreational or occasional housing, a category that everyone agrees has been growing fast. In June of 2000, housing starts were running at about 1.5 million units annually. In June of 2005, housing starts were running at about 2.0 million units annually. 16 million unoccupied units is a little high, but not far off what you would expect.

quote:
The Census Bureau has the second quarter housing numbers out for 2005. "National vacancy rates in the second quarter 2005 were 9.8 percent for rental housing and 1.8 percent for homeowner housing, the Department of Commerce Census Bureau announced today. The Census Bureau said the rental vacancy rate was not different from the second quarter rate last year (10.2 percent) or the rate last quarter (10.1 percent)." PDF Report

"Among regions, the rental vacancy rates for the current quarter were highest in the Midwest, (12.6 percent) and South (11.8 percent), although they were not different from each other. Rental vacancy rates were lower in the West (7.5 percent) with the lowest rate being in the Northeast (6.1 percent)."

"There were an estimated 123.7 million housing units in the United States in the second quarter 2005. Approximately 107.9 million housing units were occupied: 74.0 million by owners and 33.9 million by renters. Of the 15.9 million vacant housing units, 12.0 million were for year-round use. Approximately 3.7 million of the year-round vacant units were for rent, 1.4 million were for sale only, and the remaining 6.9 million units were vacant for a variety of other reasons."

cjm: you'd expect the rate to be higher here for two reasons. First, Americans move often; second, we're in a still-unfinished migration from the north and east to the south and west. If you've got time see if you can find some region-by-region numbers for homeowner housing. I'll bet the low rental vacancy rate in the Northeast goes along with a relatively high homeowner rate.

Why would anyone rent when you can buy at roughly the same cost?

because in some parts of the country, rents have fallen while prices to buy have sky rocketed. ultimately, rent and price are connected. when they become disconnected, a correction is inevitable.

the parts of the country that initially took off, have provided finacing for speculation in other parts of the country. for example, people in socal take money out of their homes and use it to buy houses in phoneix and las vegas, driving up the prices there.

some speculators have been buying properties 5 and 10 at a time. this has the effect of increasing the supply of rental properties, driving down the rates.

joe: most of the north east hasn't experienced huge increases in home pricing because of the high property tax rates there. therefore there rental market hasn't been so distorted. in the west and south there are huge amounts of building going on without commensurate increases in population. speculators buy the new properties and put them on the rental market, increasing the empty percentage.

i don't see this as a doom and gloom situation, just a repeat of the dotcom kerfuffle. if you haven't been playing with fire, you won't get burned.

cjm:

Rent and own can only be that intimately connected if they're identical, no? Which means that in addition to the lower rent you'd have to be able to sock away enough in another investment to recoup the same equity down the road? And even that ignores the human drive to own a home of one's own.

oj, i am not sure i get your point. i agree that on the whole people prefer to own rather than rent, upto a point. if the price to own gets too far out front of the cost of renting then they do as you say, they take the difference and invest it. coincidentally the stock market is now taking off :)
this situation is all about timing, some people are selling out and waiting for prices to drop so they can buy back in.

cjm: where I am (Colorado Springs) we're seeing the construction and the population.

joe: what are prices doing there ? i know the denver market is static, and foreclosures are up. prices in denver seem to be about the same as when i left 3 years ago. what is the colo springs economy like ? the hippy in me really likes manitou springs :)

cjm:

Find me someone who does that.

http://yglesias.typepad.com/matthew/2005/03/time_to_buy.html

do a "find" on "now renting", the reference is about half-way down the page.

this is the site i get housing bubble information from:

http://thehousingbubble2.blogspot.com/

oj, is this an upsetting topic for you ? if so i won't bring it up again.

cjm:

No, I don't care. Our house has toi be offered back to dartmouth College--we don't get any appreciation.

I just find it delusional that people think we can add 200 million people over the rest of this half century without building millions more houses.

there are less people in montana now, than in 1900, what do you think that does to property values ? massachusets is losing population. the atlas entry for new hampshire, is pretty much unchanged from 1960. california on the other hand has tripled in population in the same period. my house has doubled in value in 3 years, from an already high starting point. florida's population is exploding. it's all about location. think alaska is going to catch a big chunk of those 200m newcomers ? then buy property in siberia, because it's even more temperate there.

the reason i think there is a speculative bubble in real estate, right now, is because prices have far outstripped incomes. in the bay area, something like only 6% of the population can afford a house based on their salaries, think that is sustainable ?

we won't haved to wait long to find out who is delusional on this point...

NH desperately needs houses:

http://www.beangroup.com/content/articles/New_Hampshire's_population_growing_rapidly/1649/

The problem, Orrin, is that you're attempting to apply a long term, national trend line to a short term, regional situation.

Will demand for housing remain strong, nationally ?

Yes.

Does that mean that every state and town in America will see strong appreciation ?

No.

Will there be locations that, in fifty years, will have LOWER real valuations for real estate, despite national population growth ?

Yes.

Is it possible that, in some states and urban areas, the current valuations have gotten ahead of sustainability ?

There is no doubt whatsoever.

Michael:

Yes, the housing market will remain strong nationally for decades.

Individual houses may vary.

oj, that article made me laugh, it was like a little kid pretending to be a grown up. just move the southern border of nh into ma a little and poof! all of your new people will already be there.

Except that they're moving here.

from massachusets which has a net loss of population, currently. this is called "zero sum"; for every house added to nh one becomes empty in ma.

will people still clamor to come here, once their home countries become essentially the same as the u.s. ?

while it is easy to extrapolate today out to forever, it isn't particularly useful.

Yes, the housing market will remain strong nationally for decades.

Individual houses may vary.

Thus, national "froth", regional and local bubbles, which will have some negative national impact when they deflate.

As the others inflate--meaning you won't notice.

cjm:

They never will.

why do you say that ? the trend worldwide is of increasing prosperity, with the possible exception of Africa. i see population flows as tidal with groups moving around, back and forth. parents used to admonish their children to clean their plates because of the hungry children in europe. but still you may have a point in that America is by far the most free country existant, and that alone may be enough to act as a permanent draw. perhaps the solution to the real estate issue is to allow other parts of the world to become part of the U.S.

For the most part they're likely to follow the Euro-Japanese track; aping our economics and politics can bring them affluence, but lacking our religious basis they'll just die off somewhat comfortably.

or become Christian nations. just read that in the PRC the communist party now has fewer members than Christians. there can be only one.

cjm:

Yes, that affords China its best prospect for a decent future.