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Housing bubbles: why are Americans ignoring reality?

By Hugh Pavletich - posted Tuesday, 24 November 2009

Within this article "The comprehensive state of the US housing market", Dr Housing Bubble (a housing commentator based in California) asserts that of the 129 million residential units in the United States, some 15,950,000 are vacant and therefore overall, the United States has a huge oversupply of residential stock.

Other United States commentators are making the same assertions, such as Colin Barr of Fortune magazine with "Housing market still faces a big glut".

However, in reading closely the "US Census Residential Vacancies and Homeownership Report" (PDF 50KB) released on October 29, 2009, the figures are hardly cause for alarm.


As at the 3rd Quarter 2009, Table 3 illustrates that there are an estimated 130 million housing units in the United States, of which 111 million (85.5 per cent) are occupied, with 75 million (57.8 per cent) owned and 36 million (27.7 per cent) rented. The balance, being some 19 million (14.5 per cent), are described as “vacant” (with a revised 3rd Qtr 2008 18 million units alongside). The “vacant” housing units are loosely broken up into vacant the year round, for rent, for sale only and seasonal. There has been no dramatic shift in these figures during the past 12 months,

The US Census Population Clock states that the present US population is 307 million.

The Census Bureau Residential Report illustrates that in the 3rd Quarter 2009, the estimated vacancy rate for usually occupied rentals was 11.1 per cent (9.9 per cent 3rd Quarter 2008) and 2.6 per cent (2.8 per cent 3rd Quarter 2008) for homeowner housing. There is nothing much to get excited about there, and indeed, it is very pleasing to see that somewhat elevated “rental vacancy”, so the poor are not getting hammered in the United States as they are in Australia, due to Australian state governments created scarcities (lifting land prices for revenue purposes), causing major rental shortages and grossly excessive rents.

The importance of “vacancy cushions” cannot be over emphasised, as they provide the necessary time for the construction industries to gear up, so that unnecessary property inflation does not occur.

The US Census Quickfacts (the Texas page - with US figures alongside) states that the 2008 US population the persons per occupied household in 2000 was 2.59.

As societies become more affluent, people per household should fall (note Texas people per household is slightly higher on these 2000 figures at 2.74 per household, likely due to the higher Hispanic population with larger families).


Conversely - through these economic downturns, it is likely too that household sizes would increase somewhat.

For example, in using the US Population Clock as a rough guide with the 307 million population figure (and deliberately ignoring for the purpose of this discussion, those in institutional care etc), if the people per household overall increased from say 2.59 per household requiring 118 million residential units - to say 2.79 people per household (as economic conditions worsen), just 110 million residential units would be required for occupation. Around 8.5 million less than was occupied during the peak of the boom.

Further to this - significant numbers of second or vacation homes would no longer be required, as households struggle to lower their expenses through this economic phase.

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About the Author

Hugh Pavletich is Managing Director of Pavletich Properties Ltd, a commercial property development and investment company, based in Christchurch, New Zealand. He initiated and co authors the Annual Demographia International Housing Affordability Survey and in 2004 was elected a fellow with the Urban Development Institute of Australia, for services to the property industry. He operates the website Performance Urban Planning.

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