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High Vacancies, Low Households Equals Slow Construction

by UrbanTurf Staff

High Vacancies, Low Households Equals Slow Construction: Figure 1

By in large, most key indicators point to a continued turnaround in the housing market. However, housing starts remain well below their normal levels.

Trulia looked into why this is the case, but it basically found that the vacancy rate is too high and household formation is too low to support normal levels of building activity:

  • The vacancy rate nationally is 10.3%, closer to its recession-era peak (10.9% in 2010) than to its pre-bubble level (8.9% in 2000). Even growing metros, like Las Vegas, Tampa, and Atlanta, still have elevated vacancy rates. The U.S. has a for-sale inventory shortage, but not a housing shortage.

  • Household formation is 746,000 annually (2013 Q2) and has averaged just 560,000 annually since 2007 – roughly half of normal levels. Young adults, who are key to household formation, are still out of work and living with their parents.

  • Geographic features, building regulations, and other supply constraints contribute to the perennial affordability problems in San Francisco, New York, and other cities. But the main reason why national construction today is well below normal is not supply constraints.

    For more analysis, click here.

This article originally published at https://dc.urbanturf.com/articles/blog/high_vacancies_low_households_equals_slow_construction/7568

2 Comments

  1. Michael P. Jacobs said at 9:30 pm on Tuesday September 17, 2013:
    Bank management would rather continue to book an inflated real estate value and pay the debt service and management costs to hold the property rather than sell the property and book the losses. This is why some markets have no inventory, why banks are still hesitant to lend money and why we are not free from the issues we created in the U.S. and globally by overextending our leverage.
  1. Charles said at 9:22 pm on Wednesday September 18, 2013:
    The correct phrase is "by and large." Mr. Jacobs, do you have a source for how much bank-owned real estate is sitting vacant and off the market right now?

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