Number of vacant homes for sale surges 34%
Homeownership rate unchanged near 69%, Census Bureau says
By Rex Nutting, MarketWatch
Last Update: 3:10 PM ET Jan 29, 2007
WASHINGTON (MarketWatch) – The number of vacant homes waiting to be sold surged 34% to 2.1 million at the end of 2006 compared with the end of 2005, by far the fastest increase ever recorded, the Census Bureau reported Monday.
A year ago, 1.57 million homes were vacant and awaiting a sale.
The vacancy rate for owned units jumped to a record 2.7% from 2.0% a year earlier. From 1965 to 2005, the homeowner vacancy rate had never been above 2%. The long-term average is 1.4%.
“We have more than a million housing units of excess supply,” said James O’Sullivan, an economist for UBS. “If you are looking for evidence that the worst is over for housing, you’re not going to find it in this report. This argues that housing starts need to go down more.”
In the past 12 months, housing starts have slumped 18% to a seasonally adjusted annual rate of 1.64 million.
In 2006, the number of housing units in the United States rose by 2.14 million, or 1.7%, to 126.7 million. The number of units occupied, however, rose by less than half as much – 1.04 million.
Meanwhile, the homeownership rate (the percentage of homes occupied by their owners) was essentially steady at 68.9%, the government said, close to the all-time high of 69.3%.
With so many vacant homes for sale, owners will begin to offer them for rent, said Asha Bangalore, an economist for Northern Trust. If the supply of rentals rises, rental prices should begin to come down, helping to bring down core inflation. Read more on the rental market.
“That means a quicker change” in the federal funds overnight interest rate, Bangalore said.
Rents have a double impact on core inflation, because they are used to calculate owners’ equivalent rent, which accounts for nearly a fourth of the consumer price index. In 2006, owners’ equivalent rents rose 4.3%.
Core inflation excluding owners’ equivalent rate decelerated to 1.9% in 2006, O’Sullivan said.
Rex Nutting is Washington bureau chief of MarketWatch.