Foreclosures and a buyer’s strike may be the most visible enemies of a recovery in the housing market. Vacancy rates in homes and apartments could be just as severe a drag.
New Census Department data show that vacancy rates for both rental properties and homes are still at high levels set during the trough of the recession. Second quarter rental vacancies were 10.6%, the same as in the second quarter of last year. Home vacancies were 2.5%, also identical to the same period a year ago. Both rates dipped slightly lower in the third and fourth quarters of 2009, but have barely recovered since then. During the housing boom, rental vacancies were under 8% and home vacancies below 1.6%.The news is more information that shows that there is no foundation under the housing market yet. Mortgage rates continue to be at all-time lows. The effects of unemployment, under-employment, and concerns that home prices have much further to drop continue to keep home purchasers out of the market.
The Census evidence, taken with other public sector and private data, shows how badly the $75 billion Homeowner Stability Initiative has performed. It was meant to help as many as 4 million people who faced home foreclosures. The program has not made mortgages permanent at any reasonable level. The total number of cancellations since the HAMP program’s inception increased by 21.2 percent to 520,814, in June while conversions of trials to permanent modifications increased by 14.8 percent, to 398,021.
Housing will not recover until prices are at unimaginably low levels and buyers view new or existing home ownership as a once in a lifetime financial opportunity. It is only then that home sales will pick up again.
Douglas A. McIntyre
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