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Multi-family and Single Family Recovery Require Absorption of Excess Space

I’ve written before that the recovery of the SFR market in California is somewhat dependent on absorbing all of the excess construction leftover from the boom.  One of the most idiotic misperceptions is that California is perpetually in short supply of housing.  This line no doubt comes from the various trade groups whose job it is to a) sell people on the notion that California housing will always appreciate and b) block legislation that would make it more difficult to get housing units approved in California.  I could squeeze a full post out of either of those issues.  But I’ll save those posts for another day.

image

This post is about relative supply of housing.  A lot of people look at historical housing prices as indicators that will be important in calling a market bottom.  I see charts that look at CPI adjusted prices, or price/income ratios, or even SFR/GDP ratios.  I think these are all important to consider, but I think an important issue that you can’t leave out is supply.  Prices are set by relative supply and demand.

So I think it becomes important to consider supply of housing space.  The chart above shows vacancy rates for rental housing since 1990.  This is my first blush take, but I am at least a little concerned that prior to 2000, vacancy hovered around 8%, but now is hovering around 10%.

Obviously this is a chart that contains national data, and it’s important to look at the data on a more local level.

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April 11th, 2009 | Category: Housing Bust, Housing Recovery, Multi-family | 8 comments

Viewing 3 Comments

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    Within the last year or so, our financial system has been rocked to its foundations. The collapse of the housing bubble, the pharmacies and the numerous defaults and bankruptcies connected with it brought down major financial institutions, such as Bear-Stearns, Lehman Brothers, and Merrill Lynch.
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    “Guesstimates” by Leading Economists on Timing of Economic Recovery are Mis-leading the American Public-Full Recovery 10+ yrs.
    Today’s economists, pundits and government leaders suggest we’re headed towards ‘blue skies’ after just a few short months, it is without question preposterous and borderline irresponsible. With nearly 4 million homes and developed lots in inventory and up to another million homes being held by the banks in ‘Shadow Inventory’, we are years even decades from a full housing recovery.”

    I ENCORAGE EVERY AMERICAN WHO CARES ABOUT THEIR FINANCIAL FUTURE TO BECOME BETTER INFORMED, MORE PROACTIVE AND KEENLY AWARE OF THE REAL FACTS BEHIND THIS CRISIS
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    Ken-

    Thanks for taking time to post the comment. I would take issue with the "decades" from full recovery as that suggests 20+ years at a minimum.

    But I agree that a lot of the people currently providing the "path out" are not being intellectually honest in their message.

    Thanks again for taking the time to comment.
 
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