Real Estate

The mantra doesn't comport to the data. A crash here is imminent as well

Sunday, 23 January, 2022

Published irregularly, as conditions dictate.

We keep hearing that there is a "5.2 million unit shortage" in US housing. But this cant we keep hearing from the real estate home-builders industry is at odds with the raw data of the St Louis Fed, derived from the US Census Bureau.

To start with, we look at total US population, Households, and Dwellings. The Census Bureau defines a dwelling herein as…

"a house, an apartment, a group of rooms, or a single room occupied or intended for occupancy as separate living quarters. Separate living quarters are those in which the occupants live separately from others in the structure and which have direct access from the outside of the building or through a common hall. For vacant units, the criteria of separateness and direct access are applied to the intended occupants whenever possible. If the information cannot be obtained, the criteria are applied to the previous occupants. Tents and boats are excluded if vacant, used for business, or used for extra sleeping space or vacations. Vacant seasonal/migratory mobile homes are included in the count of vacant seasonal/migratory housing units. Living quarters of the following types are excluded from the housing unit inventory: Dormitories, bunkhouses, and barracks; quarters in predominantly transient hotels, motels, and the like, except those occupied by persons who consider the hotel their usual place of residence; quarters in institutions, general hospitals, and military installations except those occupied by staff members or resident employees who have separate living arrangements."

The data for 2021 is not published yet, but we do have it through 2020. Let us examine the data then:

Things run quite consistently in near parallel over the years. If there was a dwelling "shortage," however, we would expect the grey line to have overtaken the blue. In fact, if we zoom in and examine the difference between the two, we find:

The tightest the households-per-dwelling market was occurred in 2016 at .9214 households per dwelling. At the end of 2020, this ratio had dropped to .9098 households per dwelling, or a vacancy rate of a little over 9% of the dwellings in the United States being unoccupied (which equates to .0902 x total dwellings of 141,183,000 = 12,734,707 excess (i.e., "unoccupied," or "vacant") dwellings in the United States at the end of 2021.

The notion of a shortage of 5.2 million "homes" (whatever definition they posit this under) does not represent "housing," per se, as "dwelling" defined by the Census Bureau at the top here, but a difference between those living in conditions of defined "dwelling," above, versus what they would prefer to live in.

But how many could say the same - that they wished the lived in a better dwelling? Probably a number closer to 141 ,1 million than 5.2 million!

In the data, we find on more myth floating in the air in recent years. The notion that households are “doubling” up, with people’s children living in the basement, parents in dining room, etc., is the opposite of what has been occurring since 2010.

Looking at the average size of household in the, we find the numbers generally declining since 2000. The global financial crisis did, in fact, see the average household increase over 2009-2010, but it has been in general decline since, save for the pandemic year of 2020. It will be interesting to see how the numbers for2021 come in.

From any of the charts and data shown thus far, however, there is nothing to indicate the dramatic price rise since the end of the first quarter in 2009 with a median sales price in the US of 208,400 to the end of the 3rd quarter of 2021 at 404,700. In fact, given the decline in the "vacancy rate" of dwellings over the past several years, particularly 2020, it would appear there is more than ample dwelling supply (despite the small number currently "for sale"), none of which bodes well for the supply-demand of number of households and available dwellings in terms of short supply.