The relative interaction of supply and demand combine to realize home prices and rental rates—and both are a local market phenomenon [As always, I invoke the “There Is No Such Thing As A National Real Estate Market” — the TINSTAANREM clause — since not all markets are the same.]
The dynamics between vacancy rates in rental and ownership properties has changed significantly since the housing bubble as many owner-occupied properties have been converted to investment properties that are now rentals.
NBC News compiled a report of the cities across the U.S. with the greatest comparative housing vacancy rate. The report is based on a quarter summary prepared by the U.S. Census Bureau listing the vacancy rates for rentals and owner-occupied housing for the 75 largest Metropolitan Statistical Areas (MSAs). The quarterly report also includes these statistics for all 50 states at the state level. Also available are homeownership rate statistics at the state and MSA levels.
NBC News used a four-quarter average (to smooth quarter-to-quarter random variability from the sampling and also weighted the rental and ownership rates to estimate an overall vacancy rate (based on the national proportion of owner occupied homes to rental properties nationwide).
The top 10 vacant markets under this methodology were:
Image may be NSFW.
Clik here to view.
Is this the perfect comparison for relative rental rates? No—it is not. Take Houston, for example, (where I reside) and consider rental market conditions separately from the owner market. There is a very tight supply of owner-occupied housing, with the latest monthly inventory at just 5.5 months (where six months for existing housing is considered normal). The 12-month moving average of median home prices is up 1.35 percent. The rental market, however, given the addition of 87,300 jobs in the past 12-months, is much tighter than the U.S. Census estimate portends. A blog I wrote in July of this year referenced a Marcus and Millichap forecast of a 7.5 percent vacancy rate in Q3 of 2012. The difference, perhaps, is that the Census estimate was based on the MSA (which for the Houston-Sugar Land-Baytown MSA includes 10 counties) while the Marcus and Millichap study is more Houston focused.
Never-the-less, if you want a quick comparison where your local market stands, click the links above and take a look at the comparative local market statistics for all 50 states and the 75 largest MSAs.
The bottom line is that vacancy rates do impact home values and rental rates—but both are dynamic markets and can change quickly.
Ted
