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The Atlanta Fed's macroblog provides commentary on economic topics including monetary policy, macroeconomic developments, financial issues and Southeast regional trends.

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January 30, 2007


That Vacant Look

This news raised a few eyebrows...

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.   

... at Angry Bear, at Beat the Press, at Calculated Risk, just to cover the ABC's down my blogroll.  And indeed, the jump looks pretty impressive:

   

Vacancy_rate

   

I can't think of any particularly positive spin to put on that, but I did notice that there seems to have been a compositional change underneath that number:  The share of for-sale vacant housing units accounted for by multi-unit properties rose by about 3 percentage points:

   

1_unit_vacancies

2_unit_vacancies

   

I don't know what that means -- if anything -- but if anyone follows Dean Baker's advice and gives the vacancy report the coverage he thinks it it deserves, maybe they will explain it.

January 30, 2007 in Housing | Permalink

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It's all simple. Sellers took the news that "market is bottoming" at face value and took homes out of market until Spring comes.

I personally know 2 people who have empty homes waiting to be put on market in Spring. They both failed to sell in Summer and decided that Spring will be much better.

What it means is that 2 months from now we will have absolutely astonishing inventory coming for sale. It will be something we never saw.

I think the last year "housing crash" was just a warmup. The real crash is coming during the next 3 years. I think 2009 will be the worst.

Posted by: theroxylandr | January 30, 2007 at 11:24 PM

I've been watching the MLS listings in my Northwest Chicago suburb since about two years ago, and quite closely since May last year. In January 2005 less than ten homes were listed for rent. Today the number is 64. (Most of these have "wishing prices" that seem to me quite unrealistic -- anyone who could pay them would probably choose to buy, unless in a short-term posting/transfer job situation.)

Although nearly all the sales action is in the under-$500k price range, about 40% of the single-family homes listed are priced above $600k. A significant fraction of those are obviously spec homes still abuilding (no photo, photo showing construction, etc.), and a significant fraction of the others have photos showing rooms that are empty of furniture or appear staged with rental pieces (one giveaway is lack of the window treatments you'd expect in a lived-in $600k+ home). And many of those empty/staged homes were the same back in the summer. Moreover, I've noticed a few homes whose summer '05 listings appeared empty/staged that have been delisted but haven't shown up in the Chicago Tribune's listings of recorded sales (which pick up all sales with about 1-1/2 month delay).

There've been some price reductions, but mostly only one-time and only around 5%. It will be interesting to see how long these people will hold out, adn what will happen to the overall market price structure if they can't and the $600k+ homes start sagging into the range buyers are actually able to pay (esp. as llending standards tighten).

Posted by: jm | January 31, 2007 at 11:27 AM

OF COURSE the number of vacant homes is up, the number of people buying more than one home was way up in '05 & '06!
Let's get back to business. There's a VERY simple way to assess the state of our residential real estate sector, and if I've thought of it so has FED Senior Staff.
HOW WERE THE HOMES SOLD IN OUR BUBBLE ZONES IN 2006 FINANCED?
These make up some 40% of all our sf homes and are the homes whose prices TRIPLED in only nine years ('97-'05). IF '06 purchases were financed as they were in the three prior years (with funny loans), it's clear all the FED's efforts last year merely postponed the endgame.
Is it coincidental that CA, NV AND FLA, three HUGE Bubble states, have yet to sign onto the CSBS Directive on nonconforming mtgs.? This guidance is all but toothless, so why the reluctance of bubble-states to sign onto it?
I think the FED has a MUCH bigger problem to reconcile than trying to disprove a statistical phenomenon. Supporting efforts to prevent home prices from naturally reverting to their long-term historical growth rate risks changing the role housing has played in perpetuating our country's most cherished values.
So, what is the role of the FED, to see we never again have to endure the horror of two successive quarters of negative growth, or to look out and act for our long-term economic viability?
I sure wish someone would look BB in the eyes & tell him it's his time to stand up!

Posted by: bailey | January 31, 2007 at 12:34 PM

so bailey what is your solution?-drive up short term rates so you break the back of the housing market?

lower rates to give unsold stock a better chance to sell-but you risk creating a bigger bubble?

print lots of cash so that people can afford the super premium prices being asked on a lot of these homes?

or hold rates steady and give the market time to sort itself out?

I vote for hold rates steady unless you really start to see some inflationary pressures. then crank up rates. I would not lower rates, unless you had a spiraling situation, which I don't foresee.

gentle ben has been doing a good job with some really tough problems to handle.

Posted by: jeff | January 31, 2007 at 07:32 PM

Jeff, Good question. What's the objective if holding rates steady facilitates the same old profligate lending policies that created the housing bubble?
BB should immediately distinguish HIS FED from the failed policies of his predecessor's.
I think he should use his bully pulpit to start preaching fundamental economic principals to the Administration, Congress, its Banks, our largely deregulated financial sector & even consumers. He should follow that up by submitting a detailed plan to Congress asking the FED be appointed single body regulatory oversight of our financial sector. He should immediately stop acting as an Administration stooge (his China trip was humiliating, not embarrassing, his recent comments about our out of control entitlements ignored the simp[le point that this Administration's spending spree might have squared us for many, many decades (see Stiglitz on true Iraq cost). I'm still not over BB's analysis that our housing rush was driven by "fundamentals". I'd like to see him publicly question the value of FF as a spending/saving balancing point.
Early last fall his own Banks told him they were planing on loosening their already loose mtg. lending criteria this year to "remain competitive". A week later he released his toothless nontraditional Mtg. "Guidance". Huh? Since he stopped raising FF at 5.25% he's bought via open market purchases 16 times. Every time he buys out the curve he's supporting artificially low mtg. rates & I think he's signalling market players. He should stop this immediately.
And, what happened to his belief the FED should be transparent. Instead of worrying about what a r.e. price retracement would do, what no retracement will do.
What our economy needs most is someone to speak as an honest broker for our longterm economic wellbeing.

Posted by: bailey | January 31, 2007 at 09:23 PM

Among the many statements & actions I failed to mention is BB's recent claim that CPI STILL (significantly) OVERSTATES inflation. Huh? I'd love it if he'd share his definition of inflation & show us a representative population sampling that supports this claim.

Posted by: bailey | February 01, 2007 at 01:44 PM

Excerpt from Wm. Poole's 1/17/06 speech:
" the Federal Reserve has a responsibility to maintain financial stability. That responsibility includes increasing awareness of threats to stability and formation of recommendations for structural reform."
Sounds good like a good idea, doesn't it?

Posted by: bailey | February 02, 2007 at 11:55 AM

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