The US Census announced some remarkable numbers today:
- The percentage of families in the US owning homes dropped from 67.9% in the second quarter of 2020 to 65.4% now. (1)
- However, rental vacancies increased from 5.7% to 6.2% in the same time period.
- 14.2% of Americans moved in the last year, during the Covid-19 epidemic.(2) This is a sharp increase from the estimated 9.8% who moved in the year prior to the virus.(3)
The percentage changes may seem small, but when we have 120,756,048 households in the US, a 2.5% drop equates to 3 million empty homes. Now some of those could have turned into empty rentals, but where did the people go? How do you get a decrease in home ownership and an increase in rental vacancies at the same time?
There are several obvious possibilities:
- Deaths. Older people tend to be owners, and the virus went after them. However, that doesn’t explain rental vacancies. Further, we have seen 611,037 confirmed Covid deaths, some of which were in the same household. That doesn’t explain the much larger increase in vacant units, although it may have contributed to it.
- Consolidation. Parents and children moving in together to reduce costs and creating a single household where there had been two.
- Diaspora. People moving out of the US. The Federal government famously doesn’t track the number of Americans living outside the US, and travel restrictions made this difficult for most of the year. However, this has been a growing trend for several years leading up to 2020.
People largely blame government for the scarcity of labor, claiming that programs to aid the need reduce incentives to work. What happens if the truth is that many of these workers have relocated for better jobs, lower cost or safety reasons?
If the next quarter of data from the Census supports these numbers, then we are likely to see a decline in demand for housing. That should impact prices as well as the construction industry and economy.
That’s not considering the expected wave of foreclosures and evictions starting in August, as government restrictions on these actions disappear.
Further, the Census reported that sales of new homes have fallen in the US by more than 6% (seasonally adjusted) over the last two months.
Landlords and real estate investors are the eternal optimists. There will always be another tenant. Except of course where there isn’t. Someone owns those empty shopping malls and homes.
Interesting times, indeed.
- US Census Bureau, “Home Ownership Rate” email, 27 July 2021
- US Census Bureau, “New Residential Sales” email, 26 July 2021