Today’s Metric and what it means? 14.5% of homes are vacant!!!

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October 29, 2009
There is no sugar coating this number. This is really bad news for Real Estate, Banks, the Financial system, our Recovery, etc. Why you ask?

Do you know why most houses are vacant in our opinion? Because people have given up and just moved, because banks are sitting on homes and not foreclosing because it keeps them from recognizing a loss, because people can’t rent them for a profit, etc. No matter how you slice it this number is bad and based on today’s reading it is getting worse not better. We suspect the more vacant housing you have the more foreclosure you will have and the more depressed pricing will be. 2010 is going to be a rough year but we need to get through it and come out stronger.

As you hear on TV all the time, real estate numbers are getting less bad. The whole second derivative argument for why we are turning a corner. Let us be the first to tell you that the market is not getting better and it will not get better until we turn this vacancy problem around. Fewer vacancies mean people can not only choose to live there but they can afford to live there.

Things are going to get worse before they get better. We need to stop building homes and create incentives to turn the current inventory into useful housing or just knock them down and recycle the material for better use. Our vacant and boarded housing stock becomes a problem that brings all kinds of unhappy things to neighborhoods.

On another related topic do you want to know why the Case Shiller index is up the last 3 months? The answer is unfortunately simple. Last year we were foreclosing on a sub prime home that was at the lower end of the market and now we are foreclosing on the move up and luxury market. Even if you sell the move up house for 50% off it will still raise the Case Shiller index because that 200K sale this year was a 90K sale last year so the average looks better.

Just track the transaction volume and months supply to see how we are doing because the “average” sale this year is very different than the "average" sale last year and it can be very misleading.

We need to think of programs to turn this vacancy number around!!! More jobs would be a good thing ...
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