Too many empty houses
Schahrzad Berkland
5 Comments
We have built too many houses in this country!
Look how many vacant homes we have in this country:
Five percent of all for-sale and for-rent homes in this country are empty. So 6.2 million homes are vacant, despite the owners trying to rent them out or sell them.
That means we have 2,180,000 empty houses for sale. We have 4,000,000 empty houses for rent. Looked at another way, a little over 10% of all rentals are vacant.
How do you like being a landlord? Still think owning real estate is a sure way to riches?
I'd love to get a discussion going. Do you think it was prudent to build so many homes. Or do you think it was wasteful, to use timber, copper, granite, concrete, and glass to build 6 million homes that nobody wants?
Prices will keep falling, as long as there are so many homes that nobody wants. At some price, they will be wanted.
And don't think for a second that a housing shortage exists in California. While I don't have the data for CA rentals, I was told by a realtor that 30% of all homes on the MLS in San Diego are marked as "vacant". The fact is, builders responded to speculative demand, not fundamental demand. Speculative demand caused speculative prices. Unlike the post-WWII demand, which was driven by fundamentals, i.e. people buying homes to live in them, this boom was caused by flippers and investors. That is why the prices rose in the stratosphere and that is why they are not supported by fundamentals. Builders responded by building homes for speculators, not for families to live in. So we have a glut of homes, that the speculators and flippers are stuck holding. We have a glut of houses all over this country.
View Printer Friendly Version
Email Article to Friend
Reader Comments (5)
My wife is an (ex) architect. Once of the primary factors for her leaving the profession (becideds just pain old not being fun) was the amount of waste in the building industry. They'd tear down these beautiful old homes that were in minor disrepair (only sometimes) and replace them with gigantic zero-lot-line mcmansions, that are right now being forclosed on.... )and that's not even in sothern california.)
I think there is a glut of unaffordable homes, however the problems you are outlining above are very location specific. Hopefully the prices will come down because they need to. People won't be able to stay in Calfornia if they don't. It is a HUGE social problem here.
Do you think there are any areas where vacancies did not rise, where builders did not overbuild?
Even in conservative Omaha, NE, there is a glut of homes, and in spring 05, one of the two major builders committed suicide due to financial distress. Reports are no TV since last year, that sellers cannot get traffic for weeks at a time, and the newspaper ads show "reduced below market value", and incentives abound. So even in the conservative Omaha, there is a glut.
I know a guy who is building a lake home at the North Dakota/Canada border, and the prices have been rising due to Californians coming in to invest in vacation homes. So he is building a spec house for a wealthy CA person, who wants to speculate on real estate.
Tell me please, where in this country is there NOT a glut?
In San Diego, the area's Cities predicted in 2000, a"147,000 new unit need". By 2001, it was reduced to 107,000. By 12/06, the builders had built 125,000 new units, and are still going...tho some have slowed. Now the 'new 18-city prediction is "1,125,000 more folks by 2035." Where do they get these 'predictions,' from optimistic builders? We don't have the Stability in Jobs to support such high prices! Can't get any to even rent them-Add the poorly done 'condo conversions' & 'speculative turnover contractors' with few renters or buyers available for overpriced homes,' just watch what happens when track home builders artificially 'raise the market.'
Whether there is a shortage or surplus is a matter of price. One of the side effects of the foreclosure mess will be more people doubling up, which will drive up vacancy rates, but does that mean that all of the sudden there is a surplus. I'd say no, just that prices are too high given the fundamentals. (And, yes, I agree with the tenor of the article, that it will take quite a while to unwind from the recent speculative bubble in real estate).
In the job-rich areas of the state (SF, SJ, LA), there is not enough housing - people are forced to live in Sac, Stk, Merc.. Anyone who commutes knows the problems this causes.
Politics in this state are not rational - we have policies to increase jobs in the central cities and then impose restrictions on building near those cities. We should either decrease the number of jobs in the cities and distribute them more evenly throughout the state or increase the housing stock near where the jobs are. Or we could do both by encourage conversion of office space in the cities to condos.