California vacancy rates for single family residences (SFRs) rose from 1.4 to 2.1% in the last decade, according to the 2010 Census data. This represents more than two years of new construction at recent rates. Rental vacancy rates rose substantially more, from 3.7 to 6.3%. In addition, average household size edged upward from 2.87 to 2.90 across the state for both SFRs and rentals. Bedroom communities took the brunt of this vacancy increase.
Some suggest the data reflects the movement of Californians out of the state in search of employment or into cohabitation with family members or other residents. Homelessness and imprisonment need also be considered. [For more information on the myth of the vanishing California population, see the October 2009 first tuesday article, Let my people go! The mythology of the vanishing California population.]
Demographers suggest larger average household sizes are due to the cultural tendency for children to live with their parents into adulthood in California’s Mexican and Chinese population, rather than due to the popular myth these populations simply tend to have more children. Compared to California’s overall 10% population growth in the past decade, the Mexican population rose 35% while California’s Chinese population rose 28%.
first tuesday take: Regardless of ethnic patterns or a sense of cultural pressure to live with your parents, this simple logic follows: when you don’t have a job, you don’t have money and you can’t afford housing – to rent or own.
Employment directly shapes local real estate markets and is a critical factor in shaping trends in real estate sales and rental volume. Thus, the 2010 vacancy data is likely to go down as a distortion in long-term trends simply because the Census was taken during the period of maximum fallout from the concurrent Great Recession and a financial crisis of global proportions. More distorting is the fact the 2000 Census occurred while the economy was in full recovery. An abnormally high number of jobs existed then which are not seen in normal economic conditions (and caused the Fed to get earnest about slowing the economy).
Rent or loan mortgage payments are an individual’s largest monthly expense, so without a full-time job and a sufficient and stable income, people will temporarily cohabitate or leave the state in search of work elsewhere. Uncertainty exists throughout the population and public confidence is nowhere near what it has to be to get individuals to venture out into other digs.
Multiple listing service (MLS) brokers and their agents need to consider investing the slack time they now have to get those able-to-buy (read: employed) back into the willing-to-buy column by inducing – or tantalizing them – to start looking. If you can get them to look, they will be ready. They will know it is time to buy when jobs have picked up to a point they cause real estate sales volume to rise. At that point, these buyers will have around 12 months to pull the trigger and buy before prices turn up. [For more information on the relationship between employment and the real estate market, see the April 2011 first tuesday article, Jobs move real estate.]
RE: “Census shows empty homes, apartments in California” by MercuryNews.com