Vacancy rates should be lower where the total inventory increases and people’s ability to predict the market increases. That’s also going to be places people want to live.
Consider a city of 10 million people vs 1,000 small towns of 10k people. The variability for demand in those small towns is higher and vacancy rates can’t drop below zero. So some towns hit 0 while others might be 20%. But in a city if some apartment complex is full people just go to the apartment down the street.
Sure but on average Americans move once every ~7 years on average. A 5% vacancy rate would be ~4.2 months between owners/tenants which seems unnecessarily high. Most apartment complexes I was at could turn them over in a few weeks if someone wanted to move in. So 5% would seemingly represent a significant economic inefficiency.
3% may represent local shortages as Santa Monica is more desired than West Adams etc. So increasing availability in undesirable places may not reduce rents in general.
The 5% is a sliding window. Some of those have just opened up, some of those are about to close at any given time. And it also represents all buildings, from super in demand complexes to slower moving listings, and is a rule of thumb that also aggregates seasonal differences.
In aggregate, 5-7% seems to be a sweet spot where landlords can find tenants in a reasonable amount of time and tenants are not scrambling to send out a dozen applications a week.
I moved around a lot and the majority of the time I signed a lease it was 1+ months out for an apartment that was still occupied. Having some availability right now is definitely beneficial as stuff can happen, but current housing stock just wasn’t what I was looking at basically ever.
Though I agree less desirable locations should definitely increase the average, as should purchases vs rentals etc. It’s just 3% is already including a lot of mandatory time from cleaning, painting walls, replacing carpets, etc. So prices could fall heavily at a sustained 4% long before you hit the 5-7% range.
Expensive housing markets are very unhealthy. A median home is considered affordable at 5x median income. Most of the expensive areas (San Francisco, New York, Seattle, Los Angeles, etc.) are at 10+x.
The other metric is median rent as a percentage of median income. Nationally it has hit 40% when the affordability mark is 33%.
Just because what you are experiencing has been a norm for a while does not make it good, or the goal.
People who rent tend to move more often than people who own a house. Landlords will often take an apartment out of the rental pool for a few months to remodel it.
Actually, California population (for example) has fallen by >400k over the last several years. The first falling year was 2019, 2020 saw a small rise (<50k), 2021 saw a fall of >300k, 2022 a fall of ~150k, and 2023 a fall of ~50k.
That includes both births/deaths and in/out migration. Population growth rate has been generally falling since 1990 (except for a peak in 2000) and significantly so since the GFC in 2009. However, prices have skyrocketed.
China has overbuilt their population by 10-100million (yes, and there are even more outrageous numbers) homes over the last 10-15 years, and yet prices in Shanghai/ Beijing/ Shenzhen still exceed NYC or SF by 50%. They have a falling population.
Crowding is huge in California though. The starting point was "multiple unrelated families living in one house." If the population has dropped by 1% but you started with 3 families per house, you still have (to some rounding error) 3 families per house.
China has the confounding issue where it has both poor social security systems and a mistrusted, dysfunctional stock market and financial system, so everyone shoves money into real estate for retirement.
This is not even a new problem. The imperial landed gentry was so named because bureaucrats would shovel their money into land.
A net migration out of California does not mean an increase in available housing. There are a lot of families (adults+kids) where the children grew up and then can’t afford a home in California and left the state. A household of 4 then becomes a household of 2 but the housing supply stays the same.
The price finds whatever level it needs to maintain a population that fits within the housing supply. Obviously population can’t grow that much against a fixed housing supply; once the vacants and spare bedrooms are filled up, people just get priced out. This is Malthusian NIMBY policy working exactly as intended.
Population geography also shifts from rural to urban and from declining to rising cities even as the total population size holds constant or shrinks. The fact that there is space for you on a farm or in a coal-mining town is cold comfort to someone with a STEM degree and a job offer at a corporate headquarters.
Did you forget to factor in that it is a replacement rate? Sure, more people are born every year, but plenty of people pass along in one way or another (mortality, downsizing, various care facilities).
but it's not necessarily needed in dense urban centers. Plenty of laptop class people could secure housing in rural areas for a fraction of the cost of what they're paying now.
One of the many things contributing to pricing, is that not enough road corridors are being built or widened.
It's harder live further out, when traffic slowdowns extend commute time 10x. And governments love the idea that expensive roads can be waved away using environmentalism as an reason.
Yet these same governments don't build fast transit either, and without fast amd efficient transit, trips take far far longer than a car.
At this stage we should be building both, as we're that far behind.
The point is, there is a move for 'dense urban areas'. Pack 'em in. Increase that housing density. Yet there is another way in North America, where there is often an endless bounty of space. Better transportation corridors.
Better transportation corridors means that housing costs plateau, because it's just easier to drive 10 minutes more, 20 minutes more, than spend 4x for housing.
That said, even the laptop class often does need to commute:
* Many remote workers have to attend once a week, or more often.
* People make lives, friends, contacts, have relatives in specific areas.
* Every once in a while, you may need to go to "the city" for something important. Medical treatment or specialists, specialty products, etc. Not everything can be shipped, or is shipped.
Anyhow, it seems you sort of missed the point, that is... the faster you can get into a city, the further you can live from the city and still be part of it.
Consider a city of 10 million people vs 1,000 small towns of 10k people. The variability for demand in those small towns is higher and vacancy rates can’t drop below zero. So some towns hit 0 while others might be 20%. But in a city if some apartment complex is full people just go to the apartment down the street.