The "New Housing Crisis" – Not Enough Rental Homes?

Tyler Durden's picture

Submitted by Lance Roberts via,

The has been a rash of articles as of late suggesting there is a “new housing crisis” afoot. The issue this time, as it is suggested, is there is a “shortage” of homes for all the people that are wanting to buy homes causing prices to skyrocket out of reach. To wit:

“It hasn’t been this tough to be in the housing market since the financial crisis.


To recap the problem, the supply of housing, especially in the affordable entry-level segment, is not keeping up with huge demand from first-time buyers and existing homeowners looking to upgrade.”

It is true there is a lack of supply of homes currently on the market. However, the lack of supply is not being caused by a flood of millennial couples wanting to “buy” homes, but rather “all cash” buyers, particularly foreign buyers, snapping up properties for investment purposes.

Here is the evidence.

At The Margin

The problem with all of the analysis each month on the transactional side of housing is it only represents what is happening at the “margin.” The issue at hand, with respect to housing, is more than just the transactional side of the equation which is based on just the relatively few number of individuals, as compared to the total population, that are actively seeking to buy, rent or sell a home each month.

In order to understand what is happening in terms of “housing,” we must analyze the “housing market” as a whole rather than what is just happening at the fringes. For this analysis, we can use the data published by the U.S. Census Bureau which can be found here.


Total Housing Units

In an economy that is 70% driven by consumption, it is grossly important that the working age population is, well, working. As I discussed back in 2014:

“The mistake is assuming that just because initial claims are declining that the economy, and specifically full-time employment, is markedly improving. In any economy, it is ONLY full-time employment that matters as it provides enough income to support household formation, increased consumption and higher levels of personal savings rate which leads to increased productive investment. Unfortunately, as shown below, full-time employment as a percentage of the working-age population remains elusive despite falling jobless claims.”

Chart updated to current levels. As you can see, employment as a function of the overall working age population is only back to where we began as Bush was leaving office. (I have stripped out those in excess of 55 to eliminate the “baby boomers are all retiring” argument)


“Furthermore, the issue of ‘labor hoarding,‘ combined with the huge pool of individuals outside of the labor force, is an important phenomenon that obscures the real weakness in the underlying economy. These forces combine to reduce aggregate demand on businesses that in turn resort to productivity increases to stretch the current labor force further to protect profitability.”

To present some context for the following analysis we must first have some basis to work from. Our baseline for this analysis will be the number of total housing units which, as of Q1-2016, was 135,184,000 units. This was up from 134,409,000 in Q1-2015 for a total increase of 775,000 units which is roughly in line with annualized run rate of new one-family home sales during that period which averaged 506,000 units.

The chart below shows the historical progression of the seasonally adjusted number of housing units in the United States.


As an example, the most recent report of “existing home sales” showed that 5,530,000 homes were sold on an annualized basis in May. Since this is an annualized number, we must divide it by 12 months for the estimated seasonally adjusted number of sales for the month which was 460,833 homes. This number of home sales represents just 0.34% of the total number of homes available. This is what I mean by “activity at the margin.” When put into this frame of reference the “existing home sales” report doesn’t seem nearly as exciting.


Vacancy Rate

Out of the total number of housing units, some are vacant for a variety of reasons. They are second homes for some people that are occasionally used. They are being held off of the market for one reason or another (foreclosure, short-sell, etc.), or they are for sale or rent. The chart below shows the total number of homes, as a percentage of the total number of housing units that are currently vacant.


If a real housing recovery were underway, the vacancy rate should be falling sharply rather than rising in the latest quarter and hovering near all-time peak levels. Such does not suggest that there is a “rush to buy” by millennials at this point.


Owner Occupied Housing

Another sign of a failed housing recovery is in the number of “owner-occupied” housing. If there was indeed a crisis in “inventory” as suggested, the ownership rate would be rising sharply, rather than hitting historical lows.


Importantly, this is against the backdrop of a system of bailed out homeowners, historically low mortgage rates, and a flood of liquidity into the marketplace. Where is that “wealth effect” that was supposed to be created by the inflating asset prices?


Home Ownership

The simple reality is there has been very little actual recovery in housing, or for roughly 90% of the American population, which explains its weak contribution to economic growth. The chart of home ownership shows the overall lack of recovery the best.


At 63.5%, which is down from 65% in 2013, the current level of home ownership is the lowest that it has been since the early 1980’s.

“But Lance, the recent reports of sales, starts, permits, and completions have all improved in recent months.”

That is true, and those transactions must be showing up somewhere, right?


REO To Rent

While the Federal Reserve, and the current Administration, have tried a litany of programs to jump start the housing market nothing has worked as well as the “REO to Rent” program. Foreign investors, investment banks, and private individuals have flooded the market with cash to buy properties and convert them into rentals. This is clearly shown in the chart below which is the number of homes that are renter occupied versus the seasonally adjusted home ownership rate.



Do You See The Problem Here?

The one thing the “housing crisis” articles do get right is that prices are rapidly rising in the “hotbed” areas. As the REO-to-Rent game drives prices of homes higher, it reduces inventory and increases rental rates. This in turn prices out “first-time home buyers” who would become longer term home owners, hence the declining homeownership rate noted above.

The problem, and the next crisis, will be when the herd of speculative buyers turns into mass sellers – there will not be a large enough pool of qualified buyers to absorb the inventory which will lead to a sharp reversion in prices.

Maybe this is why the Federal Reserve, and the FDIC, and WallStreet have been lobbying to relax regulations put in place after the last housing bubble which required banks to have “skin in the game.” By removing those restrictions banks have now returned back to providing mortgages to unqualified buyers, pool them and sell them off to unwitting investors. Haven’t we watched this movie before?

While the surge in housing activity, which still remains at historically low levels as shown in the chart below, has certainly been welcome it should not be forgotten that it has taken massive bailouts, stimulus, and financial supports to induce such relatively small amounts of activity.


There is no argument that housing has indeed improved from the depths of the housing crash in 2010. However, that recovery still remains at very weak historical levels and the majority of drivers used to get it this point have begun to fade. Furthermore, and most importantly, much of the recent analysis assumes this has been a natural, and organic, recovery. Nothing could be further from the truth as analysts have somehow forgotten the trillions of dollars, and regulatory support, infused to generate that recovery.

The point here is that while the housing market has recovered – the media should be asking ‘Is that all the recovery there is?’

With 30-year mortgage rates below 4%, we should be in the middle of the next housing bubble with prices and home ownership rising. The question the media should be asking is “why?” Furthermore, what happens if the “bond market bears” get their wish and rates rise?

The housing recovery is ultimately a story of the “real” unemployment situation that still shows that roughly a quarter of the home buying cohort are unemployed and living at home with their parents. The remaining members of the home buying, household formation, contingent are employed but at lower ends of the pay scale and are choosing to rent due to budgetary considerations. This explains why household formation is near its lowest levels on record despite the “housing recovery” fairytale whispered softly in the media.


While the “official” unemployment rate suggests that the U.S. is near full employment, the roughly 94 million individuals sitting outside the labor force would likely disagree. Furthermore, considering that those individuals make up 45% of the 16-54 aged members of the workforce, it is no wonder that they are being pushed to rent due to budgetary considerations and an inability to qualify for a mortgage.

The risk to the housing recovery story remains in the Fed’s ability to continue to keep interest rates suppressed. It is important to remember that individuals “buy payments” rather than houses, so each tick higher in mortgage rates reduces someone’s ability to meet the monthly mortgage payment. With wages remaining suppressed, and a large number of individuals not working or on Federal subsidies, the pool of potential buyers remains contained.

The real crisis is NOT a lack of homes for people to buy, just a lack of enough homes for people to rent. Which says more about the “real economy” than just about anything else.

While there are many hopes pinned on the housing recovery as a “driver” of economic growth in 2013, 2014, 2015, 2016 – the lack of recovery in the home ownership data suggests otherwise.

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Aubiekong's picture

Why own or provide rental homes.  The average obama voter thinks they shouldnt have to pay rent...

johngaltfla's picture

It's a bubble....

I just surveyed some neighborhoods and homes for sale I know well in Sarasota County:

3/2 40 year old home purchased in 2015 for $244K for sale $390K

3/2 40+ year old home purchased in 2012 for $170K for sale $414K

3/2 10 year old town house purchased in 2010 for $115K for sael $500K

None on the beach, none on the water, nothing special about any of them.

Shit is going full retard just like 2007 and if I hear that commercial for the asswad and the "learn to flip homes in Tampa Bay" ad one more time, I might play Pokemon Go on the Sunshine Skyway Bridge; blindfolded and drunk.

walküre's picture

There are no renters able to pay these rents just as there were no "owners" able to service the mortgages.

Shantytowns are expanding.

johngaltfla's picture

Bingo. The carry plus association fees on these types of prices put renters at $1800 per month for shit homes not including utilities, etc.

So the investors bailed last year and now the flippers and DIY morons are about to get assraped again because they did not get fucked enough in 2008 to go bankrupt the first time.

I've seen stupid before and it is even easier to see the 2nd time around. We have some seriously dumb mother fuckers down here.

sgt_doom's picture

Which is the usual outcome when the only objective of the unlawful greed-heads is to inflate financial assets!

Occams_Chainsaw's picture

In my area homes that were 130k 5 years ago are now going for 230k.  Also nothing special about them.  It's going to pop pretty soon.

canisdirus's picture

That's nothing... In my area a median house was about 300k in 2012. Today the bottom of the barrel is 600k and the houses that were 300k are now going for 900k or more... When this thing goes south, it's going to make the 2007-2008 crash look like a minor inconvenience.

Although something is obviously up this year. Barely anything has sold in 2016 and the number of houses on the market is 3-4 times as high as I saw last year. I think the bottom will drop out sooner than many of the flippers believe.

sgt_doom's picture

Of course, and this is a known!

When the shyster firm of Covington & Burling illegally oversaw the creation of MERS, or Mortgage Electronic Registry System***, while representing the top banks, they also enjoyed a strategic partnership with Kissinger Associates.  (Henry Kissinger, right-hand man to David Rockefeller.)

Meanwhile, James Johnson, former CEO of Fannie Mae, was promoting the increasing use of mortgage securitizations, and enjoyed a longtime relationship with David Rockefeller and Henry Kissinger as Johnson was the business contact for American Friends of Bilderberg, Inc.  (directors:  David Rockefeller, Henry Kissinger, Richard Perle, et al.)

President Obama would go on to appoint Eric Holder, from Covington & Burling, to be the attorney general to contain and freeze any possible lawsuits against the banksters which would unravel everything and point to all the millions of laws broken.

He would also appoint Jami Mascik, president and vice-chair of Kissinger Associates, to his Intelligence Advisory Board.

Of course, it would be the Blackstone Group, founded with Rockefeller seed money by Rockefeller protege, Peter G. Peterson, who would buy up 41,000 homes which had been fraudclosed upon, become America's Number Uno Landlord!

*** MERS effectively takes the position that you can separate the mortgage from the note and reunite them, a position that was rejected in an 1873 Supreme Court decision, Carpenter v. Longan (Carpenter v. Longan, 83 U.S. 271, 21 L.Ed. 313 [1873])).

(FYI:  Presently at Covington & Burling you will find Carl Bildt, the Swede who led the charge to extradite WikiLeaks' Julian Assage, as well as Michael Chertoff and Dov Zakheim's son and others of questionable background.)

Kurpak's picture

The bulk of the vacant housing held off market is owned by the BANKS to artificially create a supply shortage and drive up prices to repair their shitty balance sheets from 2008-11.  Any of this other shit analysis is hot air.


Hitlery_4_Dictator's picture

End this shit show now - housing please crash 

Life of Illusion's picture



GOV should of made RTC 2 and liquidated assets, and stop FED MBS buying.


johngaltfla's picture

It is now. We're seeing 1,2, and 3% down options from GSA conforming loans again. Shit is not going to end well. Oh, and I had to edit to add: Daddy Government (you and I) are issuing hardship grants and waivers for some down payments.

BSHJ's picture

Does this mean that now is a good time to buy a house (or two or three) to turn into mortgage-paying and positive-cash-flow rental properties? Oh good, I am so tired of flipping on HGTV.

opaopaopa's picture

it is a good time to buy with 3% down and not make any payments , live rent free for 2-3 years

opaopaopa's picture

in addition, if it gets any more expencive take out second mortgage and keep the money.

thecondor's picture

We wouldn't have a shortage of rentals if 1). The government during the housing crisis kept the banks from foreclosing on millions of people, 2). after the fallout, loosening lending standards to allow more people to buy from the last few years to now all the houses in the shaow inventory and 3).  Make the banks mark to market the shadow inventory which would make them sell real fucking fast.  (I don't know if this should be /sarc or not; maybe half and half).

Aubiekong's picture

Foreclosing is when people don't pay their mortgage.  If there is no evictions why would anybody pay their mortgage?   Loosening lending standards guarantees people who cant make their payments and thus will be foreclosed on.  How would that help?  You are a liberal government dependent welfare for life moron...

thecondor's picture

For one there kong, I have never taken welfare ever in my life.  I payed my mortgage on time and still got foreclosed on, I never missed a payment.  The bank sold my mortgage to another bank and I was never notified. AAAAAANNNNNNNNDDD of course they kept cashing the checks.  I get a call from my "new bank"  saying I was three months behind.  I told them I never heard of them and they made a mistake.  Well the joke was on me when the judge told me to get the fuck out of the house.  So fuck the banks, fuck the bankers, fuck the government and FUCK YOU!!!!! 

TheJewsDidIT666's picture

Clearly Donald Trump and Putin are behind this too. Wouldn't be surprised if the KKK is as well. 

delivered's picture

Agreed on the "qualified" buyer front as the pool of real qualified buyers for owner occupied homes is drying up. There's no way that with five years of job growth, the majority of which are in poor quality jobs (i.e., service, hospitality, healthcare, etc.), that this can possibly support a real recovery in residential real estate. What MSM and the sheepies don't get is that it was never about the quantity of the the jobs but rather the quality of the jobs - low pay, weak benefits, limited job security, and no upward mobility/growth potential.

The jobs that have been created are the worst kind and should be called Vapor-jobs as they will disappear as fast as they were created during the next crisis. Just no way these jobs can provide the type of earnings needed to save for a down payment, quality for a mortgage, build a savings account of say 3 to 6 months of mortgage payments, maintain the house, etc. as on top of inflating housing/rental costs, the average worker is getting creamed by inflating healthcare and child related costs.

Basically, an impossible situation as if home prices fall again, employment levels will certainly fall as well so by the time a home is fairly priced, the target buyer will be broke, unemployed, and living in the family adobe. Alas, back to square one as the investors will step in again and even buy up more of the available home inventory.

Welcome to rental nation and in the words of the Eagles from Hotel California, "You can check out but you can never leave". Translation, the worker base will most likely always just be checking out of one rental and into another, thus they will never be able to leave their wealth death spiral.

darteaus's picture

Prescription for permanent poverty for the Kartrashian generation:

Owe $$$$ in student debt to earn a worthless degree in Gender Studies, or some other crap.  Lease a car - because I deserve a new one every three years.  Lease a cell phone (need new).  Rent an apartment or buy a condo w/HOA.  Rent my furniture because I "need" a nice place.  My clothing must look new - not just clean. Never marry, so I don't have to split housing/transportation costs.

Aubiekong's picture

Owned two rental homes that rented in the 600 -700 range. Mostly single moms or young families.  Most tenants did not feel that paying rent was a priority and they had other bills that needed to be paid first.  They could not understand why I would not allow them to live in the house for free since they were having a hard time.  Many would blame me for their hardship when I had to have them evicted for lack of rent payment.  In today's world of entitlement attitude rental property is for the birds...

Oldwood's picture

I own a couple of rent houses and would prefer not to, but while its a tough gig, I can't think of a better way to create something that might provide some retirement income. My IRA sure ain't doing it. I've thought about buying more, but as with gold, I'm still waiting for prices to come down. Timing the market is a bitch.

Autonomous's picture

The fed printed over $1.7 trillion to bail out MBS investors who were fraudulently sold into AAA rated MBS. The fed is now the world's largest owner of foreclosed and distressed homes. Many of these homes are still vacant, some are purchased from the fed by Blackstone for pennies on the dollar.

sgt_doom's picture

With the Blackstone Group's stealth goal of one day owning Fannie Mae and Freddie Mac.

nailgunner44's picture

Chink hot money ain't helping

Hubbs's picture

I have always wondered if elimination of property taxes, or at least allowing payment of an alloidal tax (one time balloon payment for taxes up front and then never having to pay taxes again on your property) would spur people to really, really sacrifice to buy a home.

Even better would be if you could put additions on without having to pay more tax.

The way it is now, you never "own" your home, even if the morgtage has been paid. You are in a perverse way always "renting" from the government. 

Don't pay your property tax  and see how long you live in your house...unless of course, in the reverse situation, when you haven't paid a penny on your mortage for years,  the bank has already foreclosed but you still occupy.

sgt_doom's picture

Exactly why it's called the rentier class!

Yes_Questions's picture




And Mrs. Questions just started her life as a Realtor..


   I picked the wrong year to quit drinking..

Consuelo's picture



The 'house flipping' radio spots have continued way longer than they did during the last downturn.    Many of these have been playing since 2012...   Direct corrolation to ongoing cheap money spigot.   It is going on long enough to absolutely convince the detractors, that this time is indeed, different than last time.   It's different alright...

ThrownOffZHTwice's picture
ThrownOffZHTwice (not verified) Jul 25, 2016 4:48 PM

We need to get the foreigners out of the housing market.  I can't compete with Won Hung Lo with his bag of $800,000 cash.  All foreign purchases of homes in the last ten years need to be confiscated and the purchasers deported.

Billy Shears's picture

You call yourself an 'merican?



kroot's picture

I have seen very similar situation in Denver. Rent has gone up for a 1 bed / 1 bath from $650 / month in 2014 to $724 in 2015 to $800 in 2016. I'm a millenial and looking to buy a house, but not at the prices in the Denver area. If only I had some money a few years earlier, I would have scooped up a house in 2009. A 1000 square foot house with roughly 5000 sq foot yard would probably sell for anywhere from 120k to 180k depending on age, quality, and location in Denver. Luckily for me my work is in computers and I can find work in nearly any city in the US. I am planning to move as I will not pay these outrageous sums as I believe it is a bubble that will collapse again.

Denver inventory is at an all time low. Seeing the housing markets crash twice in my lifetime (2000 / 2008) has given me a perspective that I think has been valuable. I won't subject myself to huge amounts of debt like I've seen done in the past. The only unfortunate part about that is having to keep the money in the bank and allowing those fuckers to loan out 9x the amount I have provided them with. But alas there too lies the other side of the issue. Most normal people have few real options to earn interest on their money. Either invest in housing, bonds (joke), or stocks (see ya at the bottom). 

It is hard being a renter for 4 years now, and when I look at it, If I had bought a house in 2012, I most likely would be able to have made the same amount (if I sold) as I've spent in rent for these 4 years. I'm determined to ride out this nonsense however I have to, even if that means moving away from Denver's amazing scenery to say Ohio. 

Stu Elsample's picture

the pot heads are moving to Colorado...that of course drives the rent costs up

Houses Depreciate's picture

Why buy it when you can rent it for half the monthly cost?

tom stamps's picture

Where ever there are good paying jobs, the housing prices will also be on the high side, unfortunately! 

InnVestuhrr's picture

Real-world data point regarding economy & cost of housing:

I put my motorhome up for sale last week, received almost 3,000 page views in less than 1 week, sold at listed price to the first person who contacted me the same day the ads were published.

EVERYONE wanted the motorhome to live in full-time because they could not afford housing, rent or buy.

I asked the people inquiring from California where they would park the motorhome if they wanted to live in it full-time because I know there are no RV parks with spaces available anywhere near California cities. They told me that they would just park the motorhome on the street, that there are people living out of parked cars, vans, trucks, etc all around California cities.

So you see, the obomination economy IS doing great and central bank monetary policy is a spectacular success !

itstippy's picture

There are MANY older single-family homes available at low (often very low) prices in the small villages and towns of South-Central Wisconsin.  The small villages and towns were built to support the surrounding family farms, and were reasonably prosperous and provided a good quality of life for almost 100 years.  Alas, the family farms are almost all gone; the farmland is worked by huge agribusiness corporations, and the population density has plummeted.

The villages now consist of lots of modest but originally well-built houses in varying states of disrepair.  The inhabitants are either retired or on some form of government assistance.  The commercial district is abandoned: no more feed mill, general store, restaurant, gas station, repair shop, bank, or anything.  The churches (big, beautiful structures) are almost empty, the fire station and town hall are still open but staffed by one or two people.  You can't buy a pack of gum or gallon of milk in the village.  You do have your choice of two or three saloons.

It would be great if some work-from-home internet businesses and computer programmers would move out here and bring some money into the community.  We have broadband access.  Why do they all want to live in big cities?  Flyover country is drying up and small town life is pretty much gone around here.  It's heartbreaking. 

Cthonic's picture

I know of many a town like the one you describe, though in a different state.  Including one unusual place where most of the property is now owned or leased by one man.  He uses the old schools and other buildings to store salvaged auto parts, and is probably one of the richest guys in the county.

The Real Tony's picture

Good news up in Canada. The Canadian government has finally done something about these God dam chinks. Starting this August 02, 2016 they impose a 15 percent tax on Chinese (foreign Chinese) buyers of Vancouver real estate over 2 million dollars. I'm short Home Capital already and hoping tomorrow they pummel Home Capital.



The B.C. government plans to tax foreigners who buy residential property in the Vancouver area – an announcement that follows months of pressure to address foreign speculation that many have blamed for the region’s superheated housing market.

Finance Minister Mike de Jong said the 15 per cent tax, which takes effect Aug. 2, will apply to the sale of all residential properties within Metro Vancouver, excluding treaty lands in the Tsawwassen First Nation. The tax will apply to buyers who are not Canadian citizens or permanent residents, as well as corporations that are either not registered in Canada or controlled by foreigners.

Mr. De Jong says the additional tax on a $2-million home would amount to $300,000. He said the law gives the province the ability to adjust the tax rate to between 10 and 20 per cent.

The announcement is the latest in a series of measures aimed at addressing skyrocketing housing prices in the Vancouver region – an issue that is expected to become central to next spring’s provincial election. The debate has been overshadowed by concerns about foreign buyers and empty homes, as prices increased by more than 30 per cent in the past year alone.

Stormtrooper's picture

Oh no!  Now those rich Chinese children will not get their brand new Maserati every year.  How selfish of you Canucks!


Houses Depreciate's picture

With 20+ million excess empty houses and growing with more on the way AND housing demand at 20 year lows and falling, there's a problem on the horizon.