GO
Loading...

Enter multiple symbols separated by commas

Vacant Homes May Signal Further Weakness In Housing Market

A glut of vacant homes suggests that the U.S. housing market has not yet stabilized and may be poised for another downturn, Merrill Lynch said in a research note released on Monday.

"Now that oil prices and mortgage rates have stopped falling, we will be back lamenting the downturn in the housing market and its spreading effects on the economy in the second quarter, much as we were in the summer and fall 2006," Merrill Lynch economist David Rosenberg wrote. "Looking at the inventory backlog and still-stretched affordability levels, this story is far from over."

The Federal Reserve's policy-setting Federal Open Market Committee cited "tentative signs of stabilization" in the housing market last week when it voted unanimously to keep interest rates on hold.

Pending home sales jumped a stronger-than-expected 4.9% in December, the biggest gain since March 2004, supporting ideas that the worst was over and the housing slowdown would not tank the broader economy.

But Rosenberg called the home sales data "more of a weather report than any serious commentary on the real estate market," pointing to unseasonably warm weather in December -- typically a slow period for home sales -- that likely spurred demand.

Instead, he focused on a Commerce Department report showing the homeowner vacancy rate rose to 2.7% in the fourth quarter, well above the year-earlier level of 2%.

That suggests a glut of almost 1 million homes sitting vacant, which will likely pressure selling prices for an extended period, Rosenberg said.

Goldman Sachs analyst Jan Hatzius noted that the vacancy rate had fluctuated between about 1% and 2% for the past 50 years.

"By itself, this would point to a fairly enormous supply overhang and little prospect of a bottom any time soon," Hatzius wrote in a research note.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

  • Why women cheat?

    Is cheating bad? Why do women cheat? The founder and CEO of affair website Ashley Madison tells all, including why he has his eye on China.

  • Judge's gavel

    The Financial Industry Regulatory Authority disciplined several financial services firms and individuals in May 2015.

  • Fine wines & finance

    Why you should try something a little different on date night. Bring the romance and champagne, and a calculator too. Every once in a while have a date to talk money and finance, and keep an important part of your relationship on track. Reporter Sharon Epperson talks to a couple who does just that.

U.S. Video

  • Cramer: Here's a sign the market could rally

    Wall Street's been soaking in red, but "Mad Money" host Jim Cramer has one signal to watch for that could point to another run.

  • Burger war maneuvers

    Cramer looks at the number of company's selling burgers and tries to determine the quality names, as well as those to avoid.

  • Cramer: What's driving defense?

    Cramer says that even though President Obama has made it clear the US can no longer be the world's policeman, the country can become the world's arms dealer. Profiting from defense spending.