Where America’s Vacant Homes Are

On November 6, Forbes published an article titled Where America’s Vacant Homes Are.

Where America’s Vacant Homes Are

Trulia Chief Economist Jed Kolko looks at the latest Census data, revealing that the vacancy rate remains elevated, and an unusually high share of vacant homes are being held off the market. It’s this vacancy overhang that is holding back construction activity.

The 2013 Q3 Census Homeownership and Vacancy survey shows that the vacancy rate is still above its pre-bubble level and remains unchanged from one year earlier. This might come as a surprise to house hunters, who have struggled with limited inventory when trying to find a home to buy or rent, but an unusually high share of vacant homes today is being held off the market. The elevated vacancy rate discourages new construction activity and is therefore one of the major hurdles to a full housing recovery.

To understand why vacancies are still widespread and what impact they have, we dug deeper into the Census data as well as other data sources that report vacancies at the metro level. Here’s what we found.

Nationally, Vacancy Rate Still Above Pre-Bubble Level
In the third quarter of 2013, 10.2% of housing units were vacant, excluding vacant homes that the Census classifies as “seasonal,” such as beach homes. Vacant homes include those for sale or for rent, as well as homes “held off market” for various reasons. This vacancy rate of 10.2% – the share of homes that are empty – was unchanged from 2012 Q3 and well above the pre-bubble level. In fact, the vacancy rate today (10.2%) is closer to its peak during the recession (11.0% in Q3 2010) than before the bubble (8.8% in Q3 2000).

But wait – aren’t homes hard to find? Buyers (and renters, too) have had little to choose from because the listed inventory is low. The share of the overall housing stock that is listed for sale, based on National Association of Realtors (NAR) and Census data, rose slightly in 2013 Q3 compared to last year but is lower than at any other point during or after the bubble. In other words, the for-sale inventory is back down to its 2000 level, and tight inventory has helped fuel sharp price increases across the country over the past two years. That means there’s an inventory shortage, but not a housing shortage:

How can the for-sale inventory be relatively low while the vacancy rate is high? Because the share of vacant homes being held off the market – that is, neither for sale nor for rent – is rising. In 2013 Q3, 53.5% of vacant homes were held off market, up slightly from 52.9% in 2012 Q3 and from a low of 45% at the height of the housing bubble in 2006.

The Census data shed some light on these vacant homes being held off market. Over the past year, from 2012 Q3 to 2013 Q3, there were increases in the number of homes that were vacant because they needed repairs or were being prepared to be rented or sold. At the same time, there were declines in the number of vacant homes in foreclosures or other legal proceedings, which is consistent with other data showing big drops in the share of homes in the foreclosure process.

Many of the vacant homes now being held off the market won’t stay off the market forever. Homes under repair or being prepared to be sold or rented could come onto the market. These homes would then be added to the active inventory, which would slow down or even reverse price and rent increases while giving house hunters more housing options. However, the trend in the vacancy rate also depends on how fast vacant homes fill up, which hinges on the growth in the number of households. The Census survey showed that household formation, at 380,000 over the past year in Q3, remains below the normal level of 1.1 million; the underlying survey data showed a slight year-over-year increase in the share of Millennials (age 18-34) living with their parents. Without more new households, vacant homes will fill up slowly.

Where Are America’s Vacant Homes?
Looking at where vacant homes are helps explain why they are vacant. We estimated the share of vacant homes in each of the 100 largest metros, based on the 2000 and 2010 decennial Census, the 2010 and 2012 American Community Survey, and U.S. Postal Service data from 2012 and 2013 (see note below).

The vacancy rate is higher today than it was before the bubble in 86 of the 100 largest metros. That means that the elevated vacancy rate at the national level is widespread at the metro level, too.

More strikingly, the vacancy rate at the metro level as of October 2013 ranges from a low of 3% in San Jose to a high of 19% in Detroit – a huge gap. No other metro approaches Detroit’s high vacancy rate, but the other highest-vacancy metros include two types of metros: (1) other Rustbelt towns, like Gary and Cleveland, and (2) Sunbelt spots like Las Vegas and several Florida metros. Detroit, Gary, and Cleveland all have faced slow economic growth over several decades, and metros with slow growth (or worse, declining population or employment) tend to have more vacant homes. In contrast, Las Vegas and the Florida metros have had rapid growth and are likely to continue to, but they suffered from overbuilding during the housing bubble; in addition, Florida leads states in having the highest share of homes in the foreclosure process, which includes many vacant homes.

Metros with the Highest Vacancy Rate
# U.S. Metro Vacancy rate, Oct 2013 Difference in vacancy rate, Oct 2013 vs Apr 2000
1 Detroit, MI 19.0% 9.3%
2 Palm BayMelbourneTitusville, FL 12.4% 5.0%
3 New Orleans, LA 12.3% 4.1%
4 Gary, IN 12.2% 4.4%
5 Jacksonville, FL 11.7% 1.7%
6 Birmingham, AL 11.6% 1.3%
7 Cleveland, OH 11.4% 3.9%
8 Memphis, TN-MS-AR 11.4% 2.3%
9 Las Vegas, NV 11.2% 3.5%
10 Cape CoralFort Myers, FL 11.1% 1.8%

The vacancy rate is lowest in coastal California and several other metros that avoided the worst of the housing bust. San Jose, as well as Ventura County and Orange County in southern California, have the lowest vacancy rates in the country – though slightly above where their vacancy rates were in 2000. Because of geographically limited land as well as building regulations, it is traditionally difficult to build much new housing on the California coast, which helps keep the vacancy rate low.

Metros with the Lowest Vacancy Rate
# U.S. Metro Vacancy rate, Oct 2013 Difference in vacancy rate, Oct 2013 vs Apr 2000
1 San Jose, CA 3.0% 0.3%
2 Ventura County, CA 3.4% 0.6%
3 Orange County, CA 3.9% 0.6%
4 MinneapolisSt. Paul, MN-WI 4.1% 1.5%
5 Denver, CO 4.4% 0.8%
6 San Francisco, CA 4.5% 0.6%
7 Middlesex County, MA 4.5% 1.7%
8 BethesdaRockvilleFrederick, MD 4.7% 2.4%
9 Long Island, NY 4.7% 1.5%
10 Oakland, CA 5.1% 0.9%

The local vacancy rate matters for construction: builders are hesitant to build new homes where there are many vacant homes. To see the impact on construction, we looked at how metro construction activity in 2013 compares with each metro’s own “normal” over the past twenty-plus years. Among the 10 metros with the highest vacancy rate today, construction in 2013 is just 48% of the historical normal level in those metros. But among the 10 metros with the lowest vacancy rate today, construction in 2013 is right at 100% of the historical normal level in those metros. The general pattern is that metros with more vacant homes have further-below-normal construction activity.

The vacancy rate, therefore, remains a hurdle for the housing recovery. Even though listed inventory is tight, many vacant homes are being held off the market. The overall vacancy rate is above its pre-bubble level and moving downward slowly and irregularly. For construction, and the housing market overall, to return to normal, more vacant homes must be occupied.

The Census Homeownership and Vacancy Survey (HVS) often reports numbers that differ from other Census surveys. We rely on the HVS for national-level trends, comparing current with past HVS data, rather than comparing HVS data directly to other Census sources. The metro-level HVS data is based on too small a sample to use. Instead, to estimate the level and changes in vacancy rates by metro, we added together vacancy changes, excluding seasonal vacancies, from the decennial Census for 2000-2010, from the American Community Survey for 2010-2012, and from the U.S. Postal Service address file for 2012-2013. This yields the change in vacancy rate between 2000 and 2013. We used multiple sources because no one reports both current and historical metro-level vacancies, and each source defines vacancies differently.

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

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CHIEF EXECUTIVE OFFICER

Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.

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Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.

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CHIEF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

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General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.

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AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.

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AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.

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AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.

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AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.

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Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.