Why are so many homes unemployed?

Theories of unemployed labor are a subset of theories of unemployed resources. 

The U.S. housing vacancy rate–an unemployment rate for homes–is at its highest level since at least 1965 (see figure).  Why?  Is it sticky prices? Lack of aggregate demand? Structural?

House prices may be sticky but they have fallen a lot–maybe not enough–but they have fallen a lot more than have wages.  On the other hand, house prices rose a lot more than wages. Maybe house prices are sticky relative to the required variation in market clearing levels.

What about lack of aggregate demand?  The homeownership rate was 67.2 in 2000 and today it’s 66.9.  Thus, we don’t have too great a supply of houses in the aggregate so aggregate demand is likely a factor.

Is the problem structural?  It does seem that we have too many houses in the South and the West where the boom was concentrated.  If we think of the unemployment rate as a measure of where there are too many houses then the following figure shows that there is a positive correlation between the home vacancy rate and the unemployment rate.  It’s not as tight as one might expect, however.  California, for example, has a high unemployment rate but a home vacancy rate slightly below the national average and many states such as Wisconsin have plenty of unemployment but a very low home vacancy rate.


My guesstimate is 50% AD, 25% sticky prices, 25% structural.  Tyler would read it differently. I do think more progress could be made if greater attention were given to theories of unemployed resources and not just unemployed labor.


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