America's Abandoned Cities
By Zack O'Malley Greenburg, Forbes
Jul 23rd, 2009
The big news in Kansas City is the Chiefs' off-season acquisition of quarterback Matt Cassel. Filling in for injured superstar Tom Brady in New England last season, Cassel became a starter for the first time since his senior year of high school.
When trading for a backup quarterback is cause for citywide celebration, it's a sign of a metropolis starving for good news--and perhaps an indicator that other troubles are afoot.
Indeed, the Kansas City metro area tops our list of America's Abandoned Cities. In Kansas City, rental vacancy rates rose from 11.9% to 15% over the past year; homeowner vacancy rates nearly doubled, up from 2.1% to 3.8%. Comparatively, the average homeowner vacancy rate in the country's 75 largest metro areas improved slightly from 3% to 2.7%, while the rental vacancy rate edged up to 10.2% from 10% a year ago.
Kansas City isn't the only metro where rental and homeowner vacancy rates are rising in tandem. Second on our list is the San Francisco-Oakland metro, where high prices are pushing Bay Area residents out of the region. Third is Tucson, Ariz., where the aftermath of the housing boom has left a glut of inventory. The pair's predicament illustrates both sides of the vacancy coin.
"There really are two reasons why you'd have vacancies: supply-related and demand-related," says Nicolas P. Retsinas, director of the Joint Center for Housing Studies of Harvard University. "A number of these places have experienced substantial overbuilding, which would lead you to have supply issues. Others, with troubled local economies, are more demand-related."
Many of the cities on the list are still digging themselves out of the wreckage of the real estate bubble. Miami, which ranks No. 8, owns a whopping 12.7% rental vacancy rate, up from 11.4% a year ago; residential towers built in the final stages of the boom now stand as empty monuments to an over-hyped market downtown. Homeowner vacancy stands at 5.6%, up from 3.8% last year, thanks mostly to a spate of foreclosures. According to Trulia.com, 40% of the homes available in Miami's city limits are foreclosures.
Behind the Numbers
To form our list, we looked at vacancy data from America's 75 largest metropolitan statistical areas and metropolitan divisions (or metros)--geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by federal agencies in collecting, tabulating and publishing federal statistics.
Our rankings, a combination of rental and homeowner vacancy fluctuation rates for the 75 largest metros, are based on year-over-year changes in the first quarter from the Census Bureau. Each metro was ranked on the year-over-year change in rental vacancy and homeowner vacancy rates; the final ranking is an average of the two.
Bay Area Blues
San Francisco boasts balmy weather, seaside diversions and the best baseball stadium in the country.
But despite the perks, the Bay Area is losing people at an even greater clip than Miami--and ranks second on our list. Rental vacancy rates swelled from 4.7% to 7.1%; homeowner vacancies more than tripled from 1.1% to 3.4%. Why the dramatic change?
"One of the things we're noticing is that rents are still high," says Ken Shuman, a Bay Area-based spokesman for real estate data provider Trulia.com. "What we're also seeing is the economy. San Francisco, of all cities, is the most transient. People flock here when times are good--they don't mind paying high rent as long as pay is high. Now, in many cases, wages are frozen or reduced."
And that's if you're lucky enough to still have a job. According to the Bureau of Labor Statistics' latest reports, Bay Area unemployment has more than doubled since last year, up from 4.6% to 9.4% as of April. Many laid-off workers aren't sticking around.
"People are migrating. It happened after the dot-com bust too," says Shuman. "As much as it's a beautiful place to live, you really have to think about lifestyle. There's no point in being here if you can't enjoy it."
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