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Second-quarter data on housing vacancies show that the supply overhang remains quite heavy in both the for-sale and for-rent components of the market.  The overhang is particularly heavy in the for-sale market, reflecting large increases in both single-family and multifamily (condo) markets since mid-2005.  This overbuilt condition is a legacy of outsized purchases by investors/speculators during the boom period and subsequent unloading of units onto the market as house price prospects have deteriorated.

The U.S. homeownership rate has been eroding for three years and the rentership rate has shown equivalent gains.  Persistent affordability problems facing prospective home buyers, combined with relatively friendly conditions in the rental market, will put further downward pressure on the homeownership rate – and a rising wave of mortgage foreclosures will contribute to the own-to-rent dynamic. The homeownership rate is sure to rebound on a longer-term basis, however, and new records will be achieved down the line.

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