America's Emptiest Cities

If your son is still living in the basement in his mid-20s, take heart: he’ll be gone soon.

Vacancy rates for apartments and single-family houses are dropping in many cities, including Tuscon and Indianapolis, which ranked high on Forbes’ list of America’s Emptiest Cities. To Budge Huskey, president of Coldwell Banker Real Estate, that suggests people who had been shacking up with friends or relatives during the recession are getting back on their feet and establishing their own households again.

“People are feeling more comfortable and stable,” said Huskey. “Real estate is tied directly to the strength of the economy.”

What’s unusual, though, says Huskey, is that vacancy rates are dropping for rentals and houses at the same time. Ordinarily, occupancy rates for apartments and houses operate like a seesaw. As more renters become homeowners, the vacancy rate for apartments goes up. During the recession, rental vacancies dropped as many people who lost their homes to foreclosure moved back into apartments (or with families) to re-establish their credit.

Indianapolis is one of those cities seeing housing occupancy rates improve across the board. At the beginning of 2011, almost 15 percent of the city’s rental units were vacant. But now, rental vacancies are below 10 percent. There are fewer single-family homes standing empty, too. At the beginning of last year, about 5 percent of houses were vacant. Now, that number is less than 2 percent.

To construct our list of America’s Emptiest Cities, we used U.S. census data to rank cities over all four quarters of 2011 by single-family and rental vacancy rates, then averaged the ranks to determine the top 10.

Tuscon, Ariz., which tops our list, is typical of many Sun Belt cities. A strong economy that includes more than 150 high-tech optics companies led to a housing boom. But when the recession hit, the city was left with too many homes and apartments. The population declined slightly in 2010, something Tuscon hadn’t seen in years. As in many Sun Belt communities, “the construction workers left, too, which was a double whammy,” said Huskey.

The rental vacancy rate in Tuscon, which had been as high as 17 percent early in 2011, fell to 10 percent by the end of the year. Single-family vacancies fell, too, from nearly 7 percent in the first quarter, to less than one percent by the fourth quarter. Population is growing again, too, up 7 percent in 2011.

Memphis comes in second. Its 18.5 percent rental vacancy rate at the end of the year was one of the highest in the nation, up from 13.5 percent at mid-year, but a portion of those counted as vacant include deteriorating properties that have been abandoned. Single-family vacancies averaged 3 percent.

Indianapolis ranked third, followed by Toledo at No. 4. Both have been hurt by a decline in manufacturing. Orlando, Las Vegas, Jacksonville, Fla., and Atlanta come next. All are still bloated with excess housing units constructed during the boom.

In Dayton, Ohio, which had the highest single-family vacancy rate in the country (over 6 percent at year-end), leaders are working to demolish abandoned homes with help from the federal government. Dayton reported 14,000 vacant structures, and demolished 300 in 2011. Steve Earman, co-owner of Coldwell Banker Heritage in Dayton, thinks the market is looking up, though. Although the average home price in Dayton is $106,000, down from a peak of $135,000 in 2008, inventories are tight and sales are picking up.

For manufacturing towns like Dayton and St. Louis, which rounds out our Top 10 list, that can only be good news.