First American Financial Corp. released the second annual First American Homeownership Progress Index (HPRI), measuring the level of homeownership and the underlying demographic and economic factors that influence the probability of homeownership over time and geography, based on IPUMS Census Data.
The 2015 HPRI declined 1.8 percent year-over-year, and is down 7.6 percent from the peak in 2005. The HPRI is just 0.4 percent above the 25-year low point set in 1995.
“While the HPRI declined nationally, the state of homeownership can vary dramatically by state and by market. In 2015, New Hampshire and Vermont claimed the highest overall rates of homeownership among all states, followed by Hawaii, Washington and Delaware,” First American Chief Economist Mark Fleming said in a release accompanying the index. “These five states are the only states with homeownership rates that exceed their homeownership rates from the year 2000. All other states are worse off from a homeownership perspective than in 2000. In fact, Nevada fares the worst at 18 percent below its 2000 level of homeownership.”
In addition to the overall homeownership index, the HPRI also includes component indices for demographic and economic factors that influence the probability of homeownership, including employment rate, educational attainment, average income, marital rate, majority rate, number of children, and the above-poverty rate.
Fleming said one of the most important factors improving the long-run outlook for homeownership is increasing educational attainment. Since 1991, the share of households in which at least one member has a bachelor’s degree has increased 24 percent, and is expected to increase further as millennials continue to graduate from college and enter the workforce with improved prospects for higher-paying jobs.
“It is no accident that the states and markets with growing educational attainment rates are also often the same places with significant improvements in homeownership levels. Education is, as never before, a key to accessing the dream of eventually owning a home,” he said.
“While the long-run benefit of increasing educational levels is clear for homeownership, it does come at a short-run cost. Attaining higher education levels takes time. As Americans, young and old, gain the intellectual capital to become more successful in the modern economy, they are also delaying lifestyle decisions, such as getting married and having children,” said Fleming. “Our research shows that, at any age, these components are important to the decision to become a homeowner. Between 2014 and 2015, the share of households with married couples declined 0.4 percent, and over the last quarter-century declined 12.5 percent. Furthermore, the average number of children per household has declined 18.7 percent since 1991.”
The decline in marriage rates and the number of children per household is partly because of the demographic shift from baby boomers to millennials as the primary engine of economic activity in the economy, according to Fleming.
“Because of education and lifestyle decisions, young millennials are more likely to have a college degree and less likely to be married or have children than their baby boomer or even Generation X counterparts at the same age,” he said.
“Homeownership’s year-over-year decline in 2015 is no longer a story of economics and a housing crisis correcting the excesses of the (mid-2000s). Tectonic demographic shifts taking place as the economy transitions from baby boomers to millennials are causing homeownership rates to transition, too,” Fleming said.
The five states with the highest year-over-year increase in the HPRI are Idaho (5 percent), Iowa (4.9 percent), Kentucky (3.9 percent), Wisconsin (3.6) and Tennessee (2.5 percent). The five states with the highest year-over-year decrease are Colorado (-11.3 percent), Louisiana (-9.0 percent), South Carolina (-8.4), Massachusetts (-7.9) and Oregon (-7.5 percent).
The five Core-Based Statistical Areas (CBSAs) with the highest year-over-year increase in the HPRI are Riverside, Calif. (8.7 percent); Memphis, Tenn. (8.5 percent); Nashville, Tenn. (7.2 percent); Milwaukee (5.3 percent); and Cincinnati (5.2 percent). The five CBSAs with the highest year-over-year decrease are Oklahoma City (-18.5 percent); Virginia Beach, Va. (-16.1 percent); Denver (-12.6 percent); Richmond, Va. (-12.5 percent); and Columbus, Ohio (-10.2 percent).