First American Financial Corporation (NYSE: FAF), a provider of title insurance, settlement services and risk solutions for real estate transactions, on Thursday released the fifth annual First American Homeownership Progress Index (HPRI), which measures how a variety of lifestyle, societal and economic factors influence homeownership rates over time at national, state and market levels.

An NAHB Economics poll conducted during the first quarter of 2018 found that 17% of American adults plan to buy a home within the next 12 months.
Courtesy Adobe Stock/Monkey Business Images

“Ten years after the Great Recession, homeownership remains one of the main tenets of the American Dream. Amid the recovery from the housing crisis, the homeownership rate hit a generational low of 63% in 2016, but it has been steadily rising since,” said Mark Fleming, chief economist at First American.

Key findings:

  • The First American Homeownership Progress Index (HPRI) showed that in 2018: Nationally, potential homeownership demand represented by the HPRI increased 0.66% in 2018 compared with 2017, based on changes in the underlying lifestyle, societal and economic data.
  • Factors that increased potential homeownership demand included a decline in the unemployment rate (+0.84%), income growth (+0.11%), rising educational attainment (+0.10%), and the higher share of married households (+0.02%).
  • The decline in the number of children per household (-0.03%), and the increase in the 30-year, fixed-rate mortgage rate (-0.38%) were factors that decreased potential homeownership demand.
  • Homeownership demand increased from 2017 to 2018 in 33 of the 50 metropolitan areas tracked by First American, as demographic and economic trends in these cities raised the likelihood of homeownership.
  • The five states with the greatest year-over-year increase in potential homeownership demand are: Delaware (+2.0%), Washington, D.C. (+1.8%), Tennessee (+1.6%), Wisconsin (+1.3%) and New Jersey (+1.3%).
  • The states with the greatest year-over-year decrease in potential homeownership demand are: Maine (-0.5%), North Carolina (-0.5%), North Dakota (-0.3%), Connecticut (-0.3%), and Idaho (-0.2%).
  • Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in potential homeownership demand are: Buffalo, N.Y. (+4.6%), Milwaukee (+3.5%), Cincinnati (+2.6%), Columbus, Ohio (+2.4%) and San Jose, Calif. (+2.3%).
  • Among the largest 50 CBSAs, the markets with the greatest year-over-year decrease in potential homeownership demand are: Indianapolis (-3.0%), Raleigh, N.C. (-1.3%), Birmingham, Ala. (-1.3%), Kansas City, Mo. (-1.0%), and Nashville, Tenn. (-1.0%).

“The homeownership rate is influenced by shifts in underlying demographic and economic factors, as well as housing market conditions. Close examination of these underlying forces can provide a more in-depth look into the changes in the homeownership rate over time,” said Fleming. “Our annual HPRI accounts for the impact of critical lifestyle, societal and economic trends on the likelihood of owning a home. Understanding these forces and tracking how they change over time allows us to measure potential homeownership demand.

He continued, “Millennials are the largest generational group in the history of the U.S., and that’s not the only thing that separates them from their generational predecessors,” said Fleming. “Millennials are more diverse, more educated, and tend to marry later in life than previous generations. Many millennials have prioritized furthering their education, thus delaying getting married and having children, which are critical lifestyle triggers to buying a first home. However, like their predecessors, millennials view homeownership as an important life goal. In fact, according to a 2019 survey, 84% of millennials believe homeownership is still part of the American Dream,” said Fleming.

“Yet, millennials trail their generational predecessors in the pursuit of homeownership. “There is a six-percentage point difference in homeownership between millennials and Generation X at the same age of 30 years old,” said Fleming. “But, the bulk of millennials have yet to turn 30, which signals higher potential homeownership demand may be on the horizon. The largest group of millennials by birth year will turn 30 in 2020, entering their prime home-buying years.”

The HPRI available as an interactive tool that can be tailored to showcase how trends in economic conditions, education, income, marital status, ethnicity, and family size impact potential homeownership demand over time across the United States at national, state and metropolitan area levels.