Paper Explores Six Trends Reshaping Homeownership Demand
First American Financial Corp., Santa Ana, Calif., released a study this week identifying trends in the future of homeownership demand.
The study, Six Trends Poised to Reshape Homeownership Demand, isolates key economic and demographic factors that influence homeownership. First American Chief Economist Mark Fleming said these trends will transform homeownership demand in the years ahead.
“Homeownership continues to be a critical driver of economic mobility, delivering financial and social advantages to entire communities, so understanding the forces that influence homeownership demand deserves attention,” Fleming said.
These trends include:
—The Most Educated Generation in the U.S. The study notes that Millennials have widely delayed family formation in pursuit of higher degrees. “The good news is educational attainment is growing,” the study said. “So it is reasonable to expect homeownership rates to grow as well. As more people achieve greater levels of education they are able to generate higher income and use that higher income to buy homes.”
—Homes and Marriage Go Together. The study notes that marriage rates, which began falling in 2005 (and subsequently, homeownership rates fell), have now turned around, suggesting marriage will be a contributing factor to homeownership going forward.
—The Home is a Family Formation Station. As Millennials settle down and begin to have families, the study said, the homeownership rate should rise. “As Millennials age, we may see an increase in the share of married households with children, and a corresponding increase in homeownership demand,” the study said.
—Finally, Income Growth. The study illustrates positive trends in income growth, following a long period of stagnant wage growth. “This upward trend in income translates, all other factors held equal, to an almost 1 percent rise in the likelihood of homeownership,” the study said.
—Is It All About the Economy? The study noted the Great Recession and subsequent increases in unemployment forced down the homeownership rate. “More recently, improving economic conditions helped fuel a resurgence in the homeownership rate,” the study said. “Economic data for 2015 and 206 suggests further increased homeownership demand.”
—Closing the Gaps. The study notes gaps persist in homeownership rates among minorities in the U.S. However, “the measureable attributes that we know promote homeownership are on the rise across ethnic and racial groups, particularly improvement in education attainment levels,” the study said, suggesting that homeownership levels should improve as well.
“Millennials are not foregoing the dream of homeownership, just delaying the timing,” the study said.
The study can be downloaded at http://info.firstam.com/six-trends-poised-to-reshape-homeownership-demand.
