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22 | TH E M R EP O RT FEATURE H ere's the thing about conven- tional wisdom: It's just waiting to be proved wrong. That's certainly the case with the conventional wisdom about homeownership. Judging by what you read in the media, American homeownership is in a rough spot. The percentage of American fami - lies owning a home has dramati- cally declined in the past decade and it's difficult, if not impossible, to reverse it. Houses are only going to get more unaffordable. Fewer and fewer homeowners mean fewer and fewer people will have access to the American Dream. It's understandable that people are so worried: Homeownership today looks very different than it did 10 years ago at its pre-recession heights. In 2006, the Census Bureau report that 68.5 percent of Americans owned a home—the third-highest rate on record, beaten only by the two years that pre - ceded it. A decade later, in the first quarter of 2016, the homeowner- ship rate was 63.5 percent—only 0.1 percent above a 48-year low. And sadly, some believe there's no end in sight—a frightening prediction that does not bode well for our economy, if true. Yet these numbers don't lead to the inevitable conclusion that homeownership is in terminal decline. Yes, homeownership is falling across the country. Much of this is due to demographic and cyclical factors. Cyclical factors are in our control to change, and the long-run outlook demographically is positive for homeownership. The real question is what do we need to do to help get homeown - ership back on the right track? To answer this question, we must identify who will contribute to sustainable homeownership levels in the future. Two specific demographic groups are critically important: millennials, who, to date, haven't bought homes early in their lives as previous genera - tions, and minorities, who will overtake whites as the majority of Americans within the next 30 years. Currently, both of these groups have lower homeowner - ship rates than the general public, which is steadily driving the overall homeownership rate even lower. Young, more likely minor - ity, individuals are forming their own households and renting their homes, which is one reason for the success of the multifamily market in recent years. We saw the same from baby boomers when they were young. The question is whether they will eventually join the ranks of homeowners or continue to drive homeownership rates down as perpetual renters. The Drivers of Homeownership F irst American research shows that a variety of factors are influential and predictive when it comes to whether these groups achieve the dream of homeown - ership. Among the most impor- tant are: educational attainment; whether one is employed with a decent income; and lifestyle deci- sions, such as getting married and having children. As any or all of these measures improve, so does the likelihood of an individual pur - chasing a home and enjoying all the benefits homeownership entails. All of these factors are change- able, which means that home- ownership could easily begin to rise. There are already some signs of progress, too. For instance, millennials are becoming more educated with every passing year, and more education leads to high - er income levels. Higher education levels also help individuals and families move into the neighbor- hoods and other areas that are more conducive to homeowner- ship. As recent research from Harvard University shows that this migration increases upward mobility for the next generation, which will slowly but surely help increase homeownership. This is cause for celebration. It doesn't get the attention it deserves. On the current trajec - tory, low minority homeowner- ship levels will become less and less severe with each passing year. Young minority households with increased educational attainment, higher income prospects, and the desire to own a home will age into homeownership. Admittedly, some parts of the country are much more con - ducive to homeownership than others. We recently released the "Homeownership Progress Index," which uses the measures above to determine where each state and market ranks. In short, some areas are already seeing significant prog - ress on these measures, meaning the soil is fertile for increased home- ownership. Other areas face greater challenges. Overall, this index gives us a window into the probability of homeownership in different loca - tions across the country. When it comes to progress, the five states that have seen the Turning the Corner Current home prices and changing demographic trends point to better homeownership rates in the coming years. By Mark Fleming, Ph.D.