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24 | TH E M R EP O RT FEATURE strongest advances in the measures necessary for homeownership are Idaho, Iowa, Kentucky, Wisconsin, and Tennessee. These states saw overall improvements of at least 2.5 percent in 2015—put another way, the people living in these states were at least 2.5 percent more likely to be homeowners over the past year. Four of the top-five perform - ing markets were also from these states, although the highest year- over-year increase was actually in Riverside, California. At the other end of the spectrum, Colorado, Louisiana, South Carolina, Massachusetts, and Oregon saw the largest declines in overall home - ownership. The worst-performing market was Oklahoma City. Nationally, each specific mea- sure plays its role in determin- ing whether America is moving forward or backward on the homeownership front. The stron- gest indicator is education, and Americans are generally becoming more educated with every passing year. As we also stated earlier, rising educational levels generally lead to increased income levels. So, it shouldn't be surprising that income is the second strongest indicator in our analysis. Not all of the measures are positive. Several in particular are largely responsible for holding It also helps that minorities—espe- cially Hispanics—are significantly younger than the general American public. Both of these demographics will begin to buy houses in greater numbers as they age, finish their education, and find some stability in their lives and their careers. Everything I have mentioned so far is moot if housing itself is unaffordable. Unsurprisingly, this is one area where doomsday scenarios abound. Let's Get Real About House Prices M any warn that housing pric- es are unaffordable or will soon become unaffordable, given their growth today so signifi- cantly outpaces income growth. The truth is almost exactly the opposite. Most analyses of real es- tate prices look at one factor and one factor only: the price of the house. But, this is highly mislead- ing when it comes to how much that house will actually cost. Simply looking at price changes without considering the changes in consumer homebuying power misrepresents the real change in prices in recent years. Income and mortgage interest rates play an immensely important role in determining what "real" prices are and whether consum - ers can afford them. Currently, interest rates are exerting a strong downward pressure on the real price of houses; the interest rate for a 30-year, fixed-rate mortgage has gone from over 5 percent in 2009 to below 4 percent today. Although interest rates are expected to slowly tick up in the months and years ahead, it will likely be quite some time before they reach their pre- and mid-recession levels. As for income, it is finally starting to rise after several years of being stagnant. The bottom line is that housing is much more affordable than many suggest. In First American's Real House Price Index, which factors in interest rates and income into the cost of housing, we found that real prices are nearly 40 percent lower than the peak reached before the recession. Some recovery has occurred since then, but real house prices are still 18 percent lower than they were in 2000. The last time houses were this affordable was in 1997. This perspective also shows that recent upticks in overall housing prices aren't as significant as they may seem. For instance: nominal house prices increased 5.1 percent on a year-over-year basis in March. By adjusting for the increase in house-buying homeownership down. The depth and duration of the recession had its part to play, as it set back employment and income growth, but people are also getting mar - ried and having children less frequently. Since these lifestyle choices play an important role in the decision to be a homeowner, homeownership rates have re - flected the trend in these choices. For a variety of reasons, millen- nials are getting married later and having children later. Although this trend started with generation X, it has undoubtedly acceler - ated in recent years. More than anything else, millennials' decision to delay marriage and children affects when—not if—they purchase homes. As long as they delay or forego these choices, they are much less likely to want to buy a home, even if they can afford it. Homeownership simply does not fit their current lifestyle, yet as they get older, this is likely to change. If there's one thing that can be forecasted with accuracy, it's that the 25-year-old today will be 35 years old a decade from now, and aging into better jobs, marriage, and children will invariably hap - pen. With age comes wisdom— and homeownership. This bodes well for the future, given that millennials are, of course, young. Homeownership rates in the first quarter of 2016 remain near a generational low point, just 0.1 percent above a 48-year low. Educational attainment levels among millennials exceeds previous generations, which bodes well for future homeownership. The American Dream Lives On Homeownership Rate (%) Education Attainment Percent Share of Population with Bachelors Degree or Higher