First American Homeownership Progress Index
The First American Homeownership Progress Index (HPRI) measures how a variety of lifestyle, societal, and economic factors influence homeownership rates over time at national, state and market levels. The individual factors can be isolated, while all other factors are held equal, to provide a unique perspective on the impact the isolated factor has on the likelihood of homeownership. The HPRI can help us better understand how to provide more opportunities for homeownership by understanding the influence of lifestyle, societal, and economic factors on the likelihood of a homeownership.
Mark Explains the Homeownership Progress Index0:42
"Even as Millennials continued to delay marriage and family formation and pursue higher education levels, the Homeownership Progress Index declined only moderately from 2015 to 2016," said Mark Fleming, chief economist at First American.
What makes it a Homeownership Progress Index?
Traditional measures of homeownership rates do not account for shifts in underlying demographic or economic factors. Instead, they report just the share of households that are homeowners. Analysis based on these traditionally calculated homeownership rates has resulted in mistaken conclusions that are often propagated as conventional wisdom. The HPRI provides a deeper look into the changes to homeownership rates over time by accounting for, and isolating, the impact of critical lifestyle, societal and economic trends that influence the likelihood of renting or owning a home.
Why does the HPRI tell a different story than other measures?
Changing demographic and economic factors either increase or decrease someone's potential to be a homeowner. For example, increasing marital rates, household size, educational attainment, income, and improving economic conditions all increase potential demand for homeownership. The HPRI measures the potential for homeownership demand based on these underlying factors. For example, the potential for, or likelihood of, homeownership may increase because of rising educational attainment or income growth. It's important to point out that the likelihood of homeownership doesn't have to match the actual homeownership rate. For example, it's possible that someone may be highly likely to desire homeownership, but are unable to find any houses they can afford to buy. In that case, potential homeownership demand would be higher than the actual homeownership rate.
What do the HPRI number values mean?
The HPRI value is the percentage of households that are likely to be homeowners, based on underlying lifestyle, societal, and economic conditions, instead of renters. Changes over time in the HPRI are caused by changes in the underlying lifestyle, societal, and economic trends. The chart below shows the HPRI over time and the corresponding year-over-year growth rate at the national level.
2016 Homeownership Progress Index
Overall National HPRI Falls -0.4 Percent from 2015 to 2016
- Nationally, potential homeownership demand represented by the HPRI declined 0.4 percent in 2016 compared to 2015 based on changes in the underlying lifestyle, societal and economic data.
- Factors that increased potential homeownership demand included income growth (+0.02 percent) and , which reflects the influence of Millennial behavior on homeownership.
- Declines in the share of married households (-0.07 percent) and the number of children per household (-0.16) were factors that decreased potential homeownership demand.
- Homeownership demand increased from 2015 to 2016 in 21 of the 50 metropolitan areas tracked by First American, as demographic and economic trends in these cities raised the likelihood of homeownership.
Potential homeownership down0.4%
in 2016 due to lifestyle choices
"Even as Millennials continued to delay marriage and family formation and pursue higher education levels, the Homeownership Progress Index only declined moderately from 2015 to 2016," said Mark Fleming, chief economist at First American. "Yet, the prospect for future homeownership demand looks hopeful, as more households increase their educational attainment level and thus their prospect for higher income."
Potential homeownership demand decreased6%
from the pre-recession peak, and is at the same level as it was in 1990, 27 years ago.
Economic conditions have changed+.17%
having the greatest positive impact on potential homeownership demand from the pre-recession peak to 2016.
Marital rates declined1.8%
having the greatest negative impact on potential homeownership demand from the pre-recession peak to 2016.
States with the greatest year-over-year increase in the Homeownership Progress Index:
- Nevada (+2.1%)
- Louisiana (+1.5%)
- Kentucky (+1.4%)
- Idaho (+1.4%)
- Ohio (+0.8%)
2016 Homeownership Progress Index
States with the greatest year-over-year decrease in the Homeownership Progress Index:
- Delaware (-3.3%)
- Maryland (-2.3%)
- Oregon (-2.3%)
- Rhode Island (-2.2%)
- Alabama (-2.2%)
CBSAs with the greatest year-over-year increase in the Homeownership Progress Index:
- San Jose, CA (+4.7%)
- Jacksonville, FL (+3.6%)
- Memphis, TN (+2.9%)
- Sacramento, CA (+2.7%)
- San Antonio, TX (+2.6%)
2016 Homeownership Progress Index
Local Market Highlights
CBSAs with the greatest year-over-year decrease in the Homeownership Progress Index:
- Birmingham, AL (-4.2%)
- Richmond, VA (-3.3%)
- Cleveland (-3.0%)
- Milwaukee (-3.0%)
- Buffalo, NY (-2.9%)
Homeownership, Like Real Estate, is Local
- While the national homeownership rate declined modestly in 2016, homeownership rates varied significantly at the market level.
- The difference between San Jose, Calif., the market with the biggest gain in potential homeownership demand and Birmingham, Ala., the market with the biggest decline in potential homeownership demand, was nine percentage points.
- Half of the top 10 markets for year-over-year growth in potential homeownership demand are in either California or Texas, while eight of the bottom 10 markets are on the East Coast or in the Midwest.
states tracked by First American experienced year-over-year increases in potential homeownership demand due to changes in the underlying lifestyle, societal and economic trends.
"Small changes in potential homeownership demand hide the large amount of variation in markets across the country. The underlying factors that the Homeownership Progress Index accounts for can vary substantially by region of the country and market. Regions or markets with stronger local economies and that can attract increasingly educated Millennial households will have stronger homeownership demand in the future."
About the First American Homeownership Progress Index
The First American Homeownership Progress Index is an economic model that uses annual IPUMS CPS individual anonymized census survey data to measure the influence of household circumstances and demographic, societal and economic characteristics on one's choice to own a home. Demographic characteristics include age, race/ethnicity, gender, marriage status and number of children. Additionally, the model includes educational attainment, income and geographic location as factors that can be examined to help explain changes in homeownership rates. The individual factors influencing homeownership can be isolated, while all other factors are held equal, to provide a unique perspective on the impact the isolated factor has on the likelihood of homeownership.
The HPRI can provide the likelihood of homeownership for a given demographic and economic profile. For example, an educated man with two children and a higher income will have a higher likelihood of homeownership than a single man without a higher education degree.
About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $5.6 billion in 2016, the company offers its products and services directly and through its agents throughout the United States and abroad. More information about the company can be found at www.firstam.com.
Opinions, estimates, forecasts and other views contained in this page are those of First American's Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American's business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2017 by First American. Information from this page may be used with proper attribution.
The next release of the First American Homeownership Progress Index will be posted in April, 2018.