First American Homeownership Progress Index

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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 Index

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"Millennials are often referred to as a 'renter generation,' because they have prioritized furthering their education and thus delayed getting married and having children, which are critical lifestyle triggers to buying a first home," 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.

Graph: HPRI and Year-Over-Year Growth

2017 Homeownership Progress Index

Overall National HPRI Increases 1.1 Percent from 2016 to 2017

  • Nationally, potential homeownership demand represented by the HPRI increased 1.1 percent in 2017 compared with 2016, based on changes in the underlying lifestyle, societal and economic data.
  • Factors that increased potential homeownership demand included income growth (+0.30 percent) and rising educational attainment (+0.13 percent), which reflects the influence of millennial behavior on homeownership.
  • The declining unemployment rate also contributed to the rise in homeownership demand (+0.70 percent).
  • Declines in the share of married households (-0.08 percent), the number of children per household (-0.05), and the increase in 30-year, fixed-rate mortgage (-0.02 percent) were factors that decreased potential homeownership demand.
  • Potential homeownership demand increased from 2016 to 2017 in 46 of the 50 metropolitan areas tracked by First American, as demographic and economic trends in these cities raised the likelihood of homeownership.

"Millennials' lifestyle and economic decisions are some of the main reasons we currently have a lower homeownership rate than expected, based on our HPRI," said Mark Fleming, chief economist at First American. "Yet, it is reasonable to expect homeownership rates to grow as millennials continue to make important decisions, including attaining an education and, later in life, getting married and buying a home."

Graph: Factors of Potential Homeownership Demand
Chart: HPRI Yearly Change (CBSAs)

"It is reasonable to expect homeownership rates to grow as millennials continue to make important decisions, including attaining an education and, later in life, getting married and buying a home."

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, marital status and number of children. Additionally, the model includes educational attainment, income, the 30-year fixed rate mortgage rate and the unemployment rate 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 wealth management services. With total revenue of $5.8 billion in 2017, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2018, First American was named to the Fortune 100 Best Companies to Work For® list for the third consecutive year. 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. © 2018 by First American. Information from this page may be used with proper attribution.