Prospect for Future Homeownership Demand Remains Solid, According to First American Homeownership Progress Index

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, says Chief Economist Mark Fleming

August 17, 2017, Santa Ana, Calif.

First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the third annual First American Homeownership Progress Index (HPRI), which measures how a variety of lifestyle, societal and economic factors influence homeownership rates over time at national, state and market levels. It’s available as an interactive tool that can be tailored to showcase how trends in economic conditions, education, income, marital status, ethnicity, and family size impact potential homeownership demand over time across the United States at national, state and metropolitan area levels. 

“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,” said Mark Fleming, chief economist at First American. “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.”

2016 First American Homeownership Progress Index

“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 Fleming. “Yet, the prospect for future homeownership demand looks hopeful, as more households increase their educational attainment level and thus their prospect for higher income.”

  • 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 rising educational attainment (+0.06 percent), 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.

Additional Quotes from Chief Economist Mark Fleming

  • “Potential homeownership demand has decreased 6 percent from the pre-recession peak, and is at the same level as it was in 1990, 27 years ago.”
  • “The change in economic conditions (+0.17 percent) had the greatest positive impact on potential homeownership demand from the pre-recession peak to 2016.”
  • “The decline in marital rates (-1.8 percent) had the greatest negative impact on potential homeownership demand from the pre-recession peak to 2016.
  • “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.”

    Chief Economist Analysis: Homeownership, Like Real Estate, is Local

    “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,” said Fleming.

    2016 Homeownership Progress Index State Highlights

  • The five states with the greatest year-over-year increase in potential homeownership demand are: Nevada (+2.1 percent), Louisiana (+1.5 percent), Kentucky (+1.4 percent), Idaho (+1.4 percent) and Ohio (+0.8 percent).

  • The five states with the greatest year-over-year decrease in potential homeownership demand are: Delaware (-3.3 percent), Maryland (-2.3 percent), Oregon (-2.3 percent), Rhode Island (-2.2 percent) and Alabama (-2.2 percent).

    2016 Homeownership Progress Index Local Market Highlights

  • Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in potential homeownership demand are: San Jose, Calif. (+4.7 percent), Jacksonville, Fla. (+3.6 percent), Memphis, Tenn. (+2.9 percent), Sacramento, Calif. (+2.7 percent), and San Antonio, Texas (+2.6 percent).

  • Among the largest 50 CBSAs, the five markets with the greatest year-over-year decrease in potential homeownership demand are: Birmingham, Ala. (-4.2 percent), Richmond, Va. (-3.3 percent), Cleveland (-3.0 percent), Milwaukee (-3.0 percent), and Buffalo, N.Y. (-2.9 percent).

    Next Release

    The next release of the First American Homeownership Progress Index will be posted in April 2018.

    Methodology

    The methodology statement for the First American Homeownership Progress Index is available at http://www.firstam.com/economics/homeownership-progress-index.

Disclaimer

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.

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 total revenue of $5.6 billion in 2016, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016 and again in 2017, First American was named to the Fortune 100 Best Companies to Work For® list. More information about the company can be found at www.firstam.com.

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