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

When millions of millennials are ready to become homeowners, will the housing market have enough homes for them?, asks Chief Economist Mark Fleming

July 9, 2018, 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 fourth 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. 

“As we reflect on our country’s recent Independence Day commemoration, we find that the desire to achieve the American dream of homeownership still exists. Because, while the U.S. homeownership rate remains close to half-century lows, demand is strong, especially among millennials,” said Mark Fleming, chief economist at First American. “In fact, results of our Real Estate Sentiment Index survey of title agents and real estate professionals conducted in the second quarter of 2018 showed nearly 87 percent of first-time home buyers were in the prime home-buying age of 26 to 35, which corresponds with the ages of millennials.

“When considering homeownership rates, it’s important to note that traditional measures do not account for shifts in underlying demographic or economic factors,” said Fleming. “Instead, they report only 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.

“We developed our annual Homeownership Progress Index to provide a more in-depth look into the changes in homeownership rates over time by accounting for the impact of critical lifestyle, societal and economic trends that influence the likelihood of renting or owning a home,” said Fleming. “Understanding these homeownership characteristics and tracking how they change over time allows us to measure potential homeownership demand.” 

Homeownership Rate Continues to Underperform Potential 

“In years past, potential homeownership demand, as indicated in the HPRI, was greater than the actual homeownership rate. This was largely due to baby boomers making the lifestyle and economic decisions that drive homeownership demand, notably settling down to form households of their own,” said Fleming. “From 1984 to 1986 and again in 1992, the actual homeownership rate was at or above the potential demand. This was most likely a result of innovations in mortgage finance, and the economic boom of the 1990s. In the late 1990s to the early 2000s, the potential demand again peaked above the actual homeownership rate. Achieving the dream of homeownership may have been restricted then by access to credit or the down payment necessary to purchase a first home.

“The housing crisis brought an interesting change, as the homeownership rate exceeded the potential demand from 2008 to 2012. Speculation, easy access to credit and exuberance during the housing boom of 2004-2007 spurred the homeownership rate to record highs,” said Fleming. “As the housing market turned in 2008 and economic fundamentals supporting potential homeownership demand decreased in subsequent years, the homeownership rate exceeded potential homeownership demand, with the gap reaching almost 9 percent at its peak in 2010.

“This contrasts sharply with the dynamic observed in 2017, the most recent year of available data to estimate the HPRI,” said Fleming. “In 2017, potential homeownership demand grew by one percent over the prior year, while the actual homeownership rate underperformed potential demand by almost 9 percent. So, what could be the cause of this?” 

Millennial Lifestyle Choices Impact Potential Homeownership

“One likely answer rests with the largest generational cohort – millennials. 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. However, the dream of homeownership is far from dead for this age group,” said Fleming. “Nearly 80 percent of millennials who responded to a recent study by Harvard University’s Joint Center for Housing Studies agreed that homeownership was part of achieving the American Dream. Is it possible that they are not rejecting homeownership but, rather, simply delaying it?

“Homeownership is strongly correlated with marriage, and millennials are getting married later than earlier generations,” said Fleming. “The median age for a first marriage in 2016 was 27.4 for women and 29.5 for men – roughly seven years more than the median ages in 1960. According to analysis in our HPRI, the homeownership rate is 30 percent higher among married couples than other households.

“We find that the decision to have children also influences the decision to own,” said Fleming. “Compared to households with no children, the homeownership rate is 5.4 percent higher for households with one or two children, and an additional percentage point higher for households with three or more children. Millennial lifestyle choices to delay marriage and children are part of the reason the homeownership rate is lower than we expect. 

Prospect for Homeownership Demand May Increase for Educated Millennials

“While important lifestyle decisions, such as marriage or owning a home, appear to take place later in life for millennials, they are getting educated in unprecedented numbers. As educational attainment levels increase, we can expect homeownership rates to eventually grow, as well,” said Fleming. “In fact, the importance of education to homeownership has only increased over time. Our HPRI shows that the impact of education in relation to homeownership has nearly doubled in 10 years. In 1997, the difference in the homeownership rate between those without a high school degree and those with a college degree was 11 percent. By 2016, this gap had widened to 21.3 percent, though it did experience a modest decline in 2017 to 20.5 percent. This goes to show that for many millennials, the key to homeownership will be getting a college education.

“Millennials’ lifestyle and economic decisions are some of the main reasons we currently have a lower homeownership rate than expected, based on our HPRI. 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,” said Fleming. “However, the question remains: as millions of millennials look to purchase their first homes, will the housing market provide enough homes for them?” 

2017 Homeownership Progress Index

The First American Homeownership Progress Index (HPRI) showed that in 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 (+0.70 percent) also contributed to the rise in homeownership demand.

  • Declines in the share of married households (-0.08 percent), the number of children per household (-0.05), and the increase in the 30-year, fixed-rate mortgage rate (-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.

2017 Homeownership Progress Index State Highlights

  • The five states with the greatest year-over-year increase in potential homeownership demand are: Indiana (+2.6 percent), Oklahoma (+2.4 percent), Georgia (+2.4 percent), South Carolina (+2.2 percent) and Arizona (+1.9 percent).

  • The states with the greatest year-over-year decrease in potential homeownership demand are: Nebraska (-1.3 percent), Alaska (-0.8 percent), and Minnesota (-0.11 percent).

2017 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: Indianapolis (+4.3 percent), Louisville, Ky. (+3.7 percent), Oklahoma City (+3.6 percent), Virginia Beach, Va. (+3.2 percent) and Cleveland (+3.1 percent).

  • Among the largest 50 CBSAs, the markets with the greatest year-over-year decrease in potential homeownership demand are: San Jose, Calif. (-2.0 percent), Hartford, Conn. (-1.9 percent), San Antonio (-1.8 percent) and Columbus, Ohio (-1.0 percent). 

Next Release

The next release of the First American Homeownership Progress Index will be posted in June 2019. 


The methodology statement for the First American Homeownership Progress Index is available at


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. 

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 $5.8 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