American Homeownership: Does our population actually own 65% of their homes? Not Exactly.
For decades, homeownership has been hovering around 65%. However, this closely monitored statistic may have a glaring flaw that The Federal Reserve Bank of Minneapolis just uncovered. The flaw being counting legal adults that still live at home with their parents, as part of the general population that actually own their own home. Naturally, this inclusion is inflating American homeownership by approximately 12%, or millions of people. The Minneapolis Fed developed a new way, a more accurate way in my opinion, to calculate homeownership in America. They dubbed it the Homeowners-To-Population Ratio, or HPOP.
How does HPOP affect the numbers?
- It removes the obvious flaw from this decades old calculation and gives us a much more accurate percentage of homeownership, which is actually hovering around 53%.
- This statistic worsens as you further fragment the population, i.e. HPOP for 35 years of age and younger hovers around 22%.
- If traditionally calculated, homeownership is represented as 37%, a swing of 15 points!
This new statistic negatively impacts the optics surrounding American homeownership and, more crucially, elevates the issue of housing affordability to new heights. It raises the obvious question, why is true homeownership so low in the largest, most robust, most diverse economy in the world?
A silver lining surrounding this topic, until affordability is addressed at a federal level, is individuals seeking homeownership that have some degree of means and/or the opportunity to move states, can find housing that truly fits their needs and their budget. For example, Hawaii, New Mexico, Delaware, California, and New Jersey have some of the worst percentage drops in homeownership between the traditional calculation and HPOP, while other states like North Dakota, South Carolina, West Virginia, Kentucky and Alabama have less of a percentage drop between the calculations.
Looking Ahead
In conclusion, HPOP is a much more accurate way to calculate American homeownership, and it negatively impacts the optics and the realities surrounding homeownership and housing affordability. Armed with this new statistic, hopefully the public and private sectors can continue to work and collaborate together and increase American homeownership overall, and at a minimum, provide enough high quality, affordable rental housing to bridge the gap.
This week’s blog post comes to us from Blake Collier!
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