Home purchases in the United States have rebounded since the the recession that began in late 2007. The residential real estate market is a major pillar of the economy and returning interest in home buying is a healthy sign of economic activity. Over the last decade, however, the homeownership rate has steadily declined — from a peak of 69.0% in 2004, to the current rate of around 62.9%. The last time the U.S. homeownership rate was this low was 1965.
Based on the homeownership rate — the share of housing units that are owner-occupied — 24/7 Wall St. reviewed the 15 metropolitan areas where residents are most likely to own their homes, and the 15 areas where residents are most likely to rent.
The Villages, a retirement community in Florida, leads the nation with a homeownership rate of 89.2%, while College Station-Bryan, a university town in Texas, has the lowest homeownership rate, at just 47.7%.
The areas with the highest ownership rates tend to have larger shares of older residents, who are generally more likely to have accumulated the capital necessary to purchase a house. All of the 15 metro areas with the highest ownership levels have above-average shares of residents 55 and older, while the opposite is true for areas with the lowest homeownership rates.
> Homeownership rate: 48.3%
> Median home value: $494,900
> Median household income: $60,514
The Los Angeles-Long Beach-Anaheim area is home to some of the most expensive housing in the country. The median home value of $494,900 is seventh highest of all metro areas and several times greater than the national median of $181,200. The typical home value is also more than eight times the area’s median household income, which at $60,514 is actually higher than the national median. Across the country, homes tend to be worth just over three times the typical household income.
As further testament to the high cost of housing, 73.1% of owner-occupied homes have a mortgage, well above the national percentage of 63.8%. Not only are fewer individuals buying homes with cash, but fewer homeowners have managed to pay off their home loans.
Generally, high homeownership rates point to a healthy housing market. However, high homeownership rates in urban areas are also due to the availability of affordable housing. Of the 15 metros with the highest ownership rates, 12 have median home values lower than the national median of $181,200.
Among the 15 metro areas where residents are least likely to own a home, not only are homes relatively expensive, but poverty rates tend to be higher. The median home value in seven of the 15 areas is higher than the national median. The poverty rate in 12 of the 15 areas is higher than the national rate of 15.5%.
Since college students disproportionately rent rather than own their lodgings, the presence of a major college or university also drives down homeownership rates in a number of these areas.
Since the beginning of 2009, housing in the U.S. has become more affordable, and 30-year fixed mortgage rates have remained below historic norms. Yet, home sales are still relatively weak.
According to the National Association of Realtors, 5.3 million previously owned homes sold in the first quarter of this year, up 2% from the previous quarter, and up 5% from a year ago. Home sales are down compared with pre-housing bubble levels, however. Also, the share of homes sold to first-time buyers in the first quarter, at 31%, is down from the historic norm of 40%.
The U.S. Department of Housing and Urban Development attributes the weak sales and the drop in first-time buyers to stricter bank lending standards, low inventories, and declines in the number of distressed properties.
High debt-to-income ratios among young Americans is another major driver of weak home sales. A recent NAR survey found that the number of home buyers age 34 and younger, who are currently the largest group of recent property buyers, would be even higher were it not for the numerous obstacles facing the younger generation. Underemployment, subpar wage growth, rising rents, and student debt repayments have all substantially hindered home buying.
To identify the cities with the highest and lowest homeownership rates, 24/7 Wall St. reviewed the percentage of housing units owned by their occupants in U.S. metropolitan statistical areas from the U.S. Census Bureau’s 2014 American Community Survey. Homeownership rates by age cohort, median home values, the percentage of occupied housing units with a mortgage, median household incomes, poverty rates, and educational attainment rates for the adult population also came from the U.S. Census. Unemployment rates are preliminary as of June 2016 from the Bureau of Labor Statistics. Regional price parity, also known as the cost of living, in each metro area came from the Bureau of Economic Analysis and are as of 2013, the most recent period for which these data are available.