Trend #4: Finally, Income Growth

August 7, 2017 at 10:00 AM | Posted by Team DataTree


It's not just the decisions to marry or have children that increase the likelihood of being a homeowner.

Economic conditions also play an important role. If the economy is in recession and it's hard to find a job, or one's income is flat or declining, it would make sense that there would be less demand for homeownership. But, could the converse also be true too?

Trend 4-3.pngAccording to our  HPRI, households with an average income of $110,000 or more in 2016 had a homeownership rate of approximately 87 percent. At the lowest annual income bracket of $28,000, the homeownership rate is 45 percent. Using the same model used to analyze the impact of marriage and having children on homeownership, Figure 5 below shows the correlation between the homeownership rate and median, inflation-adjusted income, when all other lifestyle and demographic factors are held equal. As one might expect, homeownership increases as household real incomes increase. For a household earning $50,000, an extra $10,000 a year would increase the likelihood of homeownership by 2.1 percent. Going from an income of $50,000 to $100,000 increases the likelihood of homeownership by approximately 10 percent.

The good news for the real estate industry is that there are some positive trends in                                                               income growth. After a period of stagnant wage growth, median household                                                                           income in the United States increased from $53,718 in 2014 to $56,516 in 2016.                                                                 This upward trend in income translates, all other factors held equal, to an almost                                                                 percent rise in the likelihood of homeownership.        

Access the Complete Report - 6 Trends Poised to Reshape Homeownership Demand.png

         According to a CBS MoneyWatch article1°, more jobs are being created for 25 to            34-year-olds (potential Millennial home buyers) than any other age cohort, and                these jobs are in higher paying field s. While we may not see it in today's                        homeownership rates, this analysis shows that higher-income households are                more likely to be homeowners.

        Figure 5. Rising Income to the Rescue 
        Homeownership Rate by Income (%)

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                                                                                                        To access the full study, please download it from the First American Economic Center                                                         Blog. When you need real estate and homeownership data, is the                                                                solution. Start your free trial to see for yourself.  

Topics: DataTree, real estate, housing