Exploring The Trends Poised to Reshape Homeownership Demand

July 18, 2017 at 9:00 AM | Posted by Team DataTree

Homeownership is continuously influencing society, technology and the economy. In the first post of this blog series, First American begins to analyze the significant trends that will affect homeownership in the future.

Trend #1: The Most Educated Generation in the U.S.
Millennials are going to be the most educated generation in the U.S. Generally speaking, they have widely  delayed family formation  in lieu of the  pursuit  of higher degrees.

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Despite the  popular  narrative  surrounding  Millennials  as "over-educated and under­ employed," a Millennial with a college degree earns approximately $17,500 a year more than a Millennial with only a high school diploma. As our Homeownership Progress Index (HPRI) shows, states and markets with growing educational attainment rates often experience significant improvements in homeownership.

The importance of education to homeownership has only increased over time. Our HPRl4 shows

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 the importance of education in relation to homeownership has almost doubled in less than 10 years. In 1997

, the difference in homeownership between those with a high school degree and those with a college degree was 10 percent. In 2016, the difference increased to  21 percent . The good news is educational attainment is growing. So, it is reasonable to expect homeownership rates to  grow as well. As more people achieve greater levels of education, they are able to  generate higher income and then use that higher income to buy homes.

Get the Degree, Get the House
Our model shows that, all other factors being equal, the likelihood of homeownership increases by 3 percent for those that earn a bachelor's degree over those with just a high school degree. The likelihood of homeownership jumps another 3 percent for those that earn a graduate degree.

The good news for housing is
educationaI attainment is increasing. Since 1991, the share of households in which at least one person has a bachelor's degree has increased 24 percent, and is expected to increase further as Millennials continue to graduate from college and enter the workforce with improved prospects for  higher-paying jobs.

Figure 2 below shows the change in homeownership rates caused, all else held constant, by the  change in the rate of bachelor's degree attainment. Between 1992 and 2005, the increasing share of individuals earning bachelor's degrees corresponded with a 2.7 percent increase in homeownership. Between 2005 and 2015, partially in response to the Great Recession and slow economic recovery, Millennials have been staying in school. Consequently, the educational attainment rate, which measures the completion of degrees, declined. All else held constant, this caused modest year-over-year declines in the homeownership rate.

 In 2016, a jump in the educational attainment rate drove a 3 percent year-over-year gain in homeownership.

 Figure 2. Education Pays Off

Year-Over-Year Change(% Homeownership Rate,% Share of Bachelor's Degree)

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The good news is, according to the PEW Research Center5 , 63 percent of Millennials value a college education or plan to get one. Of that number, 19 percent have already graduated from college and the  remaining  44 percent  plan to  graduate  from college.  Approximately  27 percent of Millennial women and 21 percent of Millennial men have college degrees. This is in stark contrast to only 20 percent of Generation X women and 18 percent of Generation X men. The comparison to Baby Boomers is even more dramatic - only 14 percent of women and 17 percent of men have degrees.

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

Topics: homeownership, trending, DataTree, millennials

   
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