On the other hand, rising homeownership tenure, which is the trend we've seen over the past few years, means fewer new homeowners in the form of first time homebuyers are being added to the mix, and that represents a paradigm shift in the structure and future growth of the housing market. These first-time homebuyers are the bottom of the housing market pyramid (or the top of the housing market funnel, if you prefer). Continued growth as we traditionally know it in the housing market has been heavily reliant on this group of buyers. What we see now is that instead of a large number of new homeowners, home sales are being more heavily driven by current homeowners who are buying a second or third or fourth, or more, investment home. Another implication is that the wealth-building effect of homeownership is being limited to a smaller pool of owners.

GlobeSt.com: How do homeownership tenure, pricing and the economy affect each other?

Blomquist: Homeownership tenure and home prices are a reflection of the overall economy. A shorter homeownership tenure is reflective of a more fluid economy with more opportunity for upward mobility that translates into people moving more and becoming homeowners. A longer homeownership tenure reflects an economy that is more stratified without as much opportunity for upward mobility. Prices are another reflection of that stratified economy, where a limited number of players are doing well and can afford the higher home prices while those prices are out of reach for many others who continue to rent rather than buy. I would say the current US housing market is somewhere near the middle of that spectrum, but tilting more toward a stratified housing market where homeownership is concentrated in the hands of fewer participants.

GlobeSt.com: What conditions are typically present when homeownership tenure is highest?

Blomquist: Low inventory of move-up homes for current homeowners—often, these would be newly built homes—that then trickles down into low inventory of starter homes for first-time homebuyers is a key element. Rising interest rates would help cement this trend in higher homeownership tenure because it would motivate current homeowners to stay put rather than move up into a bigger home to keep a lower interest rate, as well as making homes less affordable for first-time homebuyers.

GlobeSt.com: If prices continue to climb, how will homeownership tenure be affected?

Blomquist: Rising prices will tend to perpetuate the longer homeownership tenure trend by putting homes increasingly out of reach for first-time homebuyers and limiting homeownership to a smaller group. Now, this could be good news for investors who own rental properties, since rising home prices will ensure a continued growing pool of renters. I do think builders and developers will tap into the demand for lower-priced, entry-level housing by creating more dense housing in urban areas or at least close to transportation, providing first-time homebuyers with a somewhat lower price point in a location that allows them to save on transportation/commute costs.

|

IRVINE, CA—Rising homeownership tenure means fewer new homeowners in the form of first-time home buyers are being added to the mix, and that represents a paradigm shift in the housing market, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. According to a recent report from the firm, homeowners who sold in Q1 2017 had owned an average of 7.97 years, down slightly from a record-high average homeownership tenure of 8.00 years in Q4 2016, but still up from 7.68 years in Q1 2016. Homeownership tenure averaged 4.26 years nationwide between Q1 2000 and Q3 2007, prior to the Great Recession.

We spoke with Blomquist about what declining homeownership means for economists and how homeownership tenure relates to pricing and the economy.

GlobeSt.com: What does declining homeownership tenure mean for economists?

Blomquist: In the context of the market we're in now, it would be a welcome sign that upward mobility in housing is increasing and access to the wealth-building effect of homeownership is expanding to a broader pool of Americans. That in turn would provide a boost to the overall economy as an expanded pool of consumers are building wealth through homeownership.

On the other hand, rising homeownership tenure, which is the trend we've seen over the past few years, means fewer new homeowners in the form of first time homebuyers are being added to the mix, and that represents a paradigm shift in the structure and future growth of the housing market. These first-time homebuyers are the bottom of the housing market pyramid (or the top of the housing market funnel, if you prefer). Continued growth as we traditionally know it in the housing market has been heavily reliant on this group of buyers. What we see now is that instead of a large number of new homeowners, home sales are being more heavily driven by current homeowners who are buying a second or third or fourth, or more, investment home. Another implication is that the wealth-building effect of homeownership is being limited to a smaller pool of owners.

GlobeSt.com: How do homeownership tenure, pricing and the economy affect each other?

Blomquist: Homeownership tenure and home prices are a reflection of the overall economy. A shorter homeownership tenure is reflective of a more fluid economy with more opportunity for upward mobility that translates into people moving more and becoming homeowners. A longer homeownership tenure reflects an economy that is more stratified without as much opportunity for upward mobility. Prices are another reflection of that stratified economy, where a limited number of players are doing well and can afford the higher home prices while those prices are out of reach for many others who continue to rent rather than buy. I would say the current US housing market is somewhere near the middle of that spectrum, but tilting more toward a stratified housing market where homeownership is concentrated in the hands of fewer participants.

GlobeSt.com: What conditions are typically present when homeownership tenure is highest?

Blomquist: Low inventory of move-up homes for current homeowners—often, these would be newly built homes—that then trickles down into low inventory of starter homes for first-time homebuyers is a key element. Rising interest rates would help cement this trend in higher homeownership tenure because it would motivate current homeowners to stay put rather than move up into a bigger home to keep a lower interest rate, as well as making homes less affordable for first-time homebuyers.

GlobeSt.com: If prices continue to climb, how will homeownership tenure be affected?

Blomquist: Rising prices will tend to perpetuate the longer homeownership tenure trend by putting homes increasingly out of reach for first-time homebuyers and limiting homeownership to a smaller group. Now, this could be good news for investors who own rental properties, since rising home prices will ensure a continued growing pool of renters. I do think builders and developers will tap into the demand for lower-priced, entry-level housing by creating more dense housing in urban areas or at least close to transportation, providing first-time homebuyers with a somewhat lower price point in a location that allows them to save on transportation/commute costs.