Household Ownership May Be Significantly Overstated

Tracking household ownership is important for various reasons including understanding wealth-building capability, anticipating future housing needs, both house and multifamily construction and distribution, as well as planning ongoing capital source requirements.

Such planning depends on the availability of data. It primarily comes from the government, although other sources are often helpful. In this case, one private source of data — Apartment List — trotted out a new analysis that brings questions to the accuracy of data sources and a different interpretation that should shake many assumptions. In particular, the assumption of home ownership may be significantly overstated.

Apartment List senior research associate Rob Warnock pointed to a seeming contradiction. Some metrics show that buying a house has become more difficult. The Joint Center for Housing Studies of Harvard University showed early in 2024 that the ratio of home price to median household income hit a record high. Even in 2019, it was 4.1. In 2022, it rose to 5.6.

Then, in March, CBRE noted that average mortgage payments were 38% higher than average apartment rents. Not even explicitly counting the additional effects of down payments — the analysis did assume 10% down — mortgage payments took a big leap in 2021. What the analysis didn’t mention was that the median would include all the much lower mortgage rates from 2021 and before. That suggests the mortgage payments faced by those looking for a first house now will be even higher because the average is, as a result, bottom-weighted.

The big analytic problem comes when, as Warnock wrote, official housing data makes it look as though homeownership is quickly rising, particularly among younger cohorts. The Census Bureau divides “the number of households that are owners by the total number of occupied households,” in the Housing Vacancies and Homeownership reports. That effectively said the entire household either owns or doesn’t. But that doesn’t explain the percentage of individuals who own them. Typically, one or two people in the household are the owners, so the homeownership share is really the percentage of homes that are owner-occupied.

Apartment List looked at the Census Bureau’s 66% measure and compared it to the number of adults, 25 years of age and above, who are owners. The latter is only 60% because many younger people have moved back into their families. The number is far lower than pre-recession times. Up to the mid-to-later 1980s, the younger cohort had about the same homeownership rates as older groups. The current differences between household- and individual-level home ownership by age group are 25-to-34 (43%, 33%); 35-to-44 (63%, 55%); and 45-to-54 (71%, 65%).

People are waiting longer to buy homes (probably because they don’t have a choice) and many young adults keep living with their parents or someone else for more extended times. Student debt is also getting in the way.

“As a result, today 20 percent of young adults between the ages of 25 and 34 (9 million in total) live in a home owned by someone else. 12 percent live at their parents’ home, 4 percent live in another relative’s home, and 4 percent in a home owned by someone unrelated,” Warnock wrote.