Below-median Income Homeownership Rate is Surging

Hey, folks! Exciting news about homeownership rates! The Census Bureau just released a surprising report. Get this: the homeownership rate for families with below-median income has jumped from 48% to 53% since 2016. That’s a significant increase! On the flip side, those with above-median income saw a much smaller growth in their homeownership rate.

So, what does this mean? Well, the overall homeownership rate has been mostly driven by the growth in below-median income households. In fact, about 87% of the increase in homeownership since 2016 can be attributed to them. The gap between high and low-income homeownership rates has been shrinking too, reaching its smallest point in years.

It’s amazing how these families are finding ways to own homes despite rising prices and borrowing costs. It’s a positive trend as we celebrate National Homeownership Month!

Conversely, the homeownership rate for owner-occupied households with a family income higher than the median family income has grown at a much softer pace than the below-median family income homeownership rate.

Exhibit 6a shows that since the second quarter of 2016, the below-median family income homeownership rate has increased 5.4 percentage points while the above-median family income homeownership rate has only increased 0.8 percentage points.
Furthermore, the overall increase in the total homeownership rate since 2016 has been driven mainly by the strong growth in the below-median family income homeownership rate.

Exhibit 6b shows that since the second quarter of 2016, the growth in the below-median family income homeownership rate accounted for at least 70% of the cumulative growth in the overall homeownership rate in each subsequent quarter. As of the first quarter of 2023, 87% of the 3.1 percentage point increase in the overall homeownership rate since 2016 can be attributed to the growth in the below-median family income homeownership rate.

The homeownership rate gap between above-median and below-median family income households has shrunk over the last couple of years and has generally been trending down over the past decade as the growth in the below-median family income homeownership rate continues to outpace the above median family income homeownership rate growth. Exhibit 7 shows the gap steadily decreasing since after the Great Financial Crisis and more so in recent years. As of the first quarter of 2023, the gap stands at 25.2%, the smallest gap since the start of the series.

The strong growth in the below-median family income homeownership rate may seem unexpected given the strong house price growth since the pandemic and more recently, the jump in borrowing costs. Nonetheless, below-median family income households are overcoming constraints and finding ways to become homeowners even within a less affordable environment – an encouraging sign as we continue to celebrate National Homeownership Month.