The historical rate of homeownership in the U.S. is 65 percent, according to data published in a recent article in the Mercury News. Yet in 2017, the homeownership rate was lower, at 63.9 percent. In the third quarter of 2018, however, that number inched up closer to the national average at a rate of 64.4 percent. While the increase in the number of homeowners is a welcome sign, there are still 35.6 percent of Americans who do not own a home, even though 75 percent of them see homeownership as part of the American dream.
California Homeownership Is Below the National Average
In California, homeownership is below the national average at about 55 percent, according to data published in the Sacramento Bee. However, this number is a welcome increase after the homeownership rate in California had been falling for the decade from 2006 and 2015, when rates dropped due to the foreclosure crisis. Still, 2017’s numbers are down from California’s peak, when 60.7 percent of people owned their homes.
The reason that most Americans, including Californians, do not own is closely tied to overall housing costs and the lack of housing. While 16 percent of non-homeowners say they simply need the flexibility provided by renting, 43 percent of people surveyed said they’re not in a financial position to buy a home. This was in the fourth quarter of 2018, which was a slightly lower number than the 49 percent who said they were not in a position to buy in the third quarter of 2018. Another 33 percent said that due to their current life circumstances, homeownership is not right for them.
Alan Barbic, president of the Silicon Valley Association of Realtors, said, “There’s no question that most Americans believe in the American dream of homeownership. Aside from being an investment, owning a home brings security, stability, and independence to families.”
Bay Area Homeownership Requires a Six-Figure Income
According to the mortgage site HSH.com, the average home price in the U.S. is $266,800. HSH estimates that this would require an annual income of $61,298. By comparison, the average home price in San Francisco is $989,000, which requires an income of around $216,000. San Jose is even higher, with an average home price of $1,300,000, requiring an annual income of about $257,000.
While income certainly plays a role in what people can afford, most experts agree that more housing needs to be built. This is one of the reasons Governor Gavin Newsom has included housing development in his state budget, as we wrote about in our post about how he’s addressing the California housing crisis. Newsom has encouraged Silicon Valley companies to do their part to build housing for the workforce they attract to the Bay Area.
Factors that Drive Homeownership
Lifestyle changes can spur homeownership. Thirty-one percent of non-homeowners say they’d be encouraged to buy a home if their financial situation improved. And 28 percent of renters say that major life changes, such as getting married, starting a family, or even retiring, would be the time they decide to take the plunge and buy.
The National Association of Realtors’ (NAR) chief economist, Lawrence Yun, says that it’s these lifestyle changes that actually drive people to pursue homeownership.
It’s clear that homeownership brings stability to people’s lives as well as their communities. And while homes in the Bay Area are some of the most expensive in the country, many expert predict that 2019 will bring more of a buyers’ market than we’ve seen in the past few years.