The national homeownership rate, as measured by the American Housing Survey, rose from 63.5 percent in 1985, to 65 percent in 1995, and to 68.8 percent in 2005. By 2015, the rate had declined to 62.7 percent, below the 1985 level.

One could argue that four demographic trends during this same period caused the rate’s rise and fall. In a recent article in the Journal of Economic Perspectives, we examine these trends and show that the drop cannot be explained by demographics alone.

Instead, expanded access to credit contributed to the rate’s rise through 2005, and the effects of the Great Recession, in combination with stagnating real wages, student loan debt, tight credit, and subtle changes in attitudes toward homeownership, contributed to its decline from 2005 to 2015.

Strikingly, the black homeownership rate has continued to decline relative to white and Asian households, which cannot easily be explained by household income or demographics.

Four major demographic trends occurred in the US between 1985 and 2015:

1. The nonwhite share of the population increased. The share of white households fell from 81 to 67 percent.
2. The population aged. The share of the population ages 44 and younger declined from 49 to 36 percent.
3. Education levels increased. The share of household heads that are college educated rose from 22 to 40 percent.
4. Family structures changed. The share of households that are married with a child under 18 declined from 29 to 20 percent.  

An aging population and increase in education tend to increase the homeownership rate, while the increasingly nonwhite population and the decline of married couples with kids tend to decrease the rate.

On top of broader demographic changes, important trends in homeownership occurred between 1985 and 2015, as outlined in the table above.

Black homeownership lost ground. Hispanic and nonwhite households have lower homeownership rates than their white counterparts, but the situation for black homeownership has been particularly exacerbated. From 1985 to 2015, white, Hispanic, and Asian homeownership increased by 3, 6, and 12 percent, respectively, while black homeownership fell by 2 percent.

In fact, the homeownership rate for black households with a college education was lower in 2015 than the rate for white households with less than a high school education (57 versus 63 percent).

Only senior citizens experienced a rise in homeownership. Household heads ages 64 and younger experienced a decline in homeownership between 1985 and 2015.

Less educated people were even less likely to become homeowners. In 1985, the difference in the homeownership rate between families with less than a high school education and those with a college education was 7 percent. This had increased to 23 percent by 2015.

Families with children lost ground. Homeownership declined for all households with children between 1985 and 2015, while increasing for most households without children.

Do these demographic trends explain the rise and fall of the homeownership rate?

We investigated whether these demographic trends could explain the rise and decline in the homeownership rate using a regression analysis, which holds all but one variable constant to see how that variable affects the homeownership rate.

Our results show that the homeownership rate was 3 percent higher in 1995 and 6 percent in 2005 than could be explained by these demographic trends. In 2015, the rate was 1 percent lower than demographic trends could explain.

Our analysis suggests that a significant amount of the change in the homeownership rates is not being driven by demographic variables. These demographic trends are significant, but they largely offset each other. The rise in age and education increases the homeownership rate, while the increase in nonwhite population and the decrease in married couples with children decreases the rate.

Access to credit and the Great Recession are the primary culprits

Our analysis suggests that the Great Recession and the subsequent pullback in credit has had a significant impact on the homeownership rate, with a 7 percent swing from 2005 to 2015 that cannot be explained by demographic factors.

These findings make clear that access to credit and other economic factors make a big difference in expanding homeownership. Homeownership is not for everyone, but it is financially beneficial to most households and remains financially better than renting.

The plunging homeownership rate for black families is particularly concerning. Policymakers must recognize that this declining rate is the result of failings that go beyond the mortgage market. Among other strategies, we can broaden access to mortgage credit to reverse this negative trend and expand access to homeownership’s many benefits.