By 2040, homeowners will look vastly different than they do today. Nationally, homeownership rates will drop from 64.7 percent to 62.2 percent, but future homeownership rates will vary considerably between states. The overall number of new homeowners will increase by 6.9 million from 2020 to 2040, also with significant variation across states. Nearly all the increase in homeowners will come from households of color (defined in the data as any race or ethnicity other than white), but the growth will be very different for different racial and ethnic groups across states.
We produced three sets of state-level rankings to show what homeownership will look like in the future and the implications it could have for the housing market.
2020 homeownership rates and what we can expect by 2040
In 2020, West Virginia had the nation’s highest homeownership rate (74.2 percent), followed by Iowa, Vermont, Maine, Delaware, Wyoming, Minnesota, Idaho, and Michigan, with homeownership rates around 72 percent. The District of Columbia, New York, and California had the lowest homeownership rates.
Unsurprisingly, the states with the lowest homeownership rates had the most expensive housing (see the figure below). The average cost of a home in the five states with the lowest homeownership rates in 2020 was $525,973 versus $282,290 in the five states with the highest homeownership rates.
The 2040 homeownership rate will be determined both by the current homeownership rate and future trends. The trends are different across states, so even though we forecast the two states with the highest homeownership rates will show a decrease and the areas with the lowest homeownership rates will show an increase, this pattern is not consistent.
Growth in homeownership by 2040
Though the number of US homeowners will grow slowly over the next 20 years, there will be considerable variations across states, with some states experiencing robust growth. The number of new homeowners is influenced by the overall number of households and the growth rate of the homeowner population. Thus, the states with the most new homeowners are generally large states with fast growth rates, putting Texas (the second-largest state with the sixth-highest growth rate) and Florida (the third-largest state with the eighth-highest growth rate) on top, with well over a million new homeowners from 2020 to 2040.
Meanwhile, states with a large number of households but slow growth will have relatively fewer new homeowners. For example, California is the largest state and ranks 29th for growth rate, with 366,680 new homeowners from 2020 to 2040. Illinois, New York, and Pennsylvania top the list of states with the largest absolute declines in the number of new homeowners over the next two decades. These declines reflect either a decline in the number of new households (Illinois and New York) or very slow growth coupled with a decline in the homeownership rate (Pennsylvania), reflecting current trends.
Homeowner growth among households of color by 2040
Nationally, net growth in the number of homeowners from 2020 to 2040 will be entirely among people of color, especially Hispanic households. We ranked the 10 states with highest homeowner-household increase among people of color. Texas is ranked highest, with an increase of more than 1.5 million homeowners of color; 67 percent of the increase will come from Hispanic households, 19 percent from Asian and other households, and 14 percent from Black households (“other” households include American Indians, Alaska Natives, Native Hawaiians, other Pacific Islanders, and multiracial people). Georgia will experience a 51.4 percent growth rate among households of color, with 50 percent of the increase coming from Black households. Washington and New York will experience a significant increase in Asian and other homeowners. For these two states, 57 percent of the nonwhite homeowner increases will be from Asian and other families.
Homeownership has important implications for the housing market
As federal and state policymakers tackle housing supply, affordability, ownership, and equity, they will need to remember that each state has a different starting point, factors, and trends, suggesting there is no one-size-fits-all policy prescription. Though all states will show considerable growth in the number of homeowners of color, suggesting the need for more affordable housing, states with large increases in the total number of homeowners will face particularly acute housing supply shortages. Those states will need to ensure zoning, permitting, and land-use processing will enable sufficient affordable housing production to meet the forthcoming demand. Our state-level fact sheets, which provide detailed information about future household formation and homeownership trends, are a great starting point.
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