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Economic trends.


The homeownership rate in the United States in 1989 was a little below 64 percent, about the same as the rate in the preceding four years. However, as with many national statistics, the level and stability of the national homeownership rate masks a significant amount of variation in local markets.

Table 1 shows the distribution of homeownership rates among states in each region. The intervals of homeownership rates are set so that roughly one quarter of all states fall into each interval. Coincidentally, the top homeownership rate in the lowest interval is about the same as the national homeownership rate. This interval contains only 12 states. That means that 39 states (counting the District of Columbia as a state) have homeownership rates above the national average. The reason the national average is so much lower than the rates in most states is that many of the 12 states in the lowest interval are among the most populous. Consequently, the relatively low homeownership rates in the populous states tend to pull the national average down.

The regional distributions are interesting. One-third of the states in the Northeast have homeownership rates in the lowest interval (63.9 percent or less); but another one-third have rates in the highest interval (69.3 percent or more), making the Northeast the most diverse of the regions.

Homeownership rates in the South and the Midwest tend to be relatively high. In both regions, about two-thirds of the states have homeownership rates of 67.1 percent or more--well above the national average. At the lower end, only three states in the South, and one state in the Midwest have homeownership rates below the national average. Further, two of these three states in the South--the District of Columbia and Maryland--more or less border the Northeast.

Homeownership rates tend to be relatively low in the West. Five states have rates below the national average, with five more having rates below 67 percent. Only three states--fewer than one-quarter of the states in the region--have rates more than 67 percent--a share well below any of the other regions.

To explore the source of differences in state homeownership rates, Table 2 shows the seven states with the highest homeownership rates and the seven states with the lowest homeownership rates. The simple average of the homeownership rate in the seven states with the highest rates is 72.6 percent; the average for the states with the lowest rates is only 52.6 percent.

Not surprising considering the tallies shown in Table 1, most of the states with the highest homeownership rates are located in the South, including West Virginia, Mississippi, South Carolina and Oklahoma. Two of the remaining states--Maine and Pennsylvania--are in the Northeast and one--Michigan--is in the Midwest. None of the top seven is in the West.

However, most of the states with the lowest rates are in the West--Hawaii, California, Nevada and Alaska. Two of the remaining states--New York and Massachusetts--are in the Northeast and one--the District of Columbia--is in the South.

Part of the explanation for differences between these two groups of states has to do with the fact that renting is more common in heavily urbanized areas for a variety of reasons, and many of the states with low homeownership rates are heavily urbanized. However, housing affordability, which also partly explains lower rates in urban areas generally, is clearly a factor in differences between these two groups of states.

The average home price of the seven low homeownership rate states--$161,000--is nearly 75 percent higher than the average home price of the seven high homeownership rate states--$93,000. Incomes are higher in the low homeownership rate states too, but not nearly enough to offset the differences in prices.

As the table shows, home prices averaged about 6 1/2 times per capita income in the high homeownership states compared to around eight times in low homeownership states. At the extreme, prices are more than nine times income in California and Hawaii. With prices soaring above incomes in many states, it is not surprising to hear frequent cries of a continued affordability crisis. This crisis likely accounts for continued, relatively low homeownership rates in many large states. [Tabular Data 1 to 2 Omitted]
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Title Annotation:homeownership rates
Author:Holloway, Thomas M.
Publication:Mortgage Banking
Date:Aug 1, 1990
Previous Article:Secondary market.
Next Article:Foreclosure combat.

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