When borrowing costs started increasing in 2021 and 2022, the U.S. homebuying landscape shifted. High demand softened and many buyers took a step back from the market to wait for more affordable buying conditions. Despite this slowdown, median home prices continued to rise or remain elevated.
Nationally, this may not have impacted the homeownership rate much. According to the U.S. Census Bureau, the national homeownership rate for the second quarter of 2024 was 65.6%, mostly unchanged from the previous three years. But looking more closely at the country’s largest metropolitan areas, we can see some dramatic changes to homeownership rates across the country.
To better understand how and if home price increases have impacted U.S. homeownership rates, Zoocasa analyzed median home price data and homeownership rates in 75 of the country’s largest metropolitan statistical areas from 2021 to 2024.
Single-family median home prices were sourced from the National Association of Realtors and homeownership rates were sourced from the U.S. Census Bureau, Quarterly Residential Vacancies and Homeownership in Q2 of each year.
Understanding the Relationship Between Home Prices and Homeownership Rates
Many factors can influence a city’s homeownership rate, including interest rates, unemployment rates, economic outlook, general desirability of a location, and, of course, home prices. When home prices increase, it doesn’t necessarily result in a lower homeownership rate. In fact, rising prices can often reflect growing demand in a particular area. For instance, if a city becomes more desirable due to job growth or improved amenities, more people may be eager to buy homes there, driving up prices and resulting in a rise in the homeownership rate.
On the other hand, a significant rise in home prices without corresponding growth in income or economic stability can strain affordability, potentially limiting the number of people who can enter the housing market. In such cases, coupled with other economic factors like high borrowing costs, homeownership rates may decline as potential buyers are priced out.
So while the relationship between home prices and homeownership rates is not strictly interdependent, it is noteworthy that the average increase in median home prices across all 75 cities is 10.3%. However, in the 33 cities where the homeownership rate declined, the average increase in median home prices was higher, at 13.3%.
Homeownership Rates Increased in the Majority of Cities
From 2021 to 2024, homeownership rates increased in 41 of the 75 analyzed metropolitan statistical areas, suggesting that rising home prices have not deterred a substantial portion of buyers, particularly in cities that have maintained affordable prices.
The homeownership rate in Toledo, OH represents the largest 3-year increase, rising from 51.5% in Q2 2021 to 68.3% in Q2 2024. During the same period, Toledo’s median single-family home price rose by 18.9% to $188,500 but is still well below the national median of $422,100. Toledo’s affordability may explain why the homeownership rate has increased so rapidly, despite rising prices.
Similarly, in Albany-Schenectady-Troy, NY the homeownership rate increased from 61.3% in 2021 to 74.4% in 2023, while the median home price rose by 24.1% to $319,700. Considering that New York state’s median sale price in June 2024 was $448,000, according to the New York State Association of Realtors, Albany-Schenectady-Troy is a lower-cost option for New York buyers and may be attractive to first-time home buyers in the state. An alternative option for New York buyers may be in Rochester, where the median home price increased by a whopping 40% from 2021 to 2023, and the homeownership rate increased by 11.1% to 74.3%.
Interestingly, even some of the country’s most expensive housing markets experienced homeownership rate growth, although it was generally less pronounced than in many of the more affordable markets. With a median single-family home price of $2,008,000 in Q2 2024, San Jose-Sunnyvale-Santa Clara, CA is the most expensive housing market in the U.S.. Yet, it still benefited from an increase to its homeownership rate from 46.7% in 2021 to 55.2% in 2024.
Miami-Fort Lauderdale-West Palm Beach, FL, and Seattle-Tacoma-Bellevue, WA, saw their homeownership rates increase by 6.5% and 6.7%, respectively. However, the growth in their median single-family home prices outpaced the rise in homeownership rates. In Seattle, the median single-family home price rose by 18.8%, while in Miami, it surged by 34.6% from 2021 to 2024.
The Biggest Homeownership Rate Drops Found in the Midwest and the Sun Belt
The homeownership rate declined in 33 metropolitan statistical areas between 2021 and 2024. Austin-Round Rock, TX led the way with a 19.5% drop in the homeownership rate, followed by Knoxville, TN (-15.7%), North Port-Bradenton-Sarasota, FL (-12.9%), and Minneapolis-St. Paul-Bloomington, MN-WI (-12.1%). Many of these metropolitan cities experienced large population booms during the pandemic, especially in Florida and Texas, which likely contributed to the decline in homeownership rates as the surge in demand made homes less affordable compared to pre-pandemic conditions.
Of the ten markets to experience the largest drops in the homeownership rate, six of them saw their median single-family home price rise by over 20% from 2021 to 2024. In Knoxville, the median single-family home price increased by an impressive 31.3% - one of just eight cities where the median single-family home price increased by over 30%.
Among the ten metropolitan areas with the largest drops in homeownership rates, only three have a homeownership rate above the national average. San Diego-Carlsbad has the lowest rate at 47.6%. In fact, among all 75 metropolitan areas, San Diego-Carlsbad has the second lowest homeownership rate just behind Los Angeles-Long Beach-Anaheim with a rate of 47%. At 49.9%, New York-Newark-Jersey City, NY-NJ-PA is the only other metropolitan area with a homeownership rate below 50%.
The Ripple Effect of Pandemic Price Gains
Though Austin-Round Rock showed the smallest percentage change in the median single-family home price from 2021 to 2024, this doesn’t tell the whole story of Austin’s real estate market. According to the Austin Board of Realtors, from January 2020 to December 2020, the median residential home price grew by 20% and this rapid growth continued throughout 2021 and 2022. But now that interest rates have risen and demand has cooled off, Austin’s home prices have stabilized, though at much higher levels than pre-pandemic.
The Austin Board of Realtors reported in July 2024 that only about half of homeowners in the region can afford a median-priced home, suggesting that the effects of sharp home price growth during the pandemic years are still present, resulting in a dramatic drop in the homeownership rate, from 66.7% in 2021 to 53.7% in 2024.
Los Angeles-Long Beach-Anaheim, CA, is another example of a housing market where the homeownership rate declined, even though the median home price saw only a modest increase from 2021 to 2024. Before 2020, the median home price in Los Angeles had never exceeded $665,000. However by July 2021, it had risen above $800,000 and reached over $900,000 by September 2023. Although prices did not increase substantially from 2021 to 2024, the sharp and volatile price increases from 2020 to 2023 likely contributed to the decline in homeownership rates.
If you’re looking to enter one of these markets, it’s important to speak with a local real estate agent who can give you specific information and guidance about the local real estate market. Give us a call today to discuss your home-buying plans.
