The prospect for future homeownership demand remains solid even with a moderate decline in demand from 2015 to 2016, according to the First American Homeownership Progress Index.
Potential homeownership demand represented by the HPRI declined by 0.4% last year.
Changing demographic and economic factors will have a positive or negative impact on someone's potential to be a homeowner, according to First American Chief Economist Mark Fleming.
A 0.07% decrease in the share of married households and a 0.16% drop in the number of children per household contributed to a decline in the prospect for future homeownership demand in 2016.
Factors that increased potential homeownership demand included income growth, which rose by 0.02% from 2015, and rising educational attainment, which grew 0.06% and represents the influence of millennial behavior on homeownership.
"Even as millennials continued to delay marriage and family formation and pursue higher education levels, the Homeownership Progress Index only declined moderately from 2015 to 2016," said Fleming in a press release. "Yet, the prospect for future homeownership demand looks hopeful, as more households increase their educational attainment level and thus their prospect for higher income."
The change in economic conditions, up 0.17%, had the greatest positive impact on potential homeownership demand from the pre-recession peak to 2016; the prospect for future homeownership demand has fallen 6% from the pre-recession peak and is at the same level as it was in 1990.
Slight changes in potential homeownership demand hide the much greater amount of variation in markets across the country.
"Regions or markets with stronger local economies and that can attract increasingly educated millennial households will have stronger homeownership demand in the future," Fleming said.
Half of the top 10 markets for annual growth in potential homeownership demand are in California or Texas and eight of the bottom 10 markets are in the Midwest or on the East Coast.
The markets with the highest year-over-year increase in potential homeownership demand are San Jose, Calif. (4.7%), Jacksonville, Fla. (3.6%), Memphis, Tenn. (2.9%), Sacramento, Calif. (2.7%), and San Antonio (2.6%).
The markets with the highest year-over-year decrease in potential homeownership demand are Birmingham, Ala. (4.2%), Richmond, Va. (3.3%), Cleveland (3%), Milwaukee (3%) and Buffalo, N.Y. (2.9%).
In this year's second quarter, the U.S. homeownership rate inched up to 63.7% from 63.6% in the first quarter, fueling more hope that its post-crisis decline is ending, according to the U.S. Census Bureau.