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Rising Homeownership Rate for Multigenerational Households

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The homeownership rate for multigenerational households surpassed that of all other family household types in 2022 and now stands at 74.2%, exceeding the homeownership rate of other family households of 73.9%. Just a decade ago, the homeownership rate for multigenerational stood at 69.3%, second to other family households at 71.3%.

Multigenerational households are defined by the Census Bureau as households with three or more generations living together. In this post, NAHB used the American Community Survey (ACS) 1-year estimates from 2012 to 2022 to estimate the homeownership rates (which is calculated as the total number of owner-occupied units divided by the total number of applicable households) for different household types.

In 2012, the homeownership rate for multigenerational households stood at 69.3%, 2 percentage points (pp) below the 71.3% homeownership rate for other family households. The gap in homeownership rates between these household types remained with higher rates for other family households until 2021. By 2022, the gap inverted with 74.2% of multigenerational households owning homes versus 73.9% of other family households. This represents about a 5 pp increase in homeownership rate for multigenerational households over the decade compared to a 2.6 pp increase for other family households.

The primary factor that explains the rise in the multigenerational household homeownership rate is the availability of more capital during the period of low interest rates in 2021. While the median family income for multigenerational households consistently exceeds that of other family households’ income due to resource pooling, this difference has widened over time. For example, real median income for multigenerational households and other family households in 2012 were $63,643 and $62,633, respectively, with a difference of about $1,000. By 2022, this difference widened almost twelvefold to $11,778, with multigenerational households earning $103,501 and other family households earning $91,723.

Changes in family structure can be ruled out as a factor in this difference as the average household size has remained constant over the decade with an average of 5.1 people per multigenerational household, of which two are working members, while other family households have had an average of 3.1 people and 1.5 working members. This suggests that the income per person in a multigenerational household has been rising faster than other family households.

Income pooling has also buffered multigenerational households through rising home prices despite the higher prevalence of these households in more cost burdened areas. The chart below shows a strong correlation between the owner housing cost burdens and the incidence of multigenerational households. States with larger shares of housing cost burdened households (those that spend more than 30% of their income on housing) also have the higher shares of multigenerational households.

The faster growing income of multigenerational households also helped them afford more expensive homes in recent years, compared to other family households.  Looking at homeowners that moved into owned properties within the year (as a proxy for recent homebuyers), the median home values for multigenerational households have gone from $165,000 in 2012 to $400,000 in 2022. In comparison, the median home values for other family homebuyers went from $180,000 to $380,000. In other words, multigenerational households now pay $20,000 more for a home. However, because they have a higher pooled household income, their estimated home price-to-income (HPI) ratio remains lower than that of other family households.

To conclude, the rising homeownership rate among multigenerational households highlights their financial resilience and adaptability in the face of changing economic conditions. Despite living in less affordable states, these households leverage their pooled incomes to navigate higher home prices effectively. The significant increase in their median income over the past decade has enabled them to capitalize on favorable mortgage rates and propel their homeownership rate to a new decade high.

Footnote:

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The Nation’s Stock of Second Homes

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 In 2022, the total count of second homes was 6.5 million representing 4.6% of the total housing stock, according to NAHB estimates. This reflects a decline from 2020, when the number of second homes stood at 7.15 million.

As of 2022, the state with the largest stock of second homes was Florida (1 million), accounting for 15.3% of all second homes. Wyoming had the smallest stock with approximately 16,320 second homes, . Half of the nation’s second homes can be found in these seven states – Florida, California, New York, Texas, Michigan, North Carolina, Arizona, and Pennsylvania.

In-depth analysis of the county level data shows that the concentration of second homes is not simply restricted to conventional locations like beachfront areas. There were 807 counties spread over 50 states where second homes accounted for at least 10% of the local housing stock. Only Washington D.C. was the exception, reporting a second home share of 1.8%. Across the nation 314 counties, 10% of all counties in the U.S., had at least 20% of housing units that were made up of second homes.

Counties where at least half of their housing stock is second homes were widely spread over in 14 states.  Of these counties, four were in Wisconsin, four in Colorado, two in Michigan, Minnesota, Utah, California, Massachusetts, and Pennsylvania, and one county each in Alaska, Idaho, Maryland, Missouri, New Jersey, and New York, These national patterns are mapped below.

Counties with more than 25,000 second homes are mostly located in or near metropolitan areas.  The top 10 counties with the most second homes account for around 11.2% of second home stocks, most of which were in Arizona, Florida, California, Massachusetts, and New York. Of the top 10 counties regarding absolute numbers of second homes, only three counties (Lee County, Florida, Barnstable County, Massachusetts, and Collier County, Florida) had more than 20% of their housing stock in second homes.

In terms of methodology, this analysis focuses on the number and location of second homes that would be qualified for the home mortgage interest deduction by individuals using the Census Bureau’s 2022 American Community Survey (ACS). It does not account for homes held primarily for investment or business purposes.

NAHB estimates are based on the definition used for home mortgage interest deduction: a second home is a non-rental property that is not classified as taxpayer’s principal residence. Examples could be: (1) a home that used to be a primary residence due to a move or a period of simultaneous ownership of two homes due to a move; (2) a home under construction for which the eventual homeowner acts as the builder and obtains a construction loan (Treasury regulations permit up to 24 months of interest deductibility for such construction loans); or (3) a non-rental seasonal or vacation residence. However, homes under construction are not included in this analysis because the ACS does not collect data on units under construction.

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Top 10 Builder Market Shares for 2023

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NAHB analyzed the national market share data released by BUILDER Magazine in a previous blog post.  Last month, BUILDER Magazine released new data on the top 10 home builders within each of the 50 largest new home markets in the U.S. (ranked by single-family permits) (Figure 1).  It is important to note that this post is not specifically analyzing the top 10 largest home builders nationally and each market can differ in its respective top 10 home builder composition.

The top 10 home builders accounted for varying shares, ranging from 40.1% of single-family permits in the Kansas City area to 98.8% in Columbia, SC.  In 11 metro areas, the top 10 builders’ market share exceeded 90%. Across the 50 largest metro areas, the average market share of the top 10 builders was 78.2%, up from 73.3% in 2022.

Looking at results on a map reveals that Florida, South Carolina, Virginia, and southern California have multiple highly concentrated markets.  Texas and the Northwest include markets with lower levels of concentration.

D.R. Horton made the top 10 builder list in 47 markets, the most among all builders.  Lennar and PulteGroup followed, present in the top 10 builder list of 45 and 35 different metro markets, respectively.

From 2022 to 2023, 34 metro areas saw an increase with their top 10 builders’ market share while nine metro areas saw decreases.  The top 5 metro areas with the biggest increases were:

Los Angeles-Long Beach-Anaheim, CA (90.3%, +26 percentage points)

Myrtle Beach-Conway-North Myrtle Beach, SC-NC (92.3%, +16.4 percentage points)

Riverside-San Bernadino-Ontario, CA (94.9%, +16.1 percentage points)

Cape Coral-Fort Myers, FL (96.2%, +15.3 percentage points)

New York-Newark-New Jersey City, NY-NJ-PA (62.6%, +14.9 percentage points)

Of the nine metro markets that saw decreases in the single-family permit share controlled by their top 10 builders, the five largest decreases were seen in:

Portland-Vancouver-Hillsboro, OR-WA (66%, -8.7 percentage points)

North Port-Sarasota-Bradenton, FL (79.1%, -7.4 percentage points)

Deltona-Daytona Beach-Ormond Beach, FL (72.4%, -7.2 percentage points)

Seattle-Tacoma-Bellevue, WA (59.4%, -5.5 percentage points)

Salt Lake City, UT (59.3%, -4.3 percentage points)

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45% of Associate Members are Subcontracting/Specialty Trade Contractors

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Every year since 2008, the NAHB has conducted a member census in order to better understand the composition and characteristics of the people who belong to its organization.  Similar to a previous post about builder members, NAHB conducted a related analysis of its associate members.  In 2023, 65% of NAHB’s members were associate members—those involved in a wide range of support industries and professions including, among others, trade contractors, manufacturers, retailers/distributors, designers, and architects.

Of the 69,645 associate members, 45% are primarily subcontractor/specialty trade contractors, 11% have a professional specialty, 10% are retail dealerships or distributorships, 8% are in financial services, 5% are wholesale dealerships or distributorships, and 17% have some other type of primary activity (Exhibit 1).

In 2023, associate members had a median of 12 employees on payroll, which ties an all-time high set in 2022.  Twenty-two percent of associate members had 1-4 employees, 20% had 5 to 9, 37% had 10 to 49, and 20% had 50 or more employees.  Two percent had no payroll at all.

The median revenue of NAHB associate members was $3.0 million in 2023, an increase from $2.8 million in 2022 and the highest in the 16-year history of the Census (Exhibit 2).

In 2023, the median age of NAHB associate members was 56 which is unchanged from 2022.  Four percent of associate members were less than 35 years old, 15% were 35 to 44, 26% were 45 to 54, 34% were 55 to 64, and 21% were 65 or older.  The share of associate members who identify as female snapped a string of six consecutive annual increases, falling 2 percentage points to 24% from an all-time survey high of 26% in 2022.

For more details about NAHB associate members and a profile of each type of member, please visit housingeconomics.com or click here for the full article.

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Median Priced Existing Homes Less Affordable Than New Homes in Second Quarter

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NAHB’s Cost of Housing Index (CHI) highlights the burden that housing costs represent for middle and low-income families. In the second quarter of 2024, the CHI found that a family earning the nation’s median income of $97,800 must spend 38% of its income to cover the mortgage payment on a median-priced new single-family home. Because a typical existing home in the second quarter was more expensive ($422,100) than a typical newly built home ($412,300), the CHI for existing homes was higher, at 39%. 

Low-income families, defined as those earning only 50% of median income, would have to spend 77% of their earnings to pay for a new home and 79% for an existing one.

The latest results reveal that affordability has worsened for existing homes. A typical family needed 39% of its income to pay for a median-priced existing home in the second quarter, up from 36% in the first quarter. A low-income family needed 79% of its income vs. 71% in the previous quarter. In contrast, the CHI and low-income CHI for new homes remained unchanged between the first and second quarters of 2024, at 38% and 77%, respectively.

Additionally, CHI is produced for existing homes in 176 metropolitan areas, breaking down the percentage of a family’s income needed to make a mortgage payment in each area based on the local median existing home price and median income. Percentages are also calculated for low-income families in these markets.

In 14 out of 176 markets in the second quarter, the typical family is severely cost-burdened (must pay more than 50% of their income on a median-priced existing home).  In 89 other markets, such families are cost-burdened (need to pay between 31% and 50%). There are 73 markets where the CHI is 30% of earnings or lower.

The Top Five Severely Cost-Burdened Markets

San Jose-Sunnyvale-Santa Clara, Calif. was the most severely cost-burdened market on the CHI during the second quarter, where 94% of a typical family’s income is needed to make a mortgage payment on an existing home. This was followed by:

• San Francisco-Oakland-Berkeley, Calif. (79%)
• San Diego-Chula Vista-Carlsbad, Calif. (76%)
• Urban Honolulu, Hawaii (76%)
• Naples-Marco Island, Fla. (74%)

Low-income families would have to pay between 147% and 188% of their income in all five of the above markets to cover a mortgage.

The Top Five Least Cost-Burdened Markets

By contrast, Decatur, Ill., was the least cost-burdened market on the CHI, where families needed to spend just 15% of their income to pay for a mortgage on an existing home. Rounding out the least burdened markets are:

• Cumberland, Md.-W.Va. (17%)
• Springfield, Ill. (18%)
• Elmira, N.Y. (18%)
• Peoria, Ill. (19%)
• Binghamton, N.Y. (tied at 19%)

Low-income families in these markets would have to pay between 30% and 39% of their income to cover the mortgage payment for a median priced existing home.

Visit nahb.org/chi for tables and details.

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Multifamily Built-for-Rent Share Remains Elevated

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According to NAHB analysis of quarterly Census data, the count of multifamily, for-rent housing starts declined significantly during the second quarter of 2024. For the quarter, 88,000 multifamily residences started construction. Of this total, 83,000 were built-for-rent. This marks a notable 37% decline from the second quarter of 2023 for the multifamily built-for-rent category.

The market share of rental units of multifamily construction starts was flat at a still elevated 94% for the second quarter as the small condo market remained held back due to higher interest rates. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.

For the second quarter, there were just 5,000 multifamily condo unit construction starts.

An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to second quarter 2024 data, the average square footage of multifamily construction starts was relatively unchanged at 1,034 square feet. The median declined to 955 square feet. These estimates are near multidecade lows.

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A Data Profile of NAHB Remodelers

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In the latest 2023 NAHB member census, 21% of NAHB builder members listed residential remodeling as their primary business. These remodelers tend to be relatively small, with a median of five employees and a median annual revenue of $1.8 million.  They are thus even smaller than NAHB builder members in general, who had a median of six employees and median annual revenue of $3.4 million, as reported in a recent post.

Among the residential remodelers, 21% reported a dollar volume of less than $500,000 in 2023, 20% reported between $500,000 and $999,999, 47% between $1.0 and $4.9 million, 8% between $5.0 and $9.9 million, 2% between $10.0 million and $14.9 million, and another 2% reported $15.0 million or more. None reported zero business activity in 2023.

The median annual revenue for residential remodelers in 2023 was $1.8 million—considerably below the $3.4 million median calculated across all NAHB builder members, and a small fraction of the $45.0 million threshold the Small Business Administration uses to classify construction businesses as small. Even so, residential remodelers’ median revenue was up from the $1.2 million recorded in 2022.

The median number of payroll employees was also relatively small among NAHB’s residential remodelers in 2023—five, compared to six for all NAHB builder members. Both numbers were unchanged from 2022.

To provide a measure of housing activity roughly analogous to starts, the NAHB census asked builder members who are primarily or secondarily residential remodelers about the number of remodeling jobs they completed in 2023 costing $10,000 or more. The responses show that a plurality of 39% completed 1 to 5 jobs of this size, 16% did 6 to 10, 22% did 11 to 25, 15% did 26 to 99, and 3% completed 100 or more jobs costing more than $10,000. On average, builder members involved in residential remodeling as a primary or secondary activity completed 20 jobs costing $10,000 or more in 2023. The median number was 7.

The numbers are significantly higher if the calculations are confined to the 21% of NAHB builder members who list residential remodeling specifically as their primary activity. These members completed an average of 32 and a median of 15 $10,000-plus jobs in 2023. These results are not significantly different from the ones reported in 2022, when NAHB first included the remodeling jobs question in its member census.

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Most NAHB Builders are Small Businesses

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The majority of NAHB builder members are small businesses, according to the annual census of its members NAHB has been conducting since 2008. The most recent installment of the census was conducted at the end of 2023 and covered business activity through 2023.

The census shows that, on average, NAHB builders started 59.2 homes in 2023 (37.3 single-family and 21.9 multifamily). However, the median number of homes started was only six. Because the data include a small percentage of very large builders, the average number of starts is much higher than the median. For that reason, the median may better represent the experience of the typical NAHB builder.

Another, conventional way to evaluate the size of a business is by the annual revenue it generates. In the 2023 NAHB census, 14% of builders reported a dollar volume of less than $500,000, 12% reported between $500,000 and $999,999, 38% between $1.0 and $4.9 million, 15% between $5.0 and $9.9 million, 6% between $10.0 million and $14.9 million, and 14% reported $15.0 million or more. Only 1% reported no business activity at all in 2023. The median edged up to $3.4 million (from $3.3 million in 2021 and 2022). For comparison, the Small Business Administration’s size standards classify residential builders and remodelers as small if they have average annual receipts of $45.0 million or less ($34.0 million or less for land developers).

Historically, NAHB initiated the current version of its member census during the industry-wide downturn of 2008, when the median annual revenue of builder members was only around $1.0 million. Median annual revenue began rising in 2013, as the industry slowly recovered, plateauing at $2.6 to $2.7 million from 2017 through 2020, before jumping to $3.3 million in 2021 and 2022 and then edging up by another $0.1 million in 2023.

Due to their status as small businesses and extensive use of subcontractors, many builders carry relatively few employees on their payrolls. In NAHB’s 2023 census, builder members reported a median of six employees, including employees in both construction and non-construction jobs.

Whether based on the median of six employees, the median of six homes started, or the median annual revenue of $3.4 million, it is safe to conclude that the majority of NAHB’s builder members qualify as small businesses.

For more detail on the 2023 NAHB Builder Member Census, including a profile for each of the seven major categories of builder, please see the July 2024 Special Study.

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Unchanged Lending Conditions, But Weaker Demand for Residential Loans in Second Quarter

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According to the Federal Reserve Board’s July 2024 Senior Loan Officer Opinion Survey (SLOOS), lending standards were essentially unchanged for all residential real estate (RRE) categories in the second quarter of 2024.  However, demand for RRE loans remained modestly weaker across all categories in the quarter.  Lending conditions were significantly tighter, and loan demand modestly was weaker across all commercial real estate (CRE) loan categories.  Nevertheless, language from the most recent Federal Open Market Committee (FOMC) suggest that cuts to the federal funds rate are imminent which will be welcomed relief for the real estate market and will help stimulate future loan activity.

Residential Real Estate (RRE)

Four of the seven RRE categories (GSE-eligible, non-Qualified Mortgage or QM jumbo, Non-QM non-jumbo, and Subprime)recorded a net share of banks reported tighter lending standards in Q2 2024 as neutral (i.e., 0%) . The other three categories, which included government (i.e., issued by FHFA, Department of Veteran Affairs, USDA, etc.), QM jumbo, and QM non-jumbo non-GSE eligible recorded a negative reading which means that more banks reported looser rather than tighter conditions.

Six of the seven categories of RRE loans showed a decrease in net tightening from Q1 2024 to Q2 2024, with the only exception being GSE-eligible which increased 1.8 percentage points.  The largest drop in the net tightening percentage occurred for Non-QM jumbo which fell 9.8 percentage points (pp) from 9.8% in Q1 2024 to 0% in Q2 2024.

All RRE categories reported net weaker demand in Q2 2024.  The survey has shown that banks have indicated weaker demand for at least 12 consecutive quarters for all RRE categories going back to Q2 2021 (Subprime leads all RRE categories at 16 consecutive quarters).

Commercial Real Estate (CRE)

Banks reported significantly tighter lending conditions for both multifamily as well as all CRE construction & development loans in Q2 2024.  However, both categories showed less net tightening than they did a quarter before, most noticeably multifamily falling 11.7 percentage points.  Nevertheless, it has been 10 consecutive quarters of tighter lending conditions for construction & development and 9 consecutive quarters for multifamily.

For multifamily, 17.5% of banks reported net weakening of demand for loans which is 16.4 percentage points lower compared to Q1 2024.  As for construction & development loans, 15.9% of banks reported net weakening of demand for loans which was little changed from the previous quarter.  Weaker demand has persisted for roughly the last two years for construction & development (10 consecutive quarters) and multifamily (8 consecutive quarters).

Special Questions

The Federal Reserve included a set of special questions this quarter which asked banks “to describe the current level of lending standards at your bank relative to the range of standards that has prevailed between 2005 and the present.”  Effectively, they are asking banks to think about the median lending standards over the last two decades and determine where do conditions today rank on this continuum.  On balance, banks indicated that the current level of lending standards is located at the tighter end of this range for all loan categories, including CRE and RRE loans.

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Home Sizes: Demand versus Supply

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The share of new single-family homes built in the 1,600-3,000 square-foot range closely matches the share of buyers who want homes of that size, according to recent surveys from NAHB and the U.S. Census Bureau. The surveys show that 21% of buyers want homes with 1,600 to 1,999 square feet, and 22% of new single-family homes started in 2023 have that much floor space. In the next tier up, 38% of buyers want homes with 2,000 to 2,999 square feet, and 40% of new single-family homes fall within that size range.

Results on the square footage buyers want in their next home were published in the 2024 edition of What Home Buyers Really Want, based on a representative sample of 3,008 recent and prospective home buyers conducted in 2023. The size of homes started comes from NAHB tabulation of the recently released 2023 data file from the Census Bureau’s Survey of Construction.

Outside of the 1,600-3,000 square-foot range, the match between what buyers want and what builders provide is not as close. While 26% of buyers want homes under 1,600 square feet, only 16% of single-family homes started in 2023 were that small. And while 22% of new homes have at least 3,000 square feet, only 14% of buyers are looking for homes that large.

Part of the reason for the apparent mismatch, of course, is that builders are compensating for the existing stock of housing, much of which was built decades ago when homes tended to be smaller. According to the latest American Housing Survey (funded by HUD and conducted in odd-numbered years by the Census Bureau), a full one-third of existing homes in the U.S. have less than 1,500 square feet of floor space. Moreover, the median size of an existing single-family detached home is 1,800 square feet, compared to 2,200 square feet for single-family homes started in 2023 and the 2,067 square feet that home buyers say they want in the NAHB survey.

In other words, the median buyer wants a home that is 133 square feet smaller than the median new single-family home, but still 267 square feet larger than the median existing single-family detached home.

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