In this episode of the REconomy Podcast™, Chief Economist Mark Fleming and Deputy Chief Economist Odeta Kushi examine the demographic trends shaping homeownership demand, highlight the wealth-generating power of homeownership, and explain their cautious optimism ahead of the 2026 spring home-buying season. Despite affordability challenges and the ongoing rate lock-in effect, the underlying demand for homeownership remains structurally strong.
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“While affordability is stretched, we are seeing wage growth outpacing house price growth recently. So that is contributing to affordability improvements. And coming back to our earlier point, housing is cyclical, but demographics are structural.” — Odeta Kushi, Deputy Chief Economist at First American
Odeta Kushi - Hello and welcome to episode 136 of The REconomy Podcast, where we discuss economic issues that impact real estate, housing, and affordability. I’m Odeta Kushi, deputy chief economist at First American, and here with me is Mark Fleming, chief economist at First American. Hey Mark, I know it’s a little early for the spring buying season, but there’s no better time to talk about homeownership.
Mark Fleming - Odeta, are you already tired of all the cold and snow we’ve had here in DC? Are you trying to will the spring market into existence? If you build it, they will come.
Odeta Kushi - You’re not? Yes, good. I was waiting for the ‘80s reference. That didn’t take very long. But yes, I am trying to will spring into existence right now.
Mark Fleming - Well, I agree with you. I’m ready for it too. And, as far as the early reference, I do have a reputation to uphold after all.
Odeta Kushi - Yes, and you’re doing a great job at that. Today, we’re going to talk about what’s really happening with homeownership, how it’s measured, why there are so many misconceptions about it, whether young buyers are really locked out, and why homeownership still matters for wealth building.
Mark Fleming - All things near and dear to our homeownership-loving hearts.
Odeta Kushi - Yes, indeed. So, let’s start with the basics. Mark, how do we actually calculate the homeownership rate?
Mark Fleming - Such a great question. The homeownership rate is actually a pretty simple calculation. It’s the number of owner-occupied households divided by the total number of households, which includes both owned and rented units.
Odeta Kushi - And that denominator is actually really important because one of the biggest misconceptions coming out of the housing crash was that the decline in the homeownership rate meant everyone was losing their homes. In the fourth quarter of 2004, the homeownership rate reached a peak of 69.2 percent. By the second quarter of 2016, it had hit an all-time low of 62.9 percent.
Mark Fleming - Where are all the homeowners?
Odeta Kushi - Exactly. And did you notice those numbers are the same digits, just rearranged? Sixty-nine point two and sixty-two point nine. It’s easy to think that decline happened because the number of homeowners collapsed. But what actually happened was that rental household formation picked up over that same time horizon. The number of renter-occupied units increased by just over 30 percent, while the number of owner-occupied units declined by less than one percent.
Mark Fleming - Aha, I love a good statistical misconception. After the Great Financial Crisis, we saw a big increase in renter households. Millennials forming households, finally moving out of dorms and out of their parents’ homes, but renting first. So, the denominator, total households, was growing because renter households were increasing faster than owner households.
Odeta Kushi - And, of course, when that denominator goes faster than the numerator, the homeownership rate falls, even if the number of homeowners isn’t collapsing. Fast forward to today. In the third and fourth quarters of 2025, the homeownership rate has increased a bit from 65 percent in the second quarter of 2025 to 65.7 percent in the fourth quarter. Under the hood, the number of owned households is growing, while the number of rented households has actually declined.
Mark Fleming - So, composition matters. Now the rising homeownership rate is indicative of more homeowning households.
Odeta Kushi - Indeed. Now let’s tackle another hot topic. The age of the first-time home buyer. Yes, well, there have been lots of headlines about this recently. The National Association of Realtors reported a median first-time home buyer age of 40 in 2025. That’s up from 38 the year before. But here’s the nuance. Other large-scale data sources tell a slightly different story. According to the National Mortgage Database, which is based on millions of mortgage records—
Mark Fleming - Dun dun, cue dramatic music.
Odeta Kushi - the median age rose modestly from about 30 to 33 and then edged back down to 32 in 2025. Census-based estimates put it around 33, and the New York Fed’s consumer credit panel data shows a median age around 32 to 33 in recent years.
Mark Fleming - And I imagine here you’re going to tell me that the differences between sources depend on the methodology. Survey versus mortgage records. Definition of first-time home buyer. You can get very different answers.
Odeta Kushi - Exactly. Definitions matter. Some define a first-time home buyer as someone who hasn’t owned in three years. Others define it as never having had a mortgage at all.
Mark Fleming - So it may or may not be the case that first-time buyers are dramatically older than a decade ago. That conclusion depends on the source of the estimate. It’s possible, possibly not, that we are all turning into middle-aged first-time buyers. But instead, methodology matters.
Odeta Kushi - Right. And on the topic of first-time home buyers, the GSE first-time homebuyer share of purchase loans in October 2025 was 52 percent. I think that might surprise some folks. And it’s down from 55 percent in April of 2025, but still above the 50 percent threshold.
Mark Fleming - More than half of all purchase loans the GSEs have done were to first-time home buyers. But let’s be careful here. I presume the first-time home buyer share is calculated in a similar fashion to the homeownership rate. In other words, the number of first-time home buyer loans divided by all purchase loans, first-time and repeat buyers. So, is the rate slightly lower because of fewer first-time home buyers or because of more repeat buyers?
Odeta Kushi - That’s a great point. And again, composition matters. So since we’re on the topic of homeownership and age, let’s talk generations. Generational warfare, maybe. I don’t know. Because the assumption has long been millennials are the forever renter generation. But the data says otherwise. Sure, the 30-year-old millennial has a notable homeownership rate gap compared to Gen X and baby boomers at the same age. But, by their early 40s, millennials have largely closed the homeownership gap with Gen X at the same age. So, they delayed homeownership, but they didn’t deny it.
Mark Fleming - So, not out altogether, just late to the homeowning party.
Odeta Kushi - Exactly. And here’s a fun fact. Older Gen Zers are actually outperforming millennials at comparable ages when it comes to homeownership rates.
Mark Fleming - So Gen Z is actually saying, hey, hey, we understand the assignment. It’s a good idea to become a homeowner.
Odeta Kushi - Wow, that’s very 2020s of you.
Mark Fleming - I contain multitudes -- ‘80s references and Gen Z slang. That’s because I have Gen Z kids. There it is.
Odeta Kushi - There it is. The truth comes out. Well, Gen Zers are benefiting from a resilient and strong labor market these last couple of years, higher early-career wages in some sectors, and in some cases geographic flexibility. So, the generational story is not one of collapse. It’s one of delay and demographic momentum. Now, let’s answer the bigger question. Why does homeownership even matter?
Mark Fleming - It’s the primary driver of wealth creation in the United States, of course.
Odeta Kushi - Well done, but let’s break that down a bit. First, leverage. You can buy a home with as little as 5 percent down. That’s actually a myth buster for us. Most people think it’s necessary to put 20 percent down, but you can do it with as little as 5 percent. That’s 20-to-1 leverage. If home prices rise 5 percent, that’s a 100 percent return on your equity before transaction costs.
Mark Fleming - That’s not an endorsement of speculation at all. It’s just math.
Odeta Kushi - Right. Second is forced savings. Every month when you pay your mortgage, part of that payment reduces principal. So, you’re building equity whether you think about it or not. Renters can obviously build wealth too, but they have to deliberately invest the equivalent of a down payment and principal payments. Homeownership builds it into the structure.
Mark Fleming - And third is appreciation. We’ve talked a lot about this one. Over the long run, home prices do tend to rise and that creates equity gains simply by being the owner of the asset.
Odeta Kushi - With one very big exception. Just one notable exception in the Global Financial Crisis. Right. And fourth, it’s also an inflation hedge. With a fixed-rate mortgage, your largest monthly expense is fixed. If wages rise with inflation but your housing payment doesn’t, affordability improves over time. Certainly something to consider given the last few years of inflation.
Mark Fleming - Right, just one. About a decade or so ago, yes. And now we conclude our four-step journey. Don’t stop believing in homeownership.
Odeta Kushi - I stepped right into that. Also a bit of a stretch there, but you got it in.
Mark Fleming - It’s a strategy, but I’m trying to uphold that reputation.
Odeta Kushi - Moving right along. On the point of wealth creation, according to the 2022 Survey of Consumer Finances — and this is the latest available data, although we should be getting another one this year — the median homeowner has dramatically more wealth than the median renter. Thirty-eight times the household wealth of a renter. Over $396,000 for homeowners compared to about $10,400 for renters.
Mark Fleming - Pretty soon, yep.
Odeta Kushi - And, importantly, that wealth gap exists at every income level. For families in the bottom 20 percent of incomes, median net worth was nearly $147,000 for homeowners and only $3,400 for renters. In 2022, housing wealth represented on average approximately 75 percent of the total assets of the lowest-income households. For households in the middle of the income distribution, housing wealth represented between 48 and 74 percent of total assets.
But for households in the top 10 percent, that share was only 33 percent.
Mark Fleming - You know, it never gets old when I read those numbers — how huge the differences are between the wealth of renters and owners. It makes such a huge difference. And the lower the income of a homeowning household, the greater the share of its wealth comes from homeownership. This pattern has remained consistent over the last three decades, according to that consumer financial data.
Odeta Kushi - Absolutely. Which is why access to homeownership is not just about shelter. It’s about long-term financial resilience. And that’s why we talk about it so much.
Mark Fleming - That’s right. And we always emphasize renting versus owning is, first and foremost, a lifestyle decision.
Odeta Kushi - Right. First a lifestyle decision, and then you calculate the net present value of after-tax cash flows discounted at the homeowner’s required rate of return. Obviously. I have a spreadsheet if you need it. It’s in the contract.
Mark Fleming - Yes, of course. Doesn’t everybody? I mean, I knew that’s what you were going to say. We should clarify — we do, the two of us do. Whether anybody else does is a totally different story.
Odeta Kushi - Right.
Mark Fleming - Look, if you’re highly mobile, uncertain about how long you’ll stay somewhere, or prefer flexibility, then maybe renting does make sense, even with everything we just said.
Odeta Kushi - Of course. But, structurally, over the long run, homeownership has been one of the most reliable ways to build wealth in the U.S. So, with that, where does that leave us heading into this year’s spring market?
Mark Fleming - Yes, back to the beginning — wishing for that spring market. From everything we’ve said today, I think the homeownership story isn’t one of decline. It’s actually one of demographics. Affordability challenges, yes. Delayed, but not denied ownership.
Odeta Kushi - But of course, before you gloss it over in that list, we can’t talk about homeownership without acknowledging the elephant in the room: affordability.
Mark Fleming - Yes, that is a small detail right now.
Odeta Kushi - Right. Access to homeownership requires an affordable housing market. We do know that housing affordability improved year over year for the ninth consecutive month in November 2025, reaching its strongest level since the summer of 2022. But affordability is still more than 60 percent below its pre-pandemic five-year average. So, it feels like homeownership should be falling apart.
Mark Fleming - Mm-hmm. And yet, is it? Remember, more than half of all purchase loans made by Fannie Mae were to first-time home buyers at the end of last year, which tells you something important about demand for homeownership.
Odeta Kushi - Exactly. Housing demand didn’t disappear. It did get constrained. Affordability affects who can buy and when they can buy, but it doesn’t eliminate the underlying demographic need for shelter and ownership. We still have the largest generational cohort, the millennials, aging through their prime home-buying years. They’re in their early 40s. Household formation continues. Life events continue — marriages, children, job relocations. The desire for stability doesn’t go away because mortgage rates are higher.
Mark Fleming -But there is that little thing called the rate lock-in effect that we’re still dealing with.
Odeta Kushi - The now infamous rate lock-in effect. Yes, many existing homeowners have mortgage rates well below current market rates. That reduces resale supply because they’re financially disincentivized from moving. Fewer homes for sale means prices remain supported, even in a higher-rate environment.
Mark Fleming - Infamous. So, we have this interesting dynamic — in fact, probably the first time I’ve seen this in all the years I’ve been studying real estate markets — constrained supply, persistent first-time buyer demand, and affordability headwinds all interacting at once.
Odeta Kushi - Right. And here’s another important point. While affordability is stretched, we are seeing wage growth outpacing house price growth recently. So that is contributing to affordability improvements. And coming back to our earlier point, housing is cyclical, but demographics are structural.
Mark Fleming - That’s right. Cyclical headwinds can slow transitions, but structural demographic forces tend to win over the longer horizon.
Odeta Kushi - Which brings us back to our original point that the homeownership story today is not one of disappearance. It’s one of adjustment. Or as ‘90s rap reminded us, it was all a dream. Turns out the dream of homeownership is still very much alive.
Mark Fleming - Well, hold up. Biggie Smalls in an economics podcast. That’s nice.
Odeta Kushi - I’m just kind of impressed that you caught that, actually. I’m data-driven, but I make it lyrical.
Mark Fleming - I have no ‘80s rebuttal for this.
Odeta Kushi - And I will take the win and run with it. That is it for today’s episode. Thank you for joining us on this episode of The REconomy Podcast. If you have an economics-related question you’d like us to feature in the future, you can email us at economics@firstam.com. And, as always, if you can’t wait for the next episode, you can subscribe to our Econ Center at FirstAm.com/economics or connect with us on LinkedIn. Until next time.
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This transcript has been edited for clarity.