Homeownership Rates Are Plummeting For Younger Californians (And No, It’s Not About Delayed Marriage)

Young Californians won’t be surprised to hear that homeownership rates are declining in their age group. Now a new study finds that on average, it takes longer to become a homeowner in California than in any other state.

The point when half of Californians at any given age become homeowners is 49, according to the study by UC Berkeley’s Terner Center for Housing Innovation. That exceeds other expensive states like New York (46), and it’s much higher than many of the states Californians have been flocking to, such as Texas (37) and Arizona (35).

The study finds that in 1980, almost two-thirds of Californians aged 35 to 45 owned a home, but only 40% of residents in that age group owned a home in 2021.

The same trend is happening among younger age groups. About 40% of Californians aged 25 to 35 owned a home in 1980, but only 16% in that age group own homes today.

Terner researcher and study co-author Issi Romem said after careful analysis of home-buying affordability trends, he and his colleagues concluded that declining homeownership in California is driven more by skyrocketing home prices than decisions to delay marriage or childbearing.

“About half the difference in the homeownership rate between California and the rest of the country corresponds to just the difference in the financial ability to afford a home, as opposed to people's choices,” Romem said.

In other words, yes, younger generations are less likely to get married, and they’re having fewer kids. But those trends don’t fully explain California’s shift toward long-term renting. If California home prices had risen in line with prices nationally since 2000, there would be around 735,000 more Californians who could afford to buy a home today, the researchers estimate.

Homeownership has declined for Californians of all ethnicities, but the decline has been stark for households of color. Four decades ago, about half of Black Californians between the age of 35 and 45 owned their homes, but today only 23% are homeowners. Economists say this raises major equity concerns, because mortgages help families build wealth over time.

What should be done to address the problem? Romem said the first step is to build lots of new housing across the state.

“Point number one is: Build more at all price levels,” he said. “That's the single big thing we need to do.”

State lawmakers have also begun exploring ways to provide home-buying assistance, such as the California Dream for All program, which gives first-time buyers money to purchase homes in exchange for allowing the state government to share in the home’s appreciating value over time.

But so far, that experiment hasn’t benefited all parts of the state equally. The California Dream For All’’s first round delivered more money to applicants in Sacramento than Los Angeles County, a region with six times the population.

The report said home-buying assistance programs won’t solve California’s supply and demand imbalances, but they could help to correct home-owning disparities between white residents and Californians of Black, Indigenous, Latino and Asian descent.