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Has homeownership been inflated? The role of variable household formation in distorting homeownership rates between groups and over time

Dowell Myers and Zhou Yu
Conventional definition of homeownership is based on the share of households, which ignores the variable effects of household formation. We study whether such omission leads to a distorted assessment of trends and differentials in homeownership. In the 1990s, many groups experienced a decline in household formation, which indirectly elevated the overall homeownership rate by removing renters. Moreover, Asians have very low household formation but high homeownership rates, which are in contrast to Latinos and African Americans. We find that higher homeownership rates for Asians stems from their suppressed level of renter household formation and their greater share of adults not forming households. The overall conclusion is that, without accounting for household formation, current measures of homeownership are a deficient indicator of housing success.