The third quarter 2019 Financial Accounts of the United States, the Federal Reserve’s flow of funds data, show the aggregate values of households’ assets and liabilities in the nation. Households’ real estate assets totaled $29.2 trillion and liabilities totaled $10.5 trillion, making homeowners’ equity $18.7 trillion or 64% of total household real estate.

The data show a continuation of the decrease in the quarterly growth rate of the market value of real estate assets that began in the second quarter of this year. In the latest quarter, households’ assets grew at less than half of a percent (0.3%) while in the second quarter of 2019, assets grew at approximately 0.4%.

These reduced growth rates stand in contrast to those exhibited over the last seven years, which revealed 1- to 2 1/2 % quarterly rates. This deceleration reflects the housing slowdown that affected the market at the end of 2018 and the start of 2019, but that slowdown has now ended.

Households mortgages have been growing slowly, at less than 1% every quarter. On a policy level, the Federal Reserve had expressed interest in engineering a “soft landing” in Wednesday’s Federal Open Market Committee meeting, where, after three rate cuts (signifying a mid-cycle adjustment), it decided not to change rates. Inflationary pressures have not been significant and persistent enough for rate hikes to continue, according to Fed Reserve Chairman Jerome Powell. The developments in households’ market values will be one of many measures for the Fed to consider in making its next policy moves.

Prices paid for goods used in residential construction declined 0.4% in November (not seasonally adjusted) according to the latest Producer Price Index (PPI) released by the Bureau of Labor Statistics.

Building materials prices have declined an average of 0.1% per month over the last 12 months, and the price of goods used in residential construction has risen 1.3% in 2019. Not only is that price growth roughly one-third the pace of increases in 2018 (+3.8% YTD), it is the slowest year-to-date growth in four years. In 2015, the price index of goods used in residential construction declined 0.8% between January and November.

The PPI report shows that softwood lumber prices increased 3.5% (seasonally adjusted) in November. The index for softwood lumber has risen 7.7% over the prior three months and now stands at its highest level since September 2018.

The price index for gypsum products increased 1.1% in November after advancing 1.4% in October (seasonally adjusted). Gypsum products prices declined by 9.6% over the first six months of 2019 but have increased 5.7% since. Even after accounting for the recent increase, however, prices remain slightly lower than they were at the start of 2018.

Prices paid for ready-mix concrete (RMC) decreased 0.7% in November (seasonally adjusted) after climbing 0.1% in October (seasonally adjusted). RMC prices have risen 3.1% year-to-date after increasing by only 2.0% YTD by November 2018.

The regional indexes for the Midwest (-1.0%) and South (-2.3%) regions declined in October, while prices rose by 1.5% and 1.3% in the Northeast and West regions, respectively (not seasonally adjusted).

A recent NAHB Special Study uses the National Longitudinal Survey of Youth (NYLS) to study lifetime homeownership rates and how long individuals sustain in homeownership. The study finds a lifetime homeownership rate of 90.5% among the 1979 NLSY cohort, meaning that most people become homeowners at some point in life (Figure 1). This finding is a reminder of the importance of homeownership in terms of wealth accumulation and as a common aspiration among Americans.

Lifetime Homeownership Rates

Conducted by the US Bureau of Labor Statistics, the NLSY tracks the labor market activities and significant life events of surveyed individuals over time, starting in 1979 (when most were between the ages of 17 and 21) to 2016, the most recent year of data collection.

In contrast to the homeownership rate, which measures homeownership at a specific point in time, the lifetime homeownership rate, measures whether someone has been a homeowner at any point in their life. Studying the lifetime homeownership rate is useful as it captures people who move in and out of homeownership over time for various reasons. The NAHB special study approximates the lifetime homeownership rate by examining whether an individual in the NLSY 1979 cohort has been a homeowner at any point between 1980 and 2016.

Almost all of the NLSY 1979 sampled individuals have become homeowners at some point, but looking at differences by race and ethnicity shows that white individuals[1] have a higher lifetime homeownership rate (93.9%) than Hispanics (87.8%), and blacks (74.5%). The study also shows that individuals with mothers who have a high school degree or higher (92.7%) have a slightly higher lifetime homeownership rate than mothers who have less than a high school degree (88.5%), or who never attended high school (86.2%) (Figure 1, click through slideshow for other figures).

Homeownership Survival Rates

Using the NLSY also allows for the study of homeownership duration, or in other words, the shares of homeowners who remain in homeownership over time (Figure 2). Figure 2 shows the shares of individuals who have survived in homeownership by the year in which homeownership was first detected.

One finding from Figure 2 is that survival rates gradually improve as the NLSY cohort ages into their 30s. For example, those who start homeownership in 1980 are 23 at most in the sample, and just over half — 53% — survive in homeownership after eight years (1988). This is compared to an 88% survival rate after eight years among those who started in 1992 and who are mostly in their mid-30s.

Another observation is that survival rates begin to fall after the 1992 start year, and the curves are particularly steep for the 2004 through 2012 start years. This is most likely the impact of the Great Recession. Groups that entered homeownership just prior to the Great Recession were most likely negatively affected as they bought homes at peak home prices and had less opportunity to build equity in their homes before the downturn, compared to groups that entered homeownership at earlier dates.

For more information on NLSY 1979 lifetime homeownership rates and survival rates, including homeownership survival rates by race and ethnicity, please click here to access the NAHB Special Study.

[1] The NLSY codes uses three race/ethnicity codes: black, Hispanic; and non-black/non-Hispanic. NAHB analysis of the 2017 American Community Survey (1 year) shows that a majority of non-black, non-Hispanic homeowners – 83 percent — are white. Therefore, for the purposes of this survey the non-black, non-Hispanic homeowners will be referred to as white homeowners.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.3% in November on a seasonally adjusted basis, following a 0.4% increase in October. Excluding the volatile food and energy components, the “core” CPI increased by 0.2% in November, the same increase as in October.

In November, increases in the food and energy indexes contributed to the overall increase in the CPI. The food index increased by 0.1% in November, after a 0.2% increase in October. The indexes for food at home and food away from home increased over the month. Meanwhile, the price index for a broad set of energy sources rose by 0.8% in November, after a 2.7% increase in October. The major energy indexes, such as the indexes for gasoline, fuel oil, electricity and utility gas service, all increased in November.

Over the past twelve months, on a not seasonally adjusted basis, the CPI rose by 2.1% in November, faster than a 1.8% increase in October. It was the largest gain since November 2018 on a year-over-year basis. Meanwhile, the “core” CPI increased by 2.3% over the past twelve months, the same increase as in October. The food index rose by 2.0%, and the energy index declined by 0.6%.