Homeownership rate in the U.S. is lower than you think, new research finds

Zoom out: The findings show "that younger people are having an even harder time buying a house than traditional data would suggest," per a note about the findings from housing policy analyst Jaret Seiberg at TD Cowen.

By the numbers: The new measure, calculated by the Federal Reserve Bank of Minneapolis, finds that only about 53% of American adults own their own homes — not the commonly cited homeownership rate of 65% calculated by the Census Bureau.

• For adults under age 35, it's bleaker: Only 22% are homeowners under the new measure, compared with 37% under the traditional one.

Friction point: The difference has to do with the way the Census Bureau measures homeownership. Basically, it counts homes instead of people, asking: Does the owner live in the house?

• That means an owner-occupied house counts the same whether it contains one homeowner or a homeowner plus several adult children, parents, relatives or roommates.

How it works: Instead of looking at home occupancy, the researchers counted the share of those 18 and over who own their home. (They call this the "homeowners-to-population ratio," or HPOP.)

• Those who count as homeowners: the head of an owner-occupied household, including their spouse or unmarried partner.
• Those who don't: other adults in the house, including adult children, parents, relatives, friends or roommates.

"It's not that the old measure was doing anything wrong, but you had to know what it was doing to interpret it correctly," says Erik Hembre, a senior economist at the Minneapolis Federal Reserve who coauthored the research.

• "I think this is more aligned with what people have in their mind when we talk about the homeownership rate."

Zoom in: 14% of adults in the U.S. live in owner-occupied homes, but are not themselves homeowners, per the research.

• "In other words, more than one in eight of the nation's adults are misrepresented in the most-cited statistic on homeownership," the Minneapolis Fed economists wrote.
• The biggest adjustment comes from accounting for adult children who live at home. That lowers the rate by 8.6 percentage points, the authors calculate.

Between the lines: The U.S. is often described as a nation of homeowners — and certainly tax policy is written to benefit those with homes.

• But the new measure complicates that understanding: Barely half of adults count as homeowners.

The intrigue: In every state, the new measure shows that homeownership is lower.

• States with some of the country's highest costs have the lowest adjusted homeownership rates: California's adjusted rate is 41.2%; Hawai'i's is 42.7%, and New York's is 43.3%.
• The most "obvious explanation," the authors wrote, is that "in places where housing is cheaper, more adults are buying their own homes."

Yes, but: Some people choose to live in multigenerational households. Parents may want to give their adult children some time to save up for their own home or prefer living with others to defray costs.

• The traditional measure is also useful when you just want to understand owner occupancy rates.

What to watch: TD Cowen's Seiberg says the new measure might come up next year when Congress looks to do more on housing.

• The Minneapolis Fed's analysis could be used to justify programs that boost the supply of homes or offer down payment assistance for first-time buyers, he wrote.

The bottom line: The housing affordability crisis is actually worse than it seems.