Mortgage Market Update

California’s homeownership rate falls again — with the sharpest drop among younger adults

Californians in their late 20s and early 30s own homes at half the rate as their peers outside the state. That’s one of the key takeaways in a new UC Berkeley research paper which chronicles the state’s continued decline in homeownership among all age groups, especially younger adults.

The state’s homeownership rate for people aged 25 to 75 dropped to 43.5% in 2021, down from nearly 50% in 2000, the paper found. By comparison, homeownership in the rest of the United States is nearly 60%.

The decline was more pronounced among younger Californians aged 35 to 45, who saw homeownership drop 10 percentage points to less than 40%.

Even younger Californians aged 25 to 35 saw their homeownership rate fall to 15%, down from 25% two decades earlier.

Meanwhile, nearly 31% of their peers of the same age in the rest of the United States owned homes, the research paper found.

“Homeownership is falling [in California] in every subset of the population that you choose,” said Issi Romem, who co-authored the report for UC Berkeley’s Terner Center for Housing Innovation. “It’s falling for every age group, every education level, with or without college, every racial or ethnic group you can name, people with kids, people without kids — they’re all losing ground.”

Researchers found about half the decline in homeownership can be attributed to Californians choosing not to buy a home, whether because they preferred renting or because they stayed in college longer or had children later in life.

What caused the rest of the decline? A drop in Californians’ financial ability to buy a home, researchers said.

Romem says reversing the trend will require cities and counties to build more housing in existing neighborhoods, including in expensive coastal metros, where there’s a severe lack of affordable housing. He said local governments should loosen zoning rules in those areas to allow higher density “missing middle” housing, such as duplexes and fourplexes. Those could offer younger Californians the option to buy a more affordable home.

“We can’t remain in a world where single-family homes are holy and those neighborhoods can’t be touched,” he added. “We’ve got to start tearing things down and building stuff again.”

Connor Finney, a 29-year-old renter in Sacramento, says there simply aren’t enough affordable homes in the Capital City. He made offers on several homes last year, with the hopes of settling down and starting a family. But he says he was outbid every time.

Then mortgage rates jumped, driving up the cost of homebuying even further, convincing Finney to put his dream of homeownership on hold.

“I think a lot of people my age have experienced a kind of arrested development,” he added.

While Finney says he’d ideally like to buy a single-family home or condo in central Sacramento, Alicia Mendez Casas took a different approach in her home buying journey.

The 24-year-old recently bought a 3-bedroom home in Plumas Lake in Yuba County, about 30 miles north of Sacramento. She and her boyfriend wanted a starter home with a big backyard, but couldn’t find anything within city limits that fit their budget.

“We wanted to take the next chapter in life,” said Mendez Casas, who works for an affordable housing nonprofit in Natomas.

She added that she’s happy with her choice to buy a home outside Sacramento.

Finney, who works for the state’s housing agency, says public involvement is crucial to convincing cities to allow for more affordable types of housing.

Researchers like Romem agree. They say those are needed if young Californians are going to buy homes in this state.

Finney says he’s not sure he ever will.

“If things do continue to spiral out of control, house price-wise,” he adds, “I think I would probably make some difficult choices and consider leaving the state entirely.”

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