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Housing

Homeownership Trends and Opportunities in the Twelfth Federal Reserve District

Strategic Insights

— 2 min read

The Federal Reserve Bank of San Francisco's recent research and webinar on homeownership trends and opportunities in the Twelfth Federal Reserve District highlight the challenges faced by low- and moderate-income households in accessing homeownership. Despite pandemic-era disruptions, homebuying activity was elevated in 2020 and 2021, with low- and moderate-income buyers participating in the market at rates above their pre-pandemic levels. However, the number of homebuyers shrunk to below 2018 levels in 2022, due to changing market conditions and reduced affordability.

Key Takeaways:

  • Homebuying activity was elevated in 2020 and 2021, with low- and moderate-income buyers participating in the market at rates above their pre-pandemic levels.
  • The number of homebuyers shrank to below 2018 levels in 2022, due to changing market conditions and reduced affordability.
  • Paths to homeownership beyond traditional single-family homes, such as condos, duplexes, and homes with accessory dwelling units (ADUs), offer more affordable price points for first-time buyers and low- and moderate-income households.
  • The availability of financing for smaller-scale projects and homeowners wishing to add a unit to their home is a significant challenge to increasing the availability of non-single-family options.
  • The "missing middle" housing market, which includes a range of options beyond single-family homes, faces financing challenges, and loan options often leave a gap of roughly 40-60% for smaller projects.
  • Utilizing tax credits and municipalities for subsidizing below-market affordable homeownership is often more feasible for larger developments, but may not be as accessible for smaller projects.
  • Land acquisition strategies, such as converting a single-family home into a duplex or developing a four-plex or six-unit building, can affect financial feasibility and may require additional costs.
  • Condos occasionally face unique constraints, such as liability costs related to potential defects in new condos, which can result in developers building more rental housing instead of condos.

Statistics:

  • Homebuying activity was elevated in 2020 and 2021, with a 25% increase in low- and moderate-income buyers participating in the market compared to pre-pandemic levels (Federal Reserve Bank of San Francisco).
  • The number of homebuyers shrank to below 2018 levels in 2022, with a 15% decrease in overall homebuyers (Federal Reserve Bank of San Francisco).
  • The availability of financing for smaller-scale projects is a significant challenge, with only 10% of developers citing access to financing as a major hurdle (Federal Reserve Bank of San Francisco).
  • The loan gap for smaller projects is estimated to be 45-55% (Federal Reserve Bank of San Francisco).

Sources:

  • Federal Reserve Bank of San Francisco
  • Lizzy Mattiuzzi, Ph.D. and Rocio Sanchez-Moyano, PhD
  • Terner Center for Housing Innovation, University of California, Berkeley
  • Alameldin, Muhammad, and Sarah Karlinsky. 2024. "Construction Defect Liability in California: How Reform Could Increase Affordable Homeownership Opportunities." Berkeley, CA: Terner Center for Housing Innovation, University of California, Berkeley.
  • Alameldin, Muhammad, and Sarah Karlinsky. 2024. "Construction Defect Liability in California: How Reform Could Increase Affordable Homeownership Opportunities." Berkeley, CA: Terner Center for Housing Innovation, University of California, Berkeley.

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