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46 MISSING THE MARK Potential homeownership demand in 2018 increased by just 0.66% when compared to 2017, but the homeownership rate underperformed potential demand by 8.7%, according to the annual First American Homeownership Progress Index (HPRI). "e homeownership rate is influenced by shifts in underlying demographic and economic factors, as well as housing market conditions. Close examination of these underlying forces can provide a more in-depth look into the changes in the homeownership rate over time," said Mark Fleming, Chief Economist, First American. e HPRI reported that declines in unemployment rates, income growth, rising education attainment, and a higher share of married households all aided growth in potential homeownership. Factors that contributed to the decline of homeownership demand, though, included the number of children per household, and an increase in the 30-year fixed rate mortgages. "Historically, potential homeownership demand as measured by the HPRI has mostly outpaced the actual homeownership rate, meaning the actual homeownership rate should have been higher based on the lifestyle, societal, and economic trends influencing the demand for homeownership," Fleming said. "is was largely due to demographic trends as baby boomers settled down to form households of their own." Fleming added that there were a few distinct periods where the homeownership rate exceeded potential homeownership demand, according to the HPRI. "From 1984 to 1986 and again in 1992, the actual homeownership rate outperformed or equaled the potential demand, most likely as a result of innovations in mortgage finance, and the economic boom of the 1990s," he said. "e housing crisis is also an exception to this trend, where speculation, easy access to credit, and exuberance caused the actual homeownership rate to exceed potential demand as measured by the HPRI. e actual homeownership rate, even while it was falling, still exceeded potential homeownership demand by nearly 7% in 2010." e group mostly driving demand for homeownership in 2017 and 2018 was millennials (ages between 23-37). Fleming, though, added the lifestyle choices of millennials can help explain why the homeownership rate remained below potential demand. "Millennials are more diverse, more educated, and tend to marry later in life than previous generations," he said. "Many millennials have prioritized furthering their education, thus delaying getting married and having children, which are critical lifestyle triggers to buying a first home." FOREIGN BUYERS LESS CONFIDENT ABOUT U.S. HOUSING? A sluggish U.S. housing market and tighter currency controls by the Chinese government caused the dollar volume of homes purchased by foreign buyers from April 2018 to March 2019 to drop 36%, according to a report by CNBC. e information, released by the National Association of Realtors (NAR), added that the decline was due to a drop in the volume and average price of purchases. Foreigners bought 183,000 properties valued at $77.9 billion, which is down from 266,800 properties valued at $121 billion in the prior year. According to CNBC, foreigners paid an average price of $286,600 for properties, and while higher than the median for all existing homebuyers ($259,600), it is down from the average of $290,400 the previous year. "A confluence of many factors—slower economic growth abroad, tighter capital controls in China, a stronger U.S. dollar, and a low inventory of homes for sale— contributed to the pullback of foreign buyers," said Lawrence Yun, Chief Economist, NAR. "However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S." e Chinese were the leading buyers for the seventh-consecutive year, buying an estimated $13.4 billion in residential property, which is a 56% decline from the previous year. e recent political climate may also be causing the Chinese to pullback on U.S. real estate, with real estate agents in California reporting less demand from prospective Chinese buyers. "We call it the Trump effect. It's a combination of anti-Chinese political rhetoric, a clampdown on visa processing, and of course tariffs," Carrie Law, CEO and Director of Juwai.com, said in a recent interview with CNBC. "e Trump effect is undercutting some of the primary drivers of Chinese demand for U.S. property, including buying homes for foreign students in the U.S. and the country's reputation as a safe investment." Canadians purchased $8 billion worth of properties, and were followed by Asian Indians ($6.9 billion), United Kingdom buyers ($3.8 billion), and Mexican buyers ($2.3 million).

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