Journal of Real Estate Finance and Economics, 24:3, 261±276, 2002
# 2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
Regional and State Variation in Homeownership Rates;
or If California's Home Prices Were as Low as
Pennsylvania's Would its Ownership Rate be as High?
N. EDWARD COULSON
Department of Economics, Penn State University, University Park, PA 16802
There are signi®cant disparities in homeownership rates across the regions and states of the United States. The
causes of these disparities are determined within a standard probit model of the individual homeownership
decision where the micro-level observations are aggregated to the regional level. Factors which play a signi®cant
role at the individual level are evaluated for their ability to explain regional differentiation. The relative price of
owning and renting plays a major role as do other market level determinants. Individual demographic
characteristics are not as important with the exception of those related to the immigration and citizenship status of
the household head.
Key Words: US regions, homeownership rate
Table 1 displays mean values of some characteristics of a very large sample of households
responding to the March 1998 Current Population Survey (about which more later). The
®rst line of this table displays the well-known fact that there are substantial differences in
homeownership rates across the regions of the United States. The South and Midwest
regions have ownership rates of 67.2 percent and 68.8 percent respectively, while the
Northeast and West regions have substantially lower rates of 59.8 percent and 59.5
percent. The goal of this paper is to ®nd out why these regional (and brie¯y, state)
These gaps in regional homeownership are interesting in and of themselves, but have
policy rami®cations as well, because they can shed light on the ability of policy
instruments to raise ownership rates, particularly at the state and local level.
Homeownership is potentially an important component of social policy, particularly to
the extent that ownership engenders positive externalities in the form of social capital
(DiPasquale and Glaeser, 1999). If policymakers in the Northeast or West on that account
view the relatively low ownership rates in their areas with alarm, and wish to implement
policy to raise them and the social capital in their areas, it is important to determine
precisely why ownership in those states is lower than it is in other states. This is not
possible given the methods of previous research.