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Booming Hispanic homeownership helping fuel U.S. housing market

How will the housing industry react to this demographic shift?

New home construction in Wilmington, North Carolina
John Greim/LightRocket via Getty Images

For years, the myth of easy, accessible American homeownership and upward mobility—the caricatured image of white picket fences, suburban living, and keeping up with the Joneses—has needed a refresh in light of post-recession realities and the affordability crisis. But, with looming demographic shifts poised to change the U.S. housing market, it’s time for another change in popular perception.

The typical American homebuyer, like much of the rest of the country, is increasingly young and Hispanic. According to statistics from the 2016 State of Hispanic Homeownership Report, jointly released this May by the Hispanic Wealth Project and the (NAHREP), the U.S. is in the midst of a Hispanic homeownership surge. Since 2000, Hispanic households have increased by 6.7 million, representing 42.5 percent of the nation’s overall household growth, a trend only expected to accelerate. Latinos are expected to make up 52 percent of new homebuyers between 2010 and 2030, fueled in large part by the nation’s 14.6 million Latino millennials and growth in the increasingly diverse suburbs.

Growth in Hispanic homeownership is having an increasing impact on U.S. housing.
National Association of Hispanic Real Estate Professionals

At a time when homeownership hovers near a 50-year low, more than 330,000 Hispanics formed new households last year. This is happening despite a low rate of inherited wealth in the Hispanic community, a shortage of low-cost housing options, and higher-than average loan refusal rates among potential Hispanic homeowners. Demographers note that high workforce participation and the “fervent desire to own a home” have driven growth in Latino home buying.

“With credit remaining tight and limited housing inventory in several markets, these numbers are extremely encouraging and a testament to the economic resilience of the Hispanic community,” said 2016 NAHREP President Joseph Nery. Real estate analysts see this market as one of the potential growth engines for the American housing and real estate industries.

“The fact is the majority of Latinos want to be home owners and will make up half of all new home buyers in the next 20 years,” Scott Astrada, director of federal advocacy at the Center for Responsible Lending, told NBC. “They have a central place in the housing market and finance system.”

Many reports show this demographic playing an increasingly larger, and in some ways outsized, role in the U.S. economy. The most recent “State of the Nation's Housing" study from the Harvard University Joint Center for Housing Studies (JCHS) predicts minorities will fuel for three-quarters of the gains in U.S. households, with Latinos accounting for one third of these gains. It’s a symbol, perhaps, of the economic strength of Hispanics, which make up 17 percent of the U.S. population. According to the U.S. Bureau of Labor Statistics, Hispanics accounted for 76.4 percent of the growth in the country’s labor force between 2010 and 2016, made up 20.8 percent of new entrepreneurs in 2015, according to the Kauffman Foundation, and started almost a million new, Latino-owned businesses between 2012 and 2016.

While it may not come as a surprise that Hispanics will represent the largest segment of the Texas population by 2020, according to state data, and will be the prime source of population growth in both the Lone Star State and California, Latino populations are also on the rise all across the country. Many of the fastest-growing Hispanic communities can be found across the South, in areas such as Russell County, Alabama, and Bryan County, Georgia. Even North Dakota, not a traditional center for Hispanic migration, has four of the top ten fastest-growing Hispanic populations in the country, according to Pew Research.

National Association of Hispanic Real Estate Professionals

The rising number of Hispanic homeowners face many of the same challenges as other Americans looking to buy a home and achieve the American dream. Trends aren’t favoring first-time buyers and those looking for affordable housing: nationally, the number of single-family homes on the market has declined for 21 straight months, the National Association of Realtors says the nation is short 3 million housing units, and, according to NAHREP research, inventory in the bottom- and middle-value tiers in metropolitan areas shrank by more than 38% from 2010–2015.

But they also face many unique hurdles. The growing number of Latino millennials have fallen behind their peers when it comes to owning a home: 51 percent of non-Hispanic whites versus 27 percent of Latinos own a home, according to research by Young Invincibles. The Great Recession also had an outsized impact on this demographic’s savings, wiping out two-thirds of Latino wealth, according to Pew Hispanic (this was due primarily to a disproportionate number of Hispanics living in areas at the “vanguard of the housing meltdown”). In California, Hispanics face home prices relative to incomes that are approximately twice the national average.

According to Astrada, it’s important that this gap is overcome and Latino millennials see an increase in buying power and potential. Otherwise, it might "jeopardize the housing market and everything tied to it — economic security, wealth building and all that that entails.”

This is an increasingly important issue in many of the nation’s hottest housing markets: fewer than 20 percent of existing homes for sale in markets such as Dallas, Denver, Phoenix, and Nashville are considered affordable, according to JCHS stats. And historically homeownership, and home equity, has been representative of overall economic mobility and equality: According to a New York Times report, in 2011, the median white household had a net worth of $111,146, compared with $8,348 for the median Hispanic household. While the homeownership gap between Hispanics and white people has narrowed, it was still at 26 percent in 2015.

How can the industry support and cultivate this new generation of homebuyers? According to NAHREP, the industry could begin by addressing the shortage of “culturally competent” real estate and mortgage professionals. A lack of Hispanic professionals in these industries, as well as additional Spanish-speaking staff and agents, adds to the challenge facing first-time Hispanic buyers. Just 4 percent of mortgage professionals and 7 percent of real estate agents in the U.S. are Hispanic, while 25 percent of Hispanic buyers say they prefer working with someone who can offer assistance in Spanish.

These buyers would also benefit from expanding access to affordable lending products with low down payment requirements. Expanding access to credit would also provide a boost: last year, Hispanics were denied loans at a rate of 17.3 percent, nearly 9 percentage points higher than the denial rate for non-Hispanic whites.

In addition, NAHREP suggests that deportations and immigration policies have a potentially detrimental impact on the Hispanic housing markets, and increasingly, the housing market as a whole. A joint study by Brigham Young University and Cornell University linked deportations to increased foreclosure rates among Hispanic households, suggesting that aggressive immigration enforcement may have an impact on foreclosures and the health of regional housing markets.

Another key issue, affordability, depends in part on the supply of new homes, and with undocumented workers making up a large portion of the construction industry—15 percent according to Pew Research Center data—deportations may make this important labor pool even more shallow. Seeing that the country is already facing a shortage of construction workers, increased deportations may cause even more short-term labor issues.