Hispanic Households Will Lead New Homeownership Growth
New U.S. Mortgage Report Shows Hispanic Households Will Lead New Homeownership Rates of Growth More Than Any Other Demographic Group. Census Information and Urban Institute Studies Support Findings.
As we celebrate Hispanic Heritage Month, U.S. Mortgage Insurers outlined how the Hispanic population has been a major contributor to homeownership growth in the U.S. and is poised to be a leading driver of homeownership for the next four decades. In fact, between 2020 and 2040, Urban Institute predicts that 70% of new homeowners are going to be Latino (Goodman and Zhu, Number).
Growth in this country is being driven by non-white individuals. The 2021 census figures confirm that while the share of white population dropped roughly 10% to 57.8%, the Hispanic share of the population is up roughly 15% to 18.6% total. Indeed, millennials under the age of 30 in 2015 were projected to form “23 million net new households between 2015 and 2025, with 72 percent of household growth overall expected to be non-white households” (McCue and Herbert). Young Hispanic households will account for the largest household growth in the coming decades. In fact, while the overall rate of homeownership will decline, primarily for white or aging buyers, all new growth will come from people of color (Goodman and Zhu, Future).
“72 percent of household growth overall expected to be non-white households”
Yet, as of 2020 the gap between Latino and white homeownership rates remains a staggering 27% (Reducing). And median household income lags 26% lower than white households (Persaud). Even as the Hispanic population grows and begins to enter the housing market, challenges to homeownership persist. Hispanic buyers often have lower incomes, parental wealth, and credit scores and larger, multi-generational families compared to white buyers. Hispanic buyers have also been harder hit by the Covid-19 pandemic experiencing higher rates of job and income loss than whites making it harder to pay off debt, rent or to save for a down payment. Finally, the lack of affordable inventory and tighter credit restrictions leaves few options for purchase while making rental housing more expensive (Goodman and Zhu, Number).
So, what can we do to prepare for and support the wave of potential Hispanic homeowners? Policy makers have introduced a variety of legislative measures that address barriers to homeownership from tight supply to down payment assistance to lending reform. The IIJA, ARPA, and LIFT proposals, among others, will increase access to quality, safe, affordable housing; create gap and subsidy financing to offset high construction costs or appraisal gaps; provide housing counseling and buyer education; and expanded access to loan programs that boost affordability and build equity.
We must be diligent and collaborative in outreach campaigns at all levels of government and in the community to ensure program visibility so that all potential buyers understand the basic facts of homeownership and the programs available to make it possible. Additionally, we must rethink how we qualify future Hispanic buyers and other demographics of color. It’s time to update credit scoring models to take rental payment history, self-employment earnings, and supplemental income sources for multi-generational households into account. But increasing access to credit and capital means little without a supply of affordable inventory. Builders and developers must partner with municipalities to reconsider zoning requirements, gap financing, construction materials, and new technology to increase accessibility while bringing down costs to meet the needs of the five million Hispanic buyers poised to enter the real estate market.
Goodman, Laurie, and Jun Zhu. “The Future of Headship and Homeownership.” Urban Institute, Urban Institute, 22 Jan. 2021, www.urban.org/research/publication/future-headship-and-homeownership.
Goodman, Laurie, and Jun Zhu. “The Number of Hispanic Households Will Skyrocket by 2040. How Can the Housing Industry Support Their Needs?” Urban Institute, Urban Institute, 25 Feb. 2021, www.urban.org/urban-wire/number-hispanic-households-will-skyrocket-2040-how-can-housing-industry-support-their-needs.
McCue, Daniel, and Christopher Herbert. “Projection: US Will Add 25 Million Households by 2035.”Projection: US Will Add 25 Million Households by 2035 | Joint Center for Housing Studies, 3 Jan. 2017, www.jchs.harvard.edu/blog/projection-us-will-add-25-million-households-by-2035.
Persaud, Navi. “U.S. Mortgage INSURERS: Hispanic Population Key Component of Homeownership Growth.” National Mortgage Professional Magazine, National Mortgage Professional, 16 Sept. 2021, nationalmortgageprofessional.com/news/us-mortgage-insurers-hispanic-population-key-component-homeownership-growth.
“Reducing the Racial Homeownership Gap.” Urban Institute Housing Finance Policy Center, Urban Institute, 6 Dec. 2020, www.urban.org/policy-centers/housing-finance-policy-center/projects/reducing-racial-homeownership-gap.