Hispanics could drive homeownership rate for years

The homeownership rate among the Hispanic population continues to outpace homeownership rate growth among all other ethnicities – a growth that could drive the housing market for years. 

 

The overall homeownership rate in the U.S. in the first quarter of 2019 was 64.2%, according to the latest data from the U.S. Census Bureau. Non-Hispanic Whites make up the majority of homeowners by far with a homeownership of 73.2%. Other minorities come in much lower with a homeownership rate of 41.1% for Blacks and 47.4% for Hispanics. 

 

But change is on the horizon for these dynamics as the Hispanic population increases its homeownership rate each quarter, growing 3.3% since hitting its 50-year low back in 2015. In fact, while Hispanics make up 18% of the total U.S. population, they made up about 63% of new homeownership gains over the past 10 years, according to the National Association of Hispanic Real Estate Professionals.

 

In 2018, Hispanics gained 362,000 homeowners, increasing their homeownership rate from 46.2% to 47.1%. For the fourth consecutive year, Hispanics were the only ethnic demographic to increase their rate of homeownership.

 

The Urban Institute projects that Hispanic will account for more than half of all new homeowners over the next several years, and for 56% of all new homeowners by 2030. 

 

Income gains

 

An article by Laura Kudisto and Ben Eisen for The Wall Street Journal explained that Hispanic homeownership gains occurred as the group saw increases in income and education.

 

Back in 2017, Hispanic household incomes stood out from other Americans as they rose for a third straight year.

 

The median income for Hispanic households increased by 3.7% in 2017, the most current data available, to an annual income of $50,486, according to the U.S. Census Bureau. This is up significantly from the average increase of 1.8% for all households.

 

And as of 2017, 32.4% of Hispanic households have a median income of at least $75,000 or more. Of course, there is still plenty of room for growth. While Hispanic incomes are rising, they still count for a disproportionate percent of several occupational categories. 

 

Hispanics count for 17% of the total U.S. employment population, but make up 53% of painters, construction workers and maintenance; 51% of agricultural and 49% of maids and housekeeping cleaners. But helping their income is the population’s labor force participation rate – at 66.3%, it is higher than any other U.S. racial or ethnic demographic. 

 

Hispanics also believe their income is a major factor keeping them from getting approved for a mortgage. When asked, Hispanics reported their greatest obstacles are insufficient credit score, the ability to afford a down payment and insufficient income for monthly payments, according to the 2018 State of Hispanic Homeownership report from NAHREP. 

 

Population and household formation

Income is a major factor in determining if one can buy a home, but another great factor is life events. Economists agree that major life events is one of the top factors that determines when a population will buy a home. Things like marriage and having children are some of the greatest influencers of one’s decision to buy a home. 

 

For example, delayed marriage and waiting to have children are two of the top five reasons the Urban Institute cites for why Millennials are delaying buying a home.

 

In 2018, Hispanics formed 485,000 new households, accounting for 32.4% of total U.S. household formations, according to NAHREP’s report.

 

And this trend isn’t expected to die out anytime soon. Harvard’s Joint Center for Housing Studies projected Hispanic households will increase by 4.6 million between 2015 and 2025, outpacing that of overall U.S. household growth. 

 

Hispanics are also seeing significant growth in their share of the total U.S. population. At 58.9 million, Hispanics make up 18.1% of the U.S. population. And from 2016 to 2017, this demographic increased by 1.5 million – about half of the total U.S. population growth for this time period. In fact, Hispanics are the largest ethnic minority in the U.S., and have accounted for more than half the total population growth since 2000.

 

The population isn’t just growing because of new household formation and children being born – although this does count for a large portion. Hispanics of Mexican origin are also the largest immigrant group in all but 19 states, according to NAHREP’s report. While the Hispanic immigrant-origin communities are important segments of the population, more than two-thirds of all Hispanics are U.S. citizens

 

And to put this growth into perspective, if the Hispanic population continues to grow at this rate, by 2045, non-Hispanic Whites will shrink to just 49.7% of the population, and will no longer be the majority population in the U.S.

 

But it is a young population with a median age of just 28.7 years, compared to non-Hispanic Whites, whose median age is 43.2 years. In 2016, one out of every three Hispanics was less than 18 years old, according to NAHREP’s report, and one out of every six was under the age of 35.

 

So while most of the whites have already bought their home and could even be looking to buy their second or third home, many Hispanics are just reaching, or will soon reach, the prime first-time homebuyer age.

 

The opportunity

 

With Hispanics accounting for so much of today’s homeownership rate growth, and set to only increase their influence in the coming years, it is important that lenders are prepared to reach this growing demographic. 

 

But how?

 

There are several steps lenders can take when trying to reach the Hispanic population. A survey conducted by NAHREP found that 59% of Hispanics feel advertising is meant for them when it reflects their cultural values, 52% said when it includes people who look like them and a full 61% said when it recognizes their cultural background. 

 

In order to truly reach the Hispanic population and meet their needs, it is helpful to diversify staff.

 

When it comes to language, 81.5% of Hispanics speak English well to exclusively, irrespective of their immigrant status. In fact, even among foreign-born Hispanics, 34.8% speak English very well or exclusively. 

 

NAHREP explained that in-language advertising content might appropriately target Hispanics without English fluency, who may or may not be adequately positioned for an upcoming homeownership opportunity.

 

However, as many Hispanics could prefer English to Spanish, NAHREP explained that in-culture advertising content can be more persuasive at times than in-language content. While 61% of Hispanics say advertising is made for them if it recognizes their cultural background, advertising in Spanish could have the opposite effect. If the Hispanic person mainly speaks English, Spanish advertising could make the consumer feel they are not the intended audience.

 

While 66% of Spanish-dominant speakers feel advertising is for them when it is in English, only 20% of Hispanic English-dominant speakers felt the same. Contrarily, 60% of Hispanic English speakers felt it was for them when the advertisement was in English, compared to 34% of Spanish speakers. 

 

Lenders in Hispanic dominated areas should begin taking a close look at their marketing strategies to determine who they are trying to reach with their messaging, and if they are targeting the largest population for homeownership rate growth.

 

Some of the top areas for Hispanic homeownership include: Los Angeles; Miami; Riverside, California; New York City; Phoenix; Chicago; Washington, D.C.; Houston, Texas; San Diego; and Dallas.

 

Kelsey Ramírez