The Growing Impact of Latino Homeownership: A Closer Look at the 2022-2023 Housing Market
Recent years have witnessed remarkable growth in Latino homeownership, reinforcing a trend that has been steadily progressing for the last eight years. In 2022 alone, Hispanic homeowners added an impressive 349,000 homes to their portfolios, pushing their homeownership rate to nearly 49 percent. This surge in homeownership reflects not just a desire for a place to live but a keen interest in real estate as a business venture.
Federal Savings Bank Senior Vice President of Mortgage Banking, Javier Garcia, has observed this shift firsthand among his clientele. Many Latinos are now viewing homeownership as an entrepreneurial opportunity, often targeting multi-unit properties. Garcia notes, "I'm seeing a lot of entrepreneurship. When you buy a multi-unit, you're becoming a first-time homebuyer and business owner as well."
Over the years, Latino households have played a significant role in driving homeownership growth, contributing nearly 25 percent of the total since the Great Recession. Even in the face of challenges, such as rapidly increasing interest rates and soaring home prices, Latinos have exhibited resilience, with a 42 percent increase in mortgage utilization from 2018 to 2021.
So, what can we expect from incoming Latino homeowners in the year ahead? Let's explore five key trends highlighted in the National Association of Hispanic Real Estate Professionals' (NAHREP) 2022 State of Homeownership Report.
1. Latinos Are Better Prepared Than Ever
Latinos in the United States have been making substantial strides in the labor force, boasting the highest labor force participation rate for the past two decades, currently standing at 66 percent. With one in five Latinos enrolled in colleges or trade schools, and a nearly 50 percent increase in median household income over the past decade, this cohort is not only interested in homeownership for personal use but also as a smart investment. In fact, almost half of top-performing Latino real estate agents have reported an increase in investment property acquisitions by Latino homebuyers.
Garcia adds, "I'm having a lot of young adults, twenty to twenty-two-year-olds that went to nursing school or who have gone specifically into IT [and are now] making six figures at an early age and able to afford more." The key is not only mortgage readiness but also matching markets with suitable affordability, which can be found in places like El Paso, Laredo, and Corpus Christi in Texas, as well as Cleveland, Ohio, and Detroit, Michigan, according to NAHREP.
2. A Younger Demographic Leads the Charge
Latinos are, on average, a younger demographic, with a median age of thirty compared to the overall population's median age of thirty-eight. The desire for homeownership among younger Latinos is driven, in part, by rising rent costs. As a result, multigenerational living arrangements have become more common, with young adults either living with their parents or parents co-signing mortgages to facilitate homeownership. NAHREP's report reveals that more than 30 percent of Latino households are multigenerational.
3. Diversification of Funding Opportunities
Latinos are diversifying their funding sources for homeownership, increasingly utilizing tools such as mortgages and FHA financing. Two years ago, Latinos were twice as likely to fund their home purchases through FHA loans compared to other loan products. FHA financing is appealing because it is more forgiving of lower credit scores and higher debt-to-income ratios.
Garcia explains, "[FHA financing] has always been a tool for lower to moderate income in general." Interestingly, while Latinos experience a 66 percent denial rate through conventional financing compared to their non-Latino counterparts, the gap narrows to just 4 percent when utilizing FHA financing.
4. Access, Affordability, and Representation Challenges
Despite the progress, access and affordability issues persist for Latino homebuyers. Rising home prices post-pandemic combined with increasing interest rates have made homeownership less attainable for families in lower- and middle-income brackets. Real estate investors have also entered the market, snapping up affordable single-unit family homes.
Another critical challenge is the lack of representation on the selling side of the real estate market. Latino real estate professionals make up only 11 percent of the industry, with even fewer Latino loan officers. Greater representation could help bridge cultural nuances and serve consumers better, as evidenced by the fact that more than 60 percent of their buyer transactions in the last
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