Minority households will be the driving force of the mortgage market in the coming decades but face tough market conditions.

Hispanic homeownership has steadily grown for seven consecutive years, and it is predicted that Hispanic households will account for 70% of homeownership growth over the next 20 years. But amidst a tight housing market, potential Hispanic homebuyers, especially first-time buyers, face many challenges. At first glance, Hispanics seem to be thriving. They accounted for over half (51%) of the nation’s growth between 2010 and 2020 and were responsible for the overwhelming majority (80.8%) of labor force growth. When it comes to homeownership, the Urban Institute predicted in 2021 that Hispanics will account for 53.1% of household formations over the next 20 years and this population seems to be well on their way.

According to the National Association of Hispanic Real Estate Professional’s (NAHREP) “2021 State of Hispanic Homeownership Report,” the Hispanic homeownership rate increased to 48.4%, up from 47.5% in 2019, with an average increase of nearly one percentage point every two years — adding 657,000 Hispanic households between 2019 and 2021. The nation’s monthly home supply dropped in 2021 to a new low in at least the last 10 years. A report by the National Association of REALTORS® (NAR®) estimated the U.S. was short 5.24 million homes — an increase of 1.4 million homes from 2019. NAHREP noted in its report that areas of high Hispanic concentration are suffering the most severe impacts of this housing underproduction, and thus, seeing higher home prices. HPA increased 18.3% from May 2021 to May 2022, and homeownership seems even further out of reach for Hispanics when looking at the income gap. According to the U.S. Census Bureau, as of 2020, the median Hispanic household income was $55,321 while non-Hispanic white households were $74,312 —a 25.5% difference. NAHREP writes in its report that Hispanics are the youngest of any ethnic or racial demographic in the United States: “At a median age of 30, Latinos are squarely in their prime home-buying years.”

In a survey conducted by NAR® in 2021, 34% of new Hispanic homeowners “purchased a home between the ages of 18 and 24, as opposed to only 17% of the general population.” Hence, young Hispanics are twice as likely to purchase a home. Moreover, the survey NAR® conducted found that “more than half of recent Latino homebuyers were first-time buyers.” In the coming decades, it is minority households who will increase the rate of homeownership in America and be the driving force of the mortgage market. As an organization representing an industry that exclusively serves homebuyers with limited access to funds for large down payments, USMI believes the issues and challenges facing these borrowers today will require significant collaboration amongst the industry stakeholders to ensure they have access to sustainable, affordable financing. 

Source: US Mortgage Insurers Blog