Recent years have produced incredible growth for Latino homeowners. But this isn’t a new trend. For the last eight years, Latinos have remained the outstanding cohort, posting continuous homeownership growth throughout that period. In 2022, Hispanic homeowners added 349,000 homes to their owned properties, increasing their homeownership rate to nearly 49 percent.
Federal Savings Bank Senior Vice President of Mortgage Banking Javier Garcia has seen this shift firsthand in his clientele. Many are seeking homeownership as a business, not just a place to live.
“I’m seeing a lot of Latino homebuyers target multi-unit properties,” he says. “House hacking is something everyone is seeking. I’m seeing a lot of entrepreneurship. When you buy a multi-unit, you’re becoming a first-time home buyer and business owner as well.”
Indeed, since the Great Recession, Latino-owned households have contributed nearly 25 percent of homeownership growth. Last year was perhaps one of the most challenging years for growth given that interest rates doubled in a matter of months, as well as increasing price tags on homes, making them less affordable for some. Even so, Latinos have increased their homeownership by leaning into mortgages in 2021—a 42 percent increase from 2018.
The resounding bottom line? Despite recent challenges, Latinos remain enthusiastic about the prospect of homeownership. Here are five trends to keep in mind about incoming Latino homeowners this year from the National Association of Hispanic Real Estate Professionals’ (NAHREP) 2022 State of Homeownership Report.
1. Latinos are more prepared than ever by attaining higher incomes and education levels.
Latinos have stepped into their power in the US economy and the numbers prove it. This cohort has held the biggest labor force participation rate of any demographic for the last twenty years, and today contributes a 66 percent labor force participation rate. One in five Latinos are enrolled in colleges or trade schools, and the median household income has increased nearly 50 percent in the last ten years.
With this higher education and salary acquisition, Latinos are not only looking to buy homes to live in, but also to invest in. According to the report, almost half of top producing Latino agents witnessed an increase in investment property acquisition by Latino homebuyers.
“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,” Garcia shares.
Of course, these are only part of the equation. Where Latinos are best prepared for homeownership is not only where they are mortgage-ready, but where there is a matching market with appropriate affordability. According to NAHREP, these places include El Paso, Laredo, and Corpus Christie in Texas, as well as places like Cleveland, Ohio, and Detroit, Michigan.
2. A younger demographic is driving increased homeownership rate.
By and large, Latinos are a young cohort. Their median age stands at thirty, while the median age of the overall population is thirty-eight. And while this could explain a part of their younger homeownership, the other reason is often the rising cost of rent. Latinos are making personal finance decisions accordingly.
This has led to more multigenerational homes than ever before, meaning children living with their parents and vice versa. Young adults are being added to their parents’ homes as cosigners. Latinos are also buying homes to live in with their parents. More than 30 percent of Latino households are multigenerational, per NAHREP’s report.
3. Latinos are increasingly diversifying their funding opportunities.
Whether it’s a mortgage or leveraging FHA financing, Latinos are using more tools that enable them to become homeowners. Two years ago, Latinos were twice as likely to fund their home buying through FHA versus other loan products.
“[FHA financing] has always been a tool for lower to moderate income in general,” Garcia says. “It is more forgiving of lower credit score, and higher debt to income ratios.”
Latinos have found a less friction-filled homebuying experience by pursuing an FHA. While they experience a 66 percent denial rate through conventional financing over their non-Latino counterparts, with FHAs they only experience a 4 percent difference.
4. Access, affordability, and representation remain a key challenge.
Latinos may be making headway in homeownership, but that doesn’t mean there aren’t issues in access and affordability. These challenges include the appreciation in home prices in the aftermath of a pandemic combined with rising interest rates, thus pricing out families in low- and middle-income brackets. Meanwhile, real estate investors have leaned into the housing market and have bought a large share of the available affordable single unit family homes.
Another key issue is lack of representation on the selling side in the real estate market.
Yoly Valencia, an enterprise market planner at Cushman & Wakefield, explained how her foray into commercial real estate lacked diversity and how eventually having help from someone who shared a similar background was key to breaking into the industry.
“A Latina gave me the opportunity to pivot from operations into real estate,” she says. “Our community is going into careers because they know someone that went there. [The Latino community] does not have people going into commercial real estate.”
This is where representation could make big changes in the industry. Latino realtors, as documented by NAHREP, only represent 11 percent of the industry and for loan officers that share is even lower. As the organization points out in its report, having more Latino real estate leaders in place “would bring a better understanding of cultural nuances that would better serve consumers.” The numbers on the output back this claim, showing more than 60 percent of their buyer transactions in the last year were made to other Latinos.
5. Homeownership growth at large is being driven by nonwhite buyers.
Home purchasing by nonwhite groups in the United States is on the uptick and has been since 2014, when nonwhite households accounted for 54 percent of US homeownership growth. This pattern is expected to continue.
In recent years, the Urban Institute predicted that minority households would contribute all of the homeownership growth between 2020 and 2040, 70 percent of which is expected to come from Latino households.
