18 Insights to Better Understand Latino Homeownership Growth in the U.S.

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December 11, 2020 | comments

Discover how to increase your sphere of influence within this growing segment of U.S. homebuyers

FREE INFOGRAPHIC:  Opening the Doors to Latino Homeownership

From Florida and Texas to New York and California, Hispanic homeownership is rising across the U.S., accounting for more than 60% of new U.S. homeowner gains over the past decade. To build relationships with this key ethnic group, you don’t have to speak the language. You just have to understand the culture.

Growing up in a military family, Veronica Figueroa learned the value of hard work from her father, a drill sergeant, and her mother, an entrepreneur of Puerto Rican descent who opened “pop-up” grocery stores at every base in the small towns of Kansas, Georgia and Germany.

“When I first got into real estate in East Orlando, Florida,” Figueroa says, “I had a limited belief that I could only service Hispanics because of my last name and the local demographics.”

Fifteen years later, Figueroa’s team has become the No. 1 eXp Realty team in East Orlando and, before she sold her RE/MAX franchise of eight years, she had built a thriving team in the top 10% of her market. Today, you can’t drive through Avalon Park in East Orlando without seeing the “Figueroa Team” name.

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Mexican born and raised, David Acosta arrived in El Paso, TX, in 2002 and started selling real estate the next year. Within 1 1/2 years, he built a relationship with a construction builder and soon took over their sales division. Before long, he was closing nearly 600 units a year.

Acosta, the immediate past president of the National Association of Hispanic Real Estate Professionals (NAHREP) and the team lead of the David Acosta Group at eXp Realty, and Figueroa, a Zillow Advisory Board Member who was also recently ranked the No. 3 team lead by sales volume in NAHREP’s Top 250 Latino Agents Awards, represent strong Latino markets in Texas and California for Acosta and Florida for Figueroa.

Both have witnessed the significant losses Hispanic homeowners suffered during the Great Recession — more than most other racial or ethnic groups — to rise in homeownership and account for more than 60% of new U.S. homeowner gains over the past decade, bringing the Latino homeownership rate to nearly 50% by Q1 2020, the highest level since 2008, according to Zillow.

“Latinos are injecting themselves into the homeowner market like never before,” says Figueroa. “Education is at an all-time high. They’re showing up in leadership, in government and as business owners. The dream of coming to this country and to become a homeowner is still very much alive and well. People are proud to be homeowners in the Latino market, and it comes from being empowered, being educated and being business owners.”

Today’s Latino Home Buyer: Young, Family-Oriented and Hard-Working

Who is the Hispanic homeowner? Recently, we consulted NAHREP’s latest State of Hispanic Homeownership report to get more insight into the driving influences behind this growing demographic.

Young Millennial Hispanics Buy Homes

Today’s Latino buyer is young — in fact, 14 years younger on average than the non-Hispanic homebuyer, and, with this population just starting to age into their prime homebuying years, they’re just getting started.

More than 60% of Latinos are millennials or younger, and nearly 40% of Hispanic home buyers are under the age of 34.

Of all young adults aged 18-21, Hispanics comprise the biggest majority of homeownership rates, suggesting they’re more motivated to purchase at an earlier age than their non-Hispanic counterparts.

Many of these mortgage-worthy Hispanic millennials live in Florida and Texas, particularly, within the Houston market, according to NAHREP.

Even high cost California, which saw nearly a 62% increase in Hispanic homeownership in 2018, and New York are finding more young Hispanic homeowners settling in their states.

As credit scores, income and household wealth typically improve with age, it’s likely that these patterns of young Hispanic homeownership will continue.

Hispanic Homeowners are Family-Oriented

A fast-growing ethnic population, the nation’s 60 million Latinos are known for their strong family-oriented culture and high regard for home ownership. They’re twice as likely to live in multigenerational households than the general population, with family members often pooling their finances to achieve homeownership.

“More than anything, Latinos have an overwhelming desire for owning a home against all odds,” Acosta says. “In Latin culture, many live in the same house where they grew up and maybe even their grandmother still lives with them. For Latinos, homeownership is very much a source of pride.”

Despite housing inventory shortages and credit contraction, the pursuit of the “American Dream” led Hispanics to increase their homeownership rate for the fifth consecutive year by 2019, according to NAHREP.

They’re Hard Workers

The U.S. Department of Labor Statistics projects that by the year 2028, Latinos will represent the highest share of the labor force at 20.9%.

Many are business owners

More than 8% of heads of Hispanic households who purchased a home in 2018 were self-employed, reflecting a 16% jump in self-employed borrowers from five years earlier, according to NAHREP.

They’re U.S.-Born

Increasingly each year, Hispanic homebuyers are U.S. born. Several years ago, China replaced Mexico to become the largest country of origin of foreign-born immigrants to the United States, and Asian immigrants outpaced those from Latin America by nearly 1.5 million, according to NAHREP and the Migration Policy Institute.

In contrast, immigration from Latin American countries has decelerated since the Great Recession, particularly from Mexico, and, today, nine out of 10 Latinos under age 18 are native-born to the U.S.

They’re Educated

The number of Hispanic undergraduates has increased since 2010 with 2.2 million young Latinos earning a four-year degree. The flipside to this, of course, is student debt, a significant home entry barrier.

Latinos Finance With Conventional Loans

According to Zillow Consumer Housing Trends Report data, Latino buyers have been most likely among all races surveyed to express concern about qualifying for a mortgage (38%) compared to white mortgage buyers (22%).

Of those successfully approved for a mortgage, more Hispanics have been using conventional financing (46% to 58%) over FHA loans (42% to 32%) with the median down payment averaging 3.5% in 2018. Still, Hispanics have been twice as likely to use FHA loans compared to their non-Hispanic white counterparts.

“Today, it’s possible to now buy a home with a dual income without a 20% down,” says Figueroa. “When I started 17 years ago, it used to be every Latino who wanted to own a home tried to work the system to get through the underwriting process and buy a home. Any little blemish on their credit meant they didn’t qualify.”

More loans with 3% down payments are available to Latinos, which according to NAHREP, takes on average four years for the median Latino family to save for the down.

Top U.S. Markets for Latino Homeowners

Florida, Texas, California, New York, New Jersey and Arizona led the country in the most Latino owner households added to the U.S. economy in 2018, according to NAHREP. Houston topped the list with more than 40,000 Hispanic owner households added between 2013 and 2018. Dallas came in second at 35,000+ households.

California’s Riverside, San Bernardino and Ontario markets followed with nearly 34,000 additional Hispanic households during the same time period.

Florida and Texas also dominated those markets exhibiting the fastest growth rate of Hispanic homeownership, with Midland, Texas, growing nearly 58% YoY and Florida’s Lakeland, Melbourne and Cape Coral/Fort Myers’ markets growing all around 50% YoY.

Figueroa has watched the migration patterns firsthand as more people from New York and New Jersey, even Miami, seek out new digs in her central Florida market. “We’re seeing more New Yorkers running away from the weather and high cost of living. The pandemic is also accelerating people’s desire to move to places like Jacksonville where they can work virtually. Some have been furloughed and can relocate where they want to be. The pandemic has just pushed them to get there sooner,” she says.

Texas also claims a quarter of the top markets for mortgage-ready Hispanics, including San Antonio, Dallas/Ft. Worth, El Paso, Austin andMcAllen, Texas, where 94% of mortgage-ready Hispanic millennials can afford a 3% down payment.

Barriers to Latino Homeownership

The same financial hurdles shared by all first-time buyers — high home costs, inventory, lack of access to equity from a previous home sale and the down payment — offer greater barriers for Latino homebuyers, largely due to the younger entry age of this demographic.

Low Housing Inventory

As with all demographics, low housing inventory continues to persist as a major barrier to homeownership. According to Zillow, there were 7.5% fewer homes on the market in December 2019 than the year prior, marking 2019 as the lowest level ever recorded since Zillow began tracking inventory data.

Also in 2019, the U.S. Census Bureau reported a record low homeowner vacancy rate (HVR) at 1.4%, the lowest level ever recorded since 1993.

Inventory is especially tight in states and metro areas with a high concentration of Hispanics. According to NAHREP and Census data, Hispanics number 10% or higher of the total population in half of the top 10 metro areas with the lowest HVR and 20% or higher over a quarter of the metropolitan statistical areas (MSAs).

In Figueroa’s Orlando market, for instance, inventory continues to present an increasing issue for would-be Hispanic homeowners. “If they qualify for a $200,000 home and we don’t have inventory under $250,000 they’re getting beat out. Underwriters are being particular, and we have layoffs here with Disney, a major employer,” Figueroa says.

According to a survey of top-producing Hispanic real estate agents, Latinos are more likely to purchase a fixer upper than non-Hispanics, but the scarcity of these and entry-level homes has presented a challenge for millennial Hispanics struggling with student debt, down payments and high-price housing.

Hispanics tend to gravitate toward homes about $30,000 below the market median rate with property values around $225,000. Still, according to NAHREP, a combination of high cost markets and lower incomes have Hispanics buying homes that are more expensive relative to their incomes, resulting in Latinos more leveraged than their non-Hispanic counterparts.

Credit Scores

In 2018, Hispanics shared a median FICO score of 684 versus the general population average score of 722, though the overall Hispanic and general millennial population of median credit scores aligns more closely today. According to NAHREP, contributing factors might include knowledge gaps and less established credit, both of which age can play a significant role given the younger skew of entry-level Hispanic homeowners. Of course, with credit challenges come higher debt-to-income ratios over the general population.

Student Debt

Increasingly, student debt is posing a challenge for aspiring Latino homeowners. According to the U.S. Department of Education, 66% of Latino graduates in 2016 had student debt with an average loan balance of $25,452.

Other Contributing Factors

Delinquency rates and bankruptcies, high cost markets and, especially relevant in the age of a pandemic, unemployment.

Marketing to the Hispanic Homeownership Market

To market to the Latino homeowner effectively, agents need to understand the cultural nuances. Here are a few tips that might help to expand a sphere of Hispanic homeowners.

Convert “Mortgage-Ready” Millennials to Homeowners

Considering one in four millennials are Hispanic and that millennials comprise the largest share of homebuyers (37%), the playing field is wide open.

One way to connect with this group is to host videos in Spanish on your site and embedded within email. You can integrate dotloop with BombBomb’s video marketing service to start a loop in dotloop and use BombBomb’s screen recorder feature to walk prospective clients through the contract terms on screen.

“People want to make a connection,” says Figueroa. “They don’t want to be thrown a contract without seeing a face. If you have a video in Spanish to explain contracts and documents, knowing there are different levels of comprehension in the contract explanation, that can help exceed customer expectations.”

Mine New Hispanic Markets

Hispanics have grown deep roots in California, Texas, New York and Florida, with Census data showing more than 60% of Latinos residing in these four states. But with employment and housing affordability in a state of flux, Latinos are migrating. Even prior to COVID, Latinos were exiting California, New York and Illinois and favoring markets in Texas, Arizona, Washington, Nevada and Florida, according to Freddie Mac.

Hire Culturally Proficient Agents

The real estate transaction can be mystifying enough for homebuyers, let alone language and cultural barriers to make the experience even more challenging. Both Acosta and Figueroa agree that agents don’t have to be fluent in Spanish to build relationships and represent Latino homeowners.

“Language is no longer a barrier,” says Acosta. “The vast majority of Hispanics who are 18 and older speak English. It’s more about culture. If you don’t understand the culture, find someone on your team who can speak the culture. We’re warm. We hug everybody. We’re family-oriented. Hispanic home buyers really want to develop a relationship rather than just a transaction. If you develop a relationship with people regardless of race, origin, color, whatever, you will grow leaps and bounds. People talk to friends and word of mouth is big. If you develop a relationship, they will embrace you.”

Figueroa agrees, adding, “You have to understand their journey. Maybe their mother is going to be living with them, or their kids are staying in the house longer. Once you understand their journey, you can establish trust, service and excellence in customer service.”

She recommends recruiting a diverse range of agents. “You don’t necessarily have to be Hispanic, but you have to understand them. It’s important for brokers and team leads to have people come from different walks of life and have bilingual team members. Diversity is the center of our team and allows us to be part of one world.”

NAHREP estimates that the volume of Latino specialist agents and mortgage professionals will need to double in the near future to accommodate the growing demand of Hispanic homebuyers.

“Latinos are the future,” says Figueroa. “Get involved. Hire them and you’ll find they bring so much value.”

Work Word-of-Mouth Referrals

NAHREP members overwhelmingly report the top way they obtain business is through personal relationships and referrals. Working referrals, they’ve found, is much more effective for tapping this demographic over family or personal relationships, advertising lead gen and cold calling.

Get Familiar with First-Time Homebuyer Products

According to Acosta, whose teams sell in Texas and California, there are more first-time lending programs now, with many offering 3.5% or 5% down on conventional loans with good credit. He recommends encouraging buyers to obtain full credit approval prior to making an offer but, first, to meet with an agent to help them understand different financing options and their personal situation before being referred to a lender.

Join NAHREP

One of the best ways to grow familiar with the Hispanic culture is to join NAHREP. With approximately 40,000 members and more than 100 chapters across the U.S., the organization focuses on national and state legislative issues and provides a voice for sustainable Latin homeownership.

The Latino buying community will only grow stronger as more millennials enter the market, credit scores rise and financial stability improves. Tap this powerful source of homebuyer business by hiring culturally proficient agents, working referrals, building relationships and, most of all, treating each client not as a transaction, but as the beginning of a long-term relationship.

FREE INFOGRAPHIC:
Opening the Doors to Latino Homeownership

Download this free infographic to better understand what’s driving Latino Homeownership growth in the U.S.

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