The U.S. Hispanic population is projected to more than double to 120 million by 2050, studies suggest, making them the fastest-growing ethnic group in the country. Yet, the Hispanic-homeownership rate has been falling and remains below the national average by double digits. Gary Acosta, chief executive officer of the National Association of Hispanic Real Estate Professionals (NAHREP), spoke to Scotsman Guide News this week during the Mortgage Bankers Association’s (MBA) annual convention in San Diego about credit issues facing Hispanics.
How important will Hispanic buyers be to the future of the housing and mortgage industries?
The Hispanic community already is, and will continue to be, the biggest growth opportunity in the mortgage-banking and real estate industries moving forward. If you look at the demographic trends, and you see the number of households that are formed each year and what percentage of those households are Hispanic, it is roughly 40 to 50 percent. Hispanic households are twice as likely to include two adults and at least one child, again, very much aligned for homeownership. Secondly, Hispanic buying power in this country is about $1 trillion dollars and the income gap between Hispanics and the general population is closing every year. So, Hispanics have the growth, they have the means and they have the desire.
But hasn’t there been a gap between the number of Hispanics who could be owning a home and the homeownership rate?
There has. The Hispanic homeownership rate is roughly 45 percent. This is roughly 18 percentage points below the national average. There are a number of reasons for that. Number one is that the Hispanic population is a much younger population, a full 10 years younger than the general population. If you look at Hispanic families that are headed by someone above the age of 50 years old or older, that homeownership rate is about 60 percent. As the Hispanic population ages, they will earn more money and have higher homeownership rates. That is expected to be a trend moving forward.
What are some of the barriers to Hispanic homeownership?
Particularly with immigrant Hispanics, there are language barriers. [There is] a need to have real estate agents, brokers and loan originators who understand and communicate in Spanish. The industry generally does not have those skillsets widely available. Secondly, Hispanics, just from a cultural standpoint, tend to use banking services a little bit less frequently. They tend to have thinner credit files. This also creates some challenges in terms of credit scoring and being able to get their loans approved through automated underwriting systems. A third piece is that even though the income gap is closing with the Hispanic community, the wealth gap is still relatively large. Hispanics tend to need higher [loan-to-value] loans that require a low downpayment. Those loans are getting tougher and tougher to qualify for in general right now. A lot of immigrant families and a lot of younger populations tend to earn income in nontraditional ways. They might have one wage earner in the household, but you may have somebody else who owns a small business. You may have a multigenerational family living under one roof [and] all contributing to the household income. Just using traditional underwriting metrics, that’s a tougher scenario to qualify [for a loan] in many cases.
Your association is working with the Mortgage Bankers Association on an effort to boost the number of Hispanic professionals in mortgage finance. How did that partnership come about?
We need more people with cultural skillsets to be in our industry. People who can speak the language, people who understand those cultural nuances, are in great demand. NAHRP believes we have to double the number of Latinos in the mortgage-banking space over the next 10 years to meet that demand. We are working with the MBA to introduce a program to college students that shows all of the great career opportunities that exist in the mortgage-banking space.
Any final thoughts?
It is important to realize that the Hispanic market presents more of a business opportunity than a challenge to the industry, and the majority of Hispanics looking to buy a home can qualify through traditional methods. But if you are a mortgage-banking firm that is looking to succeed in serving this market, to grow market share, then being good at the products that are most relevant to those consumers is probably number one. Number two is really making a concerted effort to diversify your [employees], so you are armed with people who are from the community and understand those cultural nuances, and who can speak the language.