This is definitely a hard time for so many Americans who find themselves unemployed or underemployed. There are others, however, with the income stability to take advantage of the lowest mortgage rates in history: 3.23% for a 30-year mortgage.
According to an article in theMReport, Hispanics drove home ownership increases in 2019, with the highest labor force participation rate in the past two decades. And in the past decade, Hispanics accounted for 1.9 million new homeowners.
As we look ahead to what a back-to-normal economy might be, Hispanics will be back to driving homeownership growth with rising incomes, rising educational attainment and the goal to live the American dream.
While Hispanics have been greatly impacted by pandemic job losses, the future looks bright, as one in three Hispanics are under the age of 18. They ARE the future.
There are barriers the industry will need to address to help Hispanics become homeowners according to the MReport. These include:
-- Lower FICO scores — The median credit score was 722 in 2018, but for Hispanics it was 684 mainly because the population is younger.
-- Gig workers and their income guarantees are not the same during the application and approval process.
-- Hispanics have slightly higher debt-to-income ratios — generally speaking — also affecting the approval process.
-- New homebuyers need lots of help navigating a complicated process and perhaps being the first in their family to do so.
Freddie Mac and the National Association of Hispanic Real Estate Professionals (NAHREP) released a 2019 State of Hispanic Home Ownership report that suggests the easier answer lies in targeting mortgage-ready Hispanic millennials. These are individuals who are non-mortgage owners 37 years old or younger (as of 2018), with FICO scores over 620 and lower debt-to-income ratios (at or below 25%). The size of the prize is significant, at 4.9 million Hispanics measured in 2018.
The other side to this is that people like to do business with people who understand them and where they are from. The real estate industry will need to increase the number and location of Hispanic realtors who are attuned to understanding their culture, navigating the process, overcoming barriers -- and of course, building trust. Another looming issue is housing affordability, which is a challenge for homebuyers in general in all major markets.
“Because Hispanics are so family-focused, buying a home is important to provide a safe space for their families including multigenerational households,” Los Angeles realtor Angela Carrasco said. “Also, there is the recognized importance of creating generational wealth maybe not available to their parents.”
While the cost of renting is expected to go down in most of the 20 largest U.S. cities, that is not projected to be the case for homebuying. The Hispanic Home Ownership Report suggests focusing on more affordable markets in Georgia and North Carolina, which makes a lot of sense.
None of us know what to expect in the next few months or even the coming year -- but one thing is certain, homeownership is a key to building wealth. We need this to happen for Hispanics and multicultural consumers for America to prosper post-pandemic.