• by Aaron Baar , September 15, 2008

Despite the difficult economic climate surrounding mortgages and mortgage lending, there is an opportunity for banks to build their businesses by taking a long-term approach with young adults and minority home buyers.

According to Mintel, Echo Boomers (those agea 13-30), African-American and Hispanic consumers plan to buy a house within the next five years. While only 23% of the general population intends to buy a house in that time frame, 38% of adults 18-24 and 39% of adults 25-34 said they will. Across all age groups, 42% of Asians, 37% of African-Americans and 30% of Hispanics say they will buy a home in the next five years, compared with 20% of whites.

"This is a tremendous opportunity for banks to work with these groups to help them build their credit and get their finances in order," Susan Menke, senior financial services analyst at Mintel, tells Marketing Daily. "I would imagine if banks could find a way to work with them, they could find some loyal customers in the future."

Home ownership rates among these groups have already increased substantially, according to Mintel. In 2007, nearly a quarter of people under 25 owned a home, compared with 16% in 1990. Similarly, 51% of minorities (comprising Hispanics, African-Americans and Asian-Americans) owned a home in 2006, compared with 44% in 1995.

The intention of first-time home buyers to purchase homes is increasing, even as they remain pessimistic about home ownership as an investment. According to Mintel, 35% of 18- to-34-year-old whites expected home prices to decline, while only 31% expected them to increase. Among Hispanics, 36% expected home prices to decline, while only 26% expected them to increase. (Interestingly, 42% of African-Americans expected their home prices in their areas to increase, while only 23% expected them to decrease.)

"It seems they're taking a realistic view of the market," Menke says of the disparity between the intention to buy and the expectation that value will increase. "There's more of a tendency not to see [ownership] as an investment, but as their homes."