
Although Hispanic homeownership rates increased last year for the third year in a row, the US still has a long way to go to narrow the homeownership gap between white and Hispanic households.
In 2017, only 46.2 percent of Hispanic households owned homes compared with 72.3 percent of white households, despite the fact that Hispanics have been responsible for 59 percent of homeownership growth since 2012. Both contributing to and resulting from this gap, the median household wealth of white families was eight times higher than that of Hispanic families.
As the Hispanic population continues to grow, the economy’s long-term stability is increasingly intertwined with the success of Hispanic Americans. Implementing strategies to improve Hispanic homeownership is an investment in both the prosperity of Hispanic Americans and in the future of the nation’s economy.
The end of Hispanic Heritage Month provides a timely opportunity to highlight ways to boost Hispanic homeownership:
1. Implement tactics to drive wage growth.
The Hispanic population is one of the nation’s fastest-growing populations. In 2017, the Hispanic population increased by 1.1 million people, and the census projects that by 2030, Hispanics will account for 20 percent of the US population.
But the rapid growth of Hispanic Americans has not been accompanied by similar growth in their wealth, income, or homeownership. In 2017, 49 percent of Hispanic households were considered low wealth. Expanding career pathways for Hispanic workers through postsecondary education and workforce training will get more Hispanic workers into higher-paying jobs.
2. Support other forms of asset building.
Hispanics have fewer assets than their white counterparts, are less able to rely on parental wealth, and are more likely to accumulate debt—all of which increases the difficulty of investing in wealth-building assets such as a home.
Implementing asset-building programs like the Family Self-Sufficiency program, automatic savings in retirement plans, subsidies to promote emergency savings, and universal children’s savings accounts can help build a stable financial foundation for potential homeowners.
3. Help improve credit scores.
Over the past decade, the median credit score for mortgages increased 20 points, and lenders are taking on less risk than reasonable standards suggest. With a younger median age and historically lower credit scores among borrowers, Hispanic households face significant barriers to accessing homeownership in a tight credit market.
Leveraging proven models for financial coaching and credit building can make financial products more accessible for a population that is increasingly invested in building good credit.
4. Increase the housing supply.
In most housing markets, the supply of housing is not keeping up with demand. These impacts are especially pronounced in hot markets like the Bay Area and Boston. Without adequate supply, rents and home prices have skyrocketed, imposing a crippling cost burden on residents, especially for low-to-moderate-income (LMI) families. These highs costs stifle families’ ability to save for an investment and put homeownership out of reach.
Building more housing in undersupplied areas and preserving existing affordable housing will help drive prices down, reduce the housing cost burden, and make homeownership more affordable.
5. Expand small-dollar mortgages.
In 2015, 14 percent of home sales were for $70,000 or less. These low-cost properties are in rural, suburban, and urban markets, but financial products to purchase these homes are lacking. In 2015, only one in four low-cost homes was financed with a traditional mortgage. Without accessible financial products, creditworthy LMI families struggle to compete with investors and cash buyers looking to create new rentals.
Creating new financial products for low-cost markets will help LMI families compete in the market and facilitate their transition from renting to owning.
6. Leverage federal down payment assistance dollars.
The housing market’s rebound after the recession, coupled with rising interest rates, is making mortgage affordability a considerable barrier. Since 2012, the share of median income needed for a monthly payment with 20 percent down has increased from 18 percent to 23.3 percent. The mortgage cost burden is higher in states with large Hispanic populations like California and New York.
Using federal down payment assistance programs to increase mortgage affordability would benefit the nearly 50 percent of Hispanic households eligible for down payment assistance.
7. Develop strategies to support the next generation of homeowners.
Hispanic millennials are one of the largest and fastest-growing populations. In 2016, the median age among Hispanics was 28 years old, and 61 percent of Hispanics were 35 or younger. Across the nation’s largest regions, nearly 30 percent of Hispanic millennials are mortgage ready. And as the population continues to grow, millennials are projected to make up the largest share of homeownership growth among Hispanics.
Developing targeted strategies to catalyze homeownership growth for current and future creditworthy Hispanic millennials will help build the next generation of homeowners.
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