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Tight Credit Slows Hispanic Homeownership


Lack of reasonably priced low down payment programs and tighter mortgage credit in general limited the growth of Hispanic homeownership in 2014, according to the 2014 State of Hispanic Homeownership Report issued today by the National Associations of Hispanic Real Estate Professionals.

However, population growth, income trends and consumer attitudes continue to support a highly optimistic outlook for Hispanic homeownership. The Hispanic population is now widely recognized as the key driver for growth in the overall housing sector and barriers to Hispanic participation have a substantial impact on all segments of the housing industry, NAHRE said.

Tight Credit is Top Barrier

In a survey of 100 of the leading Hispanic real estate agents in the country, nearly 60 percent said that tighter mortgage credit was the most signi?cant barrier to Hispanic homeownership. Respondents ranked “affordability” as the second most signi?cant barrier. NAHREP Agents also cite inventory shortages as being a leading barrier to Hispanic homeownership driven by underwater homeowners, Zombie foreclosures, and modest levels of new construction.

In 2014, the Consumer Financial Protection Bureau implemented the Quali?ed Mortgage (QM) rule as well as new rules for mortgage servicing and loan of?cer compensation. The new rules are designed to enhance consumer protection in the mortgage market. However, industry organizations and housing advocates have expressed concern about their effect on credit availability especially for minorities and other underserved markets. While the collection of data is still very early, lenders report that the new rules have created a formidable increase in their cost to originate mortgages which is being passed on to consumers.

Hispanic Homeownership has Slowed

Hispanics achieved modest gains in net new owner households in 2014.. However, the number of net homeownership gains for Hispanics has slowed over the past three years from an increase of 347,000 in 2012 to a notably smaller increase of 54,000 in 2014. The rate of homeownership for Hispanics dropped from 46.1 percent in 2013 to 45.4 percent in 2014. The decrease was due in part to the growth in Hispanic household formations. While the net growth of owner households was positive, total household formations grew at a faster pace causing the overall drop in the Hispanic homeownership rate.

Looking forward, the Hispanic population is expected to reach nearly 120 million in 2050, more than double what it is today. Since1970, the Hispanic population has grown 592 percent. By comparison, the U.S. population overall has grown 56 percent over the same period. Between 2000 and 2010 alone, Hispanics made up more than half of U.S. population growth.  Between 2013 and 2014, several states experienced substantial increases in Hispanic populations including Texas (451,000) California (371,000), Florida (293,000), and Georgia (103,000), which had the fourth largest net growth of Hispanics in the country.

Future for Hispanic Homeownership is Bright

Household formation growth is one of the most important predictors of potential homeownership gains. In 2014, the number of Hispanic households grew by 320,000, accounting for 40 percent of total U.S. household formation growth in that year alone. Hispanics hold the largest share of household growth for any racial or ethnic population group in the country and are expected to account for seven million of the nation’s 17 million new households between2010 and 2025. In terms of household composition, Hispanic households are more likely to be comprised of married couples with children. Hispanic households are also more likely than non-Hispanic households to have a multi-generational component where parents reside with their adult children.

Hispanics continue to drive the growth of the nation’s workforce. Between 2000 and 2014, Hispanics accounted for 65 percent of the growth in the U.S. labor force. Nearly one million young U.S.-born Latinos enter adulthood each year, contributing to Latino labor force and U.S. labor force growth.  In 2013, Hispanics were the only major population group to lower their poverty rate and boost their annual household income, which grew by 3.5 percent. The annual median household income of Hispanics jumped 3.5 percent, up from $39,600 in 2012 to $41,000in 2013, while their poverty rate fell more than two percentage points to 23.5 percent. In 2013, 57 percent of Hispanic households earned over $40,000, 41 percent earned over $50,000, and 13percent earned over $100,000.The purchasing power of Hispanics is $1.5 trillion, roughly equal to that of Canada. It is projected to grow to $2.0 trillion by 2020.

Hispanic Homeownership has Slowed

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