Even in a pandemic that resulted in steep job losses, economic turmoil, and a cutthroat housing market, more Hispanic buyers successfully purchased homes last year.
More than 600,000 Latinos bought a home with a mortgage last year—a 13% jump from 2019, according to a recent report by the National Association of Hispanic Real Estate Professionals.
For many Hispanic buyers, COVID-19 cemented their desire and accelerated their plans to become homeowners. Record-low mortgage rates also served as an incentive, driving down monthly mortgage costs.
“Despite significant headwinds, Latinos drove homeownership growth in America for the sixth consecutive year,” NAHREP CEO and co-founder Gary Acosta said in a statement.
The Hispanic homeownership rate peaked in the real estate boom years of the mid-2000s—and then tumbled a little during the financial crisis. Since 2014, it’s been on the upswing, reaching between 48% and 49% in 2020, according to the report.
Over the past decade, Hispanic buyers have made up more than 50% of homeownership growth, according to projections from the Urban Institute. They’re expected to make up 70% of new homeowners over the next 20 years.
Homeownership has been particularly important in helping Hispanic families build wealth. The equity in that property accounts for 57.6% of Latino wealth. Those who own their homes have a median net worth of $164,000—versus $36,050 for Latino families overall.
“For Latino households, owning a home is a central part of building a solid financial foundation, and increasing wealth over time,” says realtor.com® Senior Economist George Ratiu. “This preference became even more important during 2020, as the COVID pandemic accelerated many people’s reach for the safety of a home and the space to work, live, and school children.”
Who’s buying what kinds of homes?
Many Latinos are simply at the point in their lives when folks typically want to own homes. The median age of Latinos in this country is 29.8, which is typically when people start coupling up, starting families, and entering the housing market. Almost 1 in 3 Latinos is between the ages of 25 and 44, according to the report. That means many of them are first-time buyers.
“Even during a year beset by sharply shrinking inventory and rising prices, as well as declining credit availability, Hispanic buyers were looking to push their purchase timelines up,” says Ratiu.
They also are less likely to have a four-year college degree. Just 17.6% of Latinos 25 and older had completed a bachelor’s degree in 2019. While that can hurt their future earnings in many cases, it also means fewer Hispanic home buyers have student debt holding them back from saving up for a down payment.
However, those who buy tend to have stronger incomes. Last year, Latino households purchasing homes had a median income of $74,000, according to the report. The median value of the homes they purchased was $265,000 in 2020 for properties with mortgages.
Latino buyers are also 3.5 times more likely to be part of a multigenerational household than the rest of the population. Nearly 29% of all households with more than one generation of a family under one roof are Hispanic.
More than half of Hispanic buyers, 53%, would prefer a multigenerational home. Properties like this can accommodate aging parents as well as grown children and the grandchildren. This living situation may also be more affordable, as the family can pool resources to come up with a down payment and pay the monthly mortgage bill, utilities, and other expenses.
“Reflecting the economic challenges brought about by the pandemic, and building upon the cultural central place of the family, Latino households invested in multigenerational homes at a higher rate,” says Ratiu.
What’s holding back more Hispanic home buyers?
However, there are challenges that are holding back more Hispanic buyers from becoming homeowners. The market is the biggest one.
As the pandemic has dragged on, more people have begun searching for homes. At the same time, there are record-low numbers of properties for sale. That’s led to prices climbing to new heights, fierce bidding wars marked by offers over asking, all-cash bids, and homes selling in hours instead of days. In other words: It’s a difficult time to be a buyer today.
Then are many people who would like to purchase a home, but lost jobs last year. Unemployment across the nation soared as businesses were shuttered and people stayed home to curb the spread of COVID-19. Latinos, many of whom work in the service industry, were hit hard with a 10.4% annual unemployment rate last year, according to the report.
Even those who held on to their jobs may have a harder time qualifying for a mortgage. Latinos have a median 668 credit score, 41% median debt-to-income ratio, and typically have only 3.5% down payments.
Many lenders tightened their criteria for approving borrowers to hedge against the topsy-turvy economy. Those without stellar credit scores, steady and higher incomes, and little debt had a more difficult time qualifying for a mortgage.
“The pandemic-induced recession and accompanying job losses took a larger toll on many Latino families,” says Ratiu. “In addition, with credit availability reaching the tightest level in six years, many Latino families faced higher hurdles on their path to homeownership.”
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