When we talk about homeownership as a strong thread in the fabric of the American Dream, the idea conjures an emotional response connected to family, pride and sacred space. Though less idyllic, the potential to raise your own financial ceiling is an equally important part of the homebuying story.
The economic impact of owning a home is extremely personal and to the same extent relevant on a grand scale, especially when it comes to shrinking the wealth chasm among our nation’s demographics.
In its 2016 Annual Report, the Hispanic Wealth Project notes that in 2011, the median white household had $111,146 in household wealth (aka net worth) compared to the $8,348 reported by the median Hispanic household.
Both white and Hispanic households experienced financial gains in 2013 (to $141,900 and $13,700, respectively), though white households did so at an accelerated rate, resulting in wealth gap registering tenfold.
Source: Hispanic Wealth Project 2016 Annual Report
In addition, many Hispanics purchased widely available subprime mortgages at the height of the housing bubble, and were therefore left in a particularly vulnerable position after the market bust.
“The Hispanic Wealth Project was formed as a response to the vanishing wealth Latinos experienced during the Great Recession when they lost two-thirds of their household wealth,” said Jerry Ascencio, chairman of the Hispanic Wealth Project, in a press release.
An affiliate of the National Association of Hispanic Real Estate Professionals (NAHREP), in 2014 HWP published its “blueprint” to triple Hispanic household wealth by 2024, a plan that targeted three major goals:
1. Entrepreneurship (many NAHREP members are successful small-business owners)
2. Savings and investment (Hispanics fall behind the general population in non-cash financial asset investments)
3. And most importantly — sustainable homeownership, defined in this case as raising the Hispanic homeownership rate from 45.6 percent to 50 percent or more
“Though all three HWP components are critical, homeownership is the cornerstone and genesis of wealth creation for the middle class,” the report noted. “While homeownership is on the rise for Hispanics, the net gains of 245,000 in 2015 fell slightly short of the 320,000 annual goal necessary to reach a rate of Hispanic homeownership of 50 percent.”
Progress and barriers to opportunity
Hispanics, as the single demographic-defying declining homeownership trends, consistently rank owning a home as on of their primary goals, with 70 percent indicating that it’s the best way to build wealth. Moreover, 2015 marked the fifth consecutive year that Hispanic homeownership has been on the rise.
Source: Hispanic Wealth Project 2016 Annual Report
But although the Hispanic desire to purchase is evident, the report lays out several barriers preventing this demographic from moving the needle at a faster pace, including tight inventory and difficulty in finding a loan. To address these issues, the HWP has identified suggestions for improvement, five of which are highly critical:
1. Regular access to low down payment financing
“Nearly 40 percent of Hispanics who owned their homes since 2012 purchased their home with a down payment of less than 5 percent, as compared to 29 percent for all U.S. households,” the report noted.
Products from Fannie Mae and Freddie Mac offer low down payment conventional mortgage options will be instrumental in supporting Hispanic homeownership gains.
2. A boost in housing inventory
The HWP is calling for an increase in affordable housing. NAHREP called on the Department of Housing and Urban Development (HUD) to evaluate its Distressed Asset Stabilization Program (DASP), which sells extremely delinquent non-performing notes.
“Independent studies have shown that these note sales represent a substantial amount of resale housing stock that is more likely to end up investor-owned inside of DASP,” the HWP wrote.
3. Housing counseling that aligns with the Hispanic culture
An analysis by ClearPoint Financial Services showed that financial counseling services can help participants improve their credit scores and decrease unsecured debt.
Coming from 13-plus years of real estate experience, Leo Pareja, a broker for Keller Williams in the Washington, D.C., metro, told Inman in a related article: “A big mistake agents or big brands make is assuming that just translating documents or translating content creates a relationship.
“I think what’s important…whether you’re going after new construction or first-time homebuyers, what works in residential real estate is becoming very involved in that community segment.”
4. Culturally competent professionals
While Hispanics accounted for 69 percent of 2015 U.S. homeownership gains and are anticipated to comprise 50 percent of first-time buyer activity across the country, it’s estimated that only 4 percent of real estate professionals and 7 percent of lending professionals are Hispanic.
“Professional guidance from a culturally competent advisor is needed to help navigate the complicated home buying process for the burgeoning Hispanic market,” the report noted.
A survey of NAHREP members showed that nearly 40 percent of Hispanic clients required Spanish as a main language during the transaction.
5. Public policy changes
NAHREP supports the continuation of the mortgage interest tax deduction and other policies that favor homeownership outcomes as well successful programs under the Community Reinvestment Act, which helps meet the needs of low- to moderate-income community members.
The HWP recognizes several industry partners committed to advancing Hispanic homeownership, including Wells Fargo, which provided funding for $125 billion in mortgage originations, $10 million in housing counseling services and is working to dramatically increase its workforce of Hispanic loan consultants. (Last month, Wells Fargo also announced a new low down payment loan option with expanded credit scoring.)
In addition, Bank of America, Clearpoint Financial Services, Freddie Mac, the Mortgage Bankers Association and Realogy have implemented educational and awareness initiatives for Hispanic buyers.
“We are encouraged by the commitments from several organizations that recognize how vital Latinos are to the U.S. economy and look forward to engaging additional partners in this important effort,” Ascencio added in the press release.
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