April 10, 2017

Bay Equity and Hispanic groups advocate for housing sustainability

Representatives from Bay Equity Home Loans joined the National Association of Hispanic Real Estate Professionals (NAHREP) on Capitol Hill to advocate for legislation that supports the sustainability of successful home buying for the growing Latino community.

According to the 2016 State of Hispanic Homeownership Report, the Hispanic population is steering and shaping new household formation and homeownership in the United States.

The annual study—produced by NAHREP in collaboration with the Hispanic Wealth Project—found Hispanic homeownership increased by 209,000 homes since 2015. That’s an astonishing 74.9 percent of the nation’s overall net growth.

Even though overall homeownership rates hovered around a 50-year low of 63.4 percent in 2016, the rate among Latinos actually increased slightly—from 45.6 to 46 percent. And with greater Latino labor force participation fueling increased purchasing power, this steady growth is likely to continue.

“These are numbers you simply cannot look away from,” says Raul Espinoza, Senior Vice President of Strategic Markets and Sale at Bay Equity Home Loans. “The Hispanic market isn’t coming; it is here.”

Household formation

The average Latino homebuyer is young, with more job security and an increasing income—the three necessary components of a homebuyer's profile. Many have children and are forming households, which is another primary home-buying predictor.

According to the U.S. Census Bureau, the 2016 Latino population in the U.S. is 57 million (18 percent of the total). Latinos have accounted for half of all U.S. population growth since 2011 and have accounted for 330,000 new households in 2016 (38 percent of the total).

Economic success = Purchasing power

Increased rates of higher education—combined with the conservative financial habits and thriving entrepreneurial spirit of the culture—have contributed to greater economic success.

Between 2000 and 2016, Hispanics accounted for 76.4 percent of growth in the U.S. labor force. 20 percent of U.S. business owners are Latino. That number is up from 10 percent just a decade ago.

Hispanics’ household wages are up (with a median of 6.1 percent since 2010) while poverty has declined by 21.4 percent in that same time frame.

The resulting purchasing power is significant: if U.S. Latino consumers were a country, they would represent the world’s 14th-largest economy.

Barriers to homeownership

Despite this growing Hispanic market share and increase in purchasing power, credit standards and low starter-home inventory continue to be barriers to Latino homeownership.

The stock of single-family residential housing is at historic lows, and the shortage is mostly concentrated in affordable starter homes. In fact, fewer than 20 percent of homes available for sale are in the most affordable tier.

The large Millennial population also competes in the same housing marketplace, which contributes to the congestion.

Additionally, Latinos are more likely to be “credit invisible” than the average American. The entrenched credit scoring system of the Fair Isaac Corporation (FICO) is heavily reliant on a borrower’s record of previous monthly credit payments. People who do not use—or underuse—common forms of credit, such as a credit card or an auto loan, can have a weak credit rating regardless of income.

Lastly, Hispanic homebuyers suffer from a lack of culturally competent professionals in the real estate industry. Beyond language, Latinos seek professionals who understand the nuances of multigenerational households and other cultural differences.

Sustainable solutions

Bay Equity advocates for favorable mortgage policies in the communities it serves because, for many, homeownership is the first step to wealth acquisition and financial security.

With ongoing policy changes, rate hikes and housing-supply shortages, obtaining cultural insight on Hispanic communities is crucial for lenders.

Bay Equity Home Loans is committed to supporting NAHREP’s mission to advance sustainable homeownership for Hispanic homeowners.

“Bay Equity is committed to having the products and services in place to serve the Hispanic market, and we are consistently looking to learn more about each and every community we serve,” Espinoza says.