Working With Hispanic Homebuyers

With 2021 marking the 6th year in a row that Hispanic homeownership has increased, understanding this population should be on every real estate professional’s radar. September 15th through October 15th also marks National Hispanic Heritage Month, making it a perfect moment to discuss the growth in Hispanic homebuyers. Just as Millennials and Generation Z bring something new to the table, so do Hispanic homebuyers. 

Hispanic is a term to describe those who have ancestry from a Spanish-speaking country. In contrast, Latino refers to anyone who is from or descendent of a Latin American country. This large group of homebuyers has unique qualities that set them apart from other ethnic groups.

Providing Spanish-language materials is not the only consideration as they proceed into homeownership. They face different challenges than others when it comes to financing a home. They gravitate toward areas with a higher cost of living and value having space for their extended family members. They were also adversely affected by the pandemic when compared to their non-Hispanic counterparts.

Learning more about this unique group of homebuyers is elemental to understanding the future of real estate as we know it. They’re going to account for more than 70 percent of the growth in homeownership in the next 20 years.

Future Homeownership Rates Highlight Diversity

A recent report from the Urban Institute highlights many changes that homeownership rates will experience, specifically for people of color. The findings indicate that between 2020-2040, Hispanic homeownership will increase the most at 4.8 million new homeowners, followed by Asian homeowners at 2.7 million and Black homeowners at 1.2 million. Here’s the most shocking discovery – the number of white homeowners will decline by 1.8 million.

With nearly 43 million native Spanish speakers in the US and another 15 million with a knowledge of Spanish, it’s no surprise that Hispanic people are playing a significant role in homeownership.

Generation Z Pushes Diversity Forward

It’s not the first time that Gen Z has been mentioned concerning diversity in real estate. Nearly half of them are racial or ethnic minorities, according to the Pew Research Center. They prefer to live in culturally diverse neighborhoods that offer a sense of community and are willing to move further to achieve that.

The same research on Gen Z also reveals that approximately 1-in-5 Gen Zers are Hispanic and that only 52% are white. When looking back at the Baby Boomers, who were 82% white and 4% Hispanic, the progression of diversity in this generation is indisputable. Before working with this young generation, title agents, real estate agents, lenders, and other real estate professionals need to prepare for this demographic shift.

Hispanic People Are Ready to Buy Despite Hurdles

According to the 2020 report from the National Association of Hispanic Real Estate Professionals, the Hispanic population has a median age of 29.8 years, and 1-in 3 Latinos are at a prime age to buy a home (25-44 years old). Although they’re ready to make a move, like Millennials as a whole, they come with a specific approach to buying a home and challenges.

It’s not news that the pandemic has affected the US population as a whole, but honing in on the Hispanic population shows a unique set of impacts on their ability to buy a home.

These are five ways they were affected:

• A restrictive environment for credit access
• Low housing inventory and high prices
• Record unemployment (10.4% for Latinos, the highest since 2011)
• High rates of COVID infections (3x more than the non-Hispanic White population)
• Inability to work from home (28.9% of Latinos vs. 48.7% of non-Hispanics White workers)

Family Comes First

Hispanic homebuyers have a cultural emphasis on supporting more than just their immediate family members. They’re more likely to have lived with relatives or plan to live with relatives in their first home, Redfin reports. A whopping 52% of Hispanic homeowners have experienced living with relatives, often to save money on rent and plan for future home costs. This proportion stacks more than 10% higher than Black or white homeowners.

Part of this trend is the ability to lower costs, and another factor is the cultural significance of multi-generational homes in the Hispanic community. The Pew Research Center reported back in 2018 that Hispanics ranked second place for the highest percentage of multi-generational living in the country.

A significant factor in the higher percentage of multi-generational homes is their unique path to homeownership. Many Hispanic people in the country are coming from Latin countries and need the support of their families when first arriving in the US. They lean on their network more than families who have been in the country for multiple generations.

Financing is a Barrier

Currently, mortgage underwriting follows models that cater to past generations and traditional characteristics of low-risk borrowers. As shifts occur in the economy, especially since the pandemic began, the country is seeing an increase in self-employed individuals and gig workers and a decrease in the traditional W2 wage worker. The Hispanic population is at the forefront of these changes to the American workforce.

Financial characteristics of Hispanic homebuyers:

• High debt-to-income ratios (high cost of living)
• Low down payments for mortgages
• They have vulnerable incomes (and jobs)

On the bright side, many Hispanic people in our country have less student debt than other groups because of low college graduation rates. According to the National Association of Hispanic Real Estate Professionals’ report in 2020, “Latinos owe the least in education installment loans, a median of $17,600, compared to $30,000 for Black students and $23,000 for non-Hispanic White students. This lack of debt gives them a little help when it comes time to put down money for a home.

They Favor Large, Expensive Cities

The second factor in their struggle with financing for a home is their preference for expensive cities. Rent and home prices in these cities continuously increase yet offer access to work and a stronger sense of community.

Top cities with the largest Hispanic populations:

• New York City, New York
• Los Angeles, California
• Houston, Texas
• San Antonio, Texas
• Chicago, Illinois
• Phoenix, Arizona
• Dallas, Texas
• El Paso, Texas
• San Diego, California
• San Jose, California
• Miami, Florida

Although the cities above hold the highest population of Hispanics, homeownership has brought them to other states for more affordable housing options. They are willing to move further than other populations giving them a broader scope when choosing a home.

Top states for increased Hispanic homeownership:

• Washington D.C. (33.2%)
• South Carolina (25.3%)
• Wyoming (21.7%)
• Georgia (20.1%)
• Oregon (20.1%)

Working with Hispanic clients requires more than just translating documents into Spanish. A whopping 94.3% of Latinos are now U.S.-born citizens who are much more likely to have a firm grasp of English. It takes a deeper understanding of their demographics, their barriers to homeownership, and what they value in a home to get them on the path to buying a home.

Regardless of someone’s position in the real estate transaction, a one-size-fits-all approach for homebuyers will not work. Real estate professionals should be jumping in on the chance to formulate a stronger relationship with Hispanic clients as they are the future majority of homeownership growth in the country.

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