A year ago, when I started writing for El American, I was working on an article about the housing boom in the United States and how, despite the pandemic, millennials were taking the risk of becoming homeowners. Since I didn’t know or meet anyone who was buying a home I ventured to the Reddit forums where millennials abound.
I went through the various social media forums asking the netizens if there was anyone among them who had recently purchased a house. To my surprise, one of the few elaborate responses I got was from Daniel Cabrera, a young Hispanic who had recently bought a house with his girlfriend Emily in Tampa. They took advantage of the low credit and that they both had steady jobs.
Although at the time it was a pleasant surprise to meet a Hispanic to tell me about his case, it should not have been, because nowadays, Hispanics are the leading homeowners in the United States. A recent Urban Institute study shows that half of the growth in new homeowners over the last decade has been driven by Latinos, and the Hispanic population is expected to lead homeownership over the next 20 years.
Hispanic homeowners lead in home buying, but a gap persists with white and Asian populations
As of September 2021, there was still a significant gap between white (non-Hispanic) and Hispanic homeowners. While 74% of white households owned their homes, this was only true for 48% of Hispanic households, according to data from the Federal Reserve of St. Louis (FRED).
The gap becomes even more significant among the black population, where only 44% of families are homeowners. Among Islanders, Native Americans and Asians, on average up to 57% of families are homeowners.
Hispanic families owned as much as 50% of the property they lived in just before the housing crisis of 2008, which drove millions of Americans, across all demographic groups, out of their homes because they had to sell or were foreclosed on.
What makes a Hispanic become a homeowner?
Since 2016 Americans began to see a recovery in home buying that accelerated in 2019, however, with the pandemic of 2020 growth receded for a few months, only to recover sharply in late 2020 due to the Fed lowering interest rates to near zero, which made home loans cheaper.
Accelerated home buying has been led by younger people and especially Hispanics. As the Urban Institute reveals, in 1990 only 7.3% of young homeowners were Hispanic; by 2020 Hispanics will account for 16.4% of this figure.
According to Census Bureau data, currently, the states with the highest percentage of Hispanic homeowners are West Virginia and New Mexico. A striking result: while the Hispanic population in West Virginia represents only 1.5% of the state, the Hispanic population in New Mexico is almost 50%. Apparently, the number of Hispanics in a state is not a determinant of housing tenure.
Two states with significant native Hispanic populations, California and Texas, have dissimilar percentages of homeownership. While in California 44% of Hispanics own their homes, in Texas this figure rises to 57%.
This difference in homeownership becomes even more significant when taking into account that the median income of the average Hispanic household in Texas is $10,000 less than the income of a Hispanic household in California.
Taking two states where Hispanic households earn about the same, New York and Florida — in the former a Hispanic household earns on average $53,350 and in the latter about $52,497 — the same is not true for homeownership. While in Florida approximately 52% of Hispanic families own their homes, in New York only 26.32% do.
When looking at the percentage of Hispanic homeowners by state and contrasting it with the price of housing (with data provided by the Zillow platform), it can be seen that indeed the price of housing in a state is a determinant in the percentage of Hispanic families who will own their home.
Except for Colorado and Utah, in no state where housing exceeds $450,000 will Hispanic homeowners make up more than 50% of households. In fact, the trend indicates that the more affordable the median home, the more Hispanic families will be homeowners.
Even so, the relationship is not linear, as the cost of housing falls short in explaining why in South Carolina, where the median home costs about $248,000, the percentage of Hispanic homeowners is much lower than in Arizona, where home prices range from $355,000.
Factors such as access to credit and effective payment design are crucial in determining a Hispanic or non-Hispanic family’s access to housing, even more so than the cost of the home.
Despite home price growth, Hispanics will lead homeownership
Although home prices are rising across the country, Hispanics appear to be willing to save or go into debt to purchase properties, which will make them the main force in homeownership.
Economist Laurie Goodman‘s projections indicate that Hispanic households will account for up to 20% of home purchases in the next few years. Hispanic millennials, unlike their non-Hispanic counterparts, are buying at the same rate as past generations.
According to Urban Institute projections, by 2040, while there will be 1.8 million fewer white homeowners, and African Americans and Asians will increase homeownership by 4.3 million, there will be 4.8 million new Hispanic homeowners, making them the largest net homebuyers in the United States.