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March 22nd, 2012

Latinos represent a ‘mega force’ in housing

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Aaron Crowe 60x60The post below was written by HSH.com contributor Aaron Crowe. Aaron has contributed several features to HSH.com, including his most-recent work, “Seniors: Don’t sacrifice style or safety when downsizing” and “Can you score living near a baseball stadium?” This is Aaron’s first blog post for HSH.com:

Recent reports suggest that Latino first-time homebuyers are the best bet for moving home ownership rates up again in this country.

According to the 2011 State of Hispanic Homeownership Report released this month by the National Association of Hispanic Real Estate Professionals, or NAHREP, “Over the next 10 years, Hispanics are expected to account for 40 percent of the estimated 12 million net new households, with minorities comprising 70 percent of total growth.”

A ‘mega force’ in housing

“Latinos are a younger demographic as a group, so they are grouping into the prime homebuying age,” says Gary Acosta, co-executive director of NAHREP.

The collective purchasing power of this “mega force” in housing is expected to jump by 50 percent within the next four years. It’s a growing market that’s catching the attention of real estate agents, mortgage lenders and other professionals who are bilingual and know how to cater to the needs of Latino homebuyers.

Websites such as Sucasa.net and ElCentroInc.com cater to Spanish-speaking homebuyers. While Sucasa.net offers MLS listings, ElCentroInc.com provides educational information for first-time homebuyers who aren’t familiar with the homebuying process in the U.S.

Latino homebuyers face many struggles

The biggest barrier for first-time Latino buyers is financing, says Acosta. Smaller down payments–from 3 percent to 5 percent–are easier for many first-time Latino buyers to afford because they don’t have as much savings as other first-time homebuyers, Acosta explains.

During the housing boom in 2006, an analysis of loans reported under the Home Mortgage Disclosure Act found that Hispanics were twice as likely and blacks were 2.3 times more likely to receive high-interest loans than whites, according to a New York Times article. (Be sure to read a more current piece by Gene Demby in the Huffington Post’s Latino Voices section—“Blacks, Latinos Lose Major Ground In Home Ownership: Study.”)

The NAHREP report found that at the peak of the housing boom, about 30 percent of Latino borrowers were more likely to receive higher-cost, nonprime loans than white borrowers. With such costly and risky loans, Latinos were twice as likely as whites to lose their homes to foreclosures, the study found. Even Latinos with good credit scores of 660 or higher received a high-interest-rate loan more than three times as often as white borrowers.

“Latinos were disproportionately affected by the housing crisis primarily because Latinos all too often were steered to sub-prime mortgages to purchase or refinance their home,” according to the NAHREP report. “Since 2007, Latino unemployment has averaged about 12 percent and about 1.3 million Latino homeowners have lost their homes or are at imminent risk of foreclosure. According to a 2011 study by the Center for Responsible Lending, the rate of completed foreclosures on loans originating between 2004 and 2008 was 11.9 percent for Latinos.”

Another struggle they face is competing with investors for foreclosed homes. “A lot of Latinos reside in markets that have been hit hard by foreclosures,” particularly in the West, Acosta says.

Latinos: The ‘ideal consumer’

Latinos are “a more ideal consumer” for home ownership because they tend to have larger families and are more likely than other Americans to consider home ownership as a good way to build up wealth, Acosta says.

The NAHREP report found that “73 percent of Hispanics say that owning a home is a good way to build up wealth that can be passed along to their families, compared to 57 percent of all Americans.”

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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