In a report released last month, the U.S. Census Bureau said in 2011 minorities became a majority of America’s young. More than half of all infants born in the U.S. last year were minorities or multiracial.
Much has been written about the report and the changing face of America. What we haven’t seen is how this trend might affect the real estate industry. To tackle the questions we studied prominent reports to create a picture of the emerging Hispanic home buyer.
The Changing Face of the Home Buyer
Each year the National Association of Realtors releases the “Profile of Buyers and Sellers,” a comprehensive document that attempts to parse data from the previous year’s housing market. Among that data is a breakdown of such things as the median age of a home buyer and median income.
It is, quite literally, a wealth of information for anyone interested in the real estate market.
Among the information NAR gathers and releases is data on the race/ethnicity of first-time and recurring home buyers. It shouldn’t come as a surprise that whites make up the majority of home purchases—about 85 percent.
It’s the remaining home buyers—those that make up the other 15 percent—we are concerned with. When broken down NAR’s data showed in 2011:
- Black/African-American made up 6 percent of home buyers;
- Hispanic/Latino made up 6 percent of home buyers;
- Asian/Pacific Islander made up 4 percent of home buyers; and
- Other ethnicities/races made up 2 percent.
These numbers were fairly consistent when compared to the same data for 2010.
Nevertheless, the figures represent all home buyers; this includes first-time home buyers and repeat buyers. If we look deeper a trend emerges–an increase in Hispanic first-time home buyers.
The Growing Hispanic Mega Market
When first-time home buyers and repeat buyers are separated into two categories there is a different story. While whites still made up the majority of first-time home buyers, the percentage is smaller. About 75 percent of first-time home buyers self-identify as white.
The next largest group was Hispanic/Latino home buyers, which made up 11 percent of all first-time home buyers. This was in an increase of 38% percent over 2010 figures.
“The rapidly growing U.S. Hispanic population is entering the housing market in increasing numbers,” said Movoto founder and CEO Henry Shao. “As this segment of the population makes up an ever larger percentage of home buyers, the real estate industry will need to adapt. This is why Movoto has partnered with a network of top-rated, Spanish speaking agents around the country.”
What can we take from this? First-time Hispanic home buyers are on the rise.
Why are there more so many Hispanic home buyers?
The National Association of Hispanic Real Estate Professionals (NAHREP) stated in a recent report the Hispanic population in America has expanded 3.5 times between 1980 and 2010. This means that since 1980 every two out of five people added to the U.S. population were Hispanic.
We can look at it another way, too. Between 2000 and 2009 there was a significant difference in the number of births in the country, especially between whites and Hispanics. During this time whites had 1.1 births for every death, while Hispanics had 8.9 births for every death.
“Because of such population increase, Hispanics were responsible for most of the overall population growth in the country over the past decade,” the NAHREP wrote in its “2011 State of Hispanic Homeownership” report. “This continued population trend is expected to provide a strong labor pool, a driving force in the economy, and an increasingly key market for homeownership.”
In addition, the San Diego-based not-for-profit claimed that 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.
Those are lofty figures.
Gerardo “Jerry” Ascencio, NAHREP’s president, told Movoto there are a number of reasons for this market trend. In general he said Hispanics:
- Are reaching the age of household formation;
- Have a high birthrate;
- Have high purchasing power; and
- Are more excited to buy homes.
“The Hispanic community is still very excited about purchasing their own home,” Ascencio said. “For the Hispanic community purchasing a piece of property is much more than purchasing property, it’s a way of saying, ‘I have arrived.’”
Part of this trend stems from the increase in Hispanic purchasing power. Ascencio said in the next 48 months the country will see a 50 percent increase in Hispanic purchasing power. Put into a dollar figure, there will be an increase from $1.1 trillion to $1.6 trillion.
High Aspirations: Socioeconomic Reasons Behind the Trend
In addition to the increase in population and purchasing power, there are socioeconomic reasons.
Among the factors NAHREP used to point to the potential rise of the “Hispanic Mega Market” are surveys that indicated, in general, Latinos are more motivated than the general population to purchase a home—for emotional and financial reasons.
“Nobody in the Hispanic community dreams and aspires to be a tenant,” Ascencio said.
- 56 percent of Hispanics consider owning a home a symbol of success compared to only 32 percent of all Americans.
- 68 percent of Hispanics are more likely to believe purchasing a home is a good financial opportunity, while only 57 percent of all Americans think the same.
- 73 percent of Hispanics believe owning a home is a good way to accumulate wealth that can be passed to their families, compared to 57 percent of all Americans.
Ascencio said in many ways this emerging market has been overlooked, partially because of the housing crisis, and the focus on the loss of equity.
A Generation in Line
The story of the housing collapse is well worn. After years of excess the bubble collapsed in on itself and overnight homeowners were underwater. Ascencio argued there is a second story, a generation waiting in line that is just now beginning to emerge.
“That new generation, that is untapped, is ready to jump in now, and that’s why there is so much excitement about this,” Ascencio said. “This population has been under served. The American dream is still very vibrant in the Hispanic heart.”