Over 600,000 Latinos bought a home using a mortgage in 2020, an increase of 13% from the previous year.
That’s according to the 2020 State of Hispanic Homeownership Report, released this week by the National Association of Hispanic Real Estate Professionals (NAHREP). The growth in buyers helped push the Hispanic homeownership rate to an estimated 48-49% in 2020, up from 47.5% in 2019.
It’s the sixth straight year that the Hispanic homeownership rate has risen, with Latinos the only demographic in the country to grow their share of homeowners each of the past six years. NAHREP now estimates that there were some 8,880,000 Hispanic owner households in America in 2020, up roughly 725,000 units annually.
“Despite significant headwinds, Latinos drove homeownership growth in America for the sixth consecutive year,” said Gary Acosta, co-founder and CEO of NAHREP. “This was especially consequential in 2020 because it was housing more than any other sector that pulled the country out of the coronavirus-induced recession.”
Those headwinds included the significant negative impact of COVID-19 on working Latinos, considering the cohort’s over-representation in the service industry. The Latino unemployment rate in 2020 was 10.4%, the group’s highest annual average since 2011. Still, the pandemic seems to have motivated would-be Hispanic buyers further toward homeownership. NAHREP noted that 50% of Hispanic respondents to a Realtor.com survey said they wanted to buy a home sooner than they previously did due to COVID 19, compared to 41% of the general population. Moreover, 31% of Hispanic participants in a National Association of Home Builders survey said they want a larger home as a result of COVID — highest among racial groups.
Such figures support NAHREP’s assertion that Latino buyers will be big drivers of the housing market moving forward. Citing the Urban Institute, NAHREP noted that 70% of new homeowners — a net growth of 4.8 million — over the next 20 years are projected to be Hispanic, with the number of Latinos aging into their prime homebuying window the largest catalyst for growth in the near term. Nearly one in three Latinos is currently in the prime buying range of 25-44, and with a median age of 29.8, Latinos are nearly 14 years younger than the non-Hispanic white population. And if last year is any indication, many of those young millennial Latinos can be projected to buy sooner rather than later; in 2020, 43.6% of Hispanic homebuyers were under 34, compared to just 37.3% of the general population of buyers.
NAHREP’s study also found that Latino buyers continue to depend heavily on low downpayment programs to afford purchasing homes. They rely heavily on financing targeted at first-time buyers and low-wealth borrowers, with Hispanics more than twice as likely to use FHA loans than white homebuyers. In comparison, just 10.7% of all conventional loans went to Latino borrowers in 2020. The median downpayment for Latino buyers was 3.5%, compared to 10% for the homebuying population as a whole.
Latino homebuyers also generally carry a lower credit score than the general homebuying populace, with a median FICO score of 714 in 2019 compared to 746 for all buyers. And while Latino borrowers had a median debt-to-income ratio of 41% in 2019 (down from 42% the year prior), high DTIs were still the top reason Latinos were denied loans in 2020. NAHREP found that Hispanic borrowers were 16.8% more likely than white borrowers to be denied because of a too-high DTI — problematic considering the tightened credit standards brought about by the COVID-19 crisis.
“I saw more Latinos in 2020 raising their hand, wanting to become homeowners than ever before in my career, while also seeing more Latinos get denied for mortgages,” said Nora Aguirre, an agent with Century 21 Americana in Las Vegas. “This was due to the severe credit overlays in the mortgage industry. Even though the Latino community increased their homeownership rate in 2020, the number could have been significantly higher given how high Latino demand was.”
NAHREP identified access to credit as one of Latino buyers’ biggest obstacles, especially considering that 31% of Latinos report nontraditional earnings. Still, with 8.3 million Hispanics deemed “mortgage ready” — under 45 without a mortgage and with credit characteristics that would potentially qualify for one — the organization is optimistic.
“A strong work ethic lifted Latino homebuyers to near record numbers,” said Sara Rodriguez, NAHREP’s 2021 National President. “Improvements to housing supply and mortgage credit rules will ensure robust growth for the next decade and beyond.”