At a time when the housing industry needs an infusion of hope, the demographic gods are poised to unleash what some realtors, lenders and builders say will be the industry’s salvation: waves of young Hispanic workers and families hungry for houses of their own.
For the moment, however, holding back that salvation are such economic factors as tight credit and a big, new trend toward converting unsold houses to rental properties, plus a real estate industry largely unfamiliar with the Hispanic market.
Sheer numbers — the U.S. Hispanic population is expected to grow by 167 percent by 2050 with a corresponding U.S. population growth of only 42 percent — promise that a swelling percentage of home sales eventually will go to Hispanic buyers. Sixty percent of U.S. Latinos are younger than 35, and the Hispanic population’s median age is 28, the cusp of the prime home-buying time of life.
Indeed, before the housing collapse, Hispanics were among the beneficiaries of relaxed mortgage-lending standards prompted by U.S. policies designed to help minorities acquire homes.
From 2000 through 2006, Hispanic home ownership grew at a record rate.
But according to the National Association of Hispanic Real Estate Professionals (NAHREP), much of that growth was given back, as Hispanics suffered disproportionate losses from foreclosures. Hispanics living in the U.S. lost two-thirds of their household wealth from 2005 through 2009, according to the Pew Research Center, while the median level of home equity held by Hispanic homeowners declined by half. The home ownership rate among Hispanic households fell from 51 percent to 47 percent.
NAHREP foresees a revival.
Because prices for low- and moderately priced homes seem to have hit bottom, owners will again start listing such homes, said Alejandro Becerra, a housing consultant who authored a lengthy report for NAHREP entitled “State of Hispanic Homeownership.”
“That’s the virtue of the Latino community being young,” Becerra said. “That’s where the sales are occurring.”
“Out of 2.3 million new jobs that hit the market last year, Hispanics got better than 60 percent of them,” said Gerard Ascenscio, NAHREP’s president and a real estate broker based in the heavily Hispanic Los Angeles suburb of San Fernando. “So it’s a burgeoning demographic with more clout, more purchasing power – and sheer numbers.”
According to NAHREP’s report, Hispanics are “beginning to drive growth in housing demand” with a small, 0.6 percent uptick in the percentage of Hispanic homeownership during the third quarter of 2011, the last period for which census figures are available.
But the difficulty young Hispanics are having in finding financing is suppressing the market, NAHREP officials said.
According to Gary Acosta, co-founder of NAHREP and owner of New Vista Asset Management, the Hispanic market includes many “first-time home buyers whose access to capital is limited and [who] haven’t had time to acquire a lot of wealth and may not have family members who can loan them money for a down payment.”
Acosta and NAHREP are concerned about tight lending. They acknowledge that looser standards contributed to the housing bubble, but they say the government’s insistence on stricter standards is hurting potential minority homebuyers.
“The pendulum has swung too far the other way,” Acosta said.
He continued: “There is almost no money for less than 10 percent down. The FHA loans work in many cases, but in a lot of cases [they don’t].”
Acosta said more stringent income documentation requirements work against Hispanic would-be buyers who take on second jobs such as housecleaning to earn down payments.
“It’s difficult to document that income in a traditional way,” Acosta said. Being paid in unreported cash, as is common with domestic work, is illegal even though it is a widespread practice.
Low- and no-documentation loans were popular before the crash, even though they carried higher interest rates. In an essay on his website, Becerra cited a Credit Suisse report that loans with low to no documentation rose from 30 percent in 2001 to 60 percent in 2006.
Even when they can get financing, all prospective homebuyers are running into a problem finding entry-level homes, Ascenscio said.
“Out on the open market,” he said, “there is a scarcity of inventory with most houses getting multiple bids, so a lot of my customers can’t seem to land an accepted offer.”
Part of the scarcity is due to the fact that underwater homeowners are holding on to their homes, hoping the market improves before they put them up for sale. The problem seems to be worse in areas that were hardest-hit by the downturn, like Southern California, Las Vegas and Phoenix, where logic dictates that plenty of unwanted properties should be on the market.
With rents rising faster than purchase prices, entry-level buyers also are finding competition from investors who seek to turn lower-priced homes into rental properties. Institutional investors are buying thousands of conversion-to-rental homes, nearly 65 percent more in 2011 than in 2010, according to the National Association of Realtors. Banks themselves are also renting out some of these homes.
And banks favor some investors because they offer cash. In fact, banks will accept a lower cash bid for a foreclosed home over a higher, financed offer. The investors are also willing to buy damaged homes, and then make them rentable by doing minimal safety repairs.
The Demand Institute, a think-tank jointly operated by The Conference Board and the Nielsen Company, has forecast that the housing recovery will follow the pattern Ascenscio is concerned about: Investors, meeting the demand for rental properties, gobble up inexpensive homes while “a wide swath of Americans … delay, scale back, or put off entirely their dreams of home ownership,” according to the institute’s chief research officer, Louise Keely.
But Hispanics have a passion for the family home, Ascenscio said. They “want houses, not apartments,” agrees Robert Alaniz, a public-affairs marketer based in Los Angeles. “People savvy to that are going to start targeting that market now.”
According to Ascenscio, Hispanics increasingly are an upwardly mobile, educated and flexible population, willing to spread beyond the traditional Latino geographic enclaves.
“They’re going where there’s a higher demand for the labor force,” he said, “and better housing opportunities.”
Understanding the Hispanic market
It is easy to find realtors who understand the Hispanic market in the regions of the U.S. where those of Mexican, Puerto Rican, Cuban, Colombian and Central American heritage settled decades ago, such as Southern California, Nevada, Arizona, Texas, Florida, New York and New Jersey. Realtors in those markets often come from the Latino community, or have worked within that community for so long that they have adapted their practices to the culture, Ascenscio said.
But Hispanics are moving to states like Alabama, North Carolina, North Dakota, Minnesota and Wisconsin, where they represent a fraction of the overall population. According to NAHREP, over the past decade, “Hispanics alone drove the population growth of Phoenix, Philadelphia, Indianapolis, Omaha and Atlanta.” Of those, only Phoenix is known as a Hispanic locale.
Such migration means local realtors who want to tap into a new source of clients need to learn, if not the language, some features of the culture, NAHREP executives agreed.
“When I opened San Fernando Realty, from the bottom up, I gave this office the look and feel to make [Latinos] feel comfortable,” said Ascenscio, who is a native of Mexico. “If you walk into my office, you see big exposed wood beams, faux wood beams, Spanish style décor, a big mural of the missions of Alta California. Outside you have arches, a tower in the front, clay tiles. I don’t have chairs, I have old church benches.”
All of his staff members are bilingual.
Carmen Mercado, a national recruiter for Century 21 and a native of Puerto Rico, is based on Long Island, N.Y. She said an investment of a realtor’s time into learning the Hispanic customer’s needs and preferences is worthwhile.
“Anyone in the real estate community who is committed to ethically and responsibly serving the Hispanic community can do so,” Mercado said. “You don’t have to be Latino or speak the language to do that.”
Mercado said speaking Spanish, or hiring someone who does, would help, but if that option isn’t available, it isn’t a necessity. A realtor who does business only in English can nonetheless pursue Hispanic customers.
“If you develop the tools to serve that market, to give them a comfort level and earn their trust, they will become customers for life,” she added.
Mercado also recommended that realtors refer Hispanic clients to community resources, such as housing counseling agencies, which are in every state. Such agencies can provide advice on buying a home, renting, defaults, foreclosures and credit issues.
During her years as a realtor on Long Island, Mercado connected many of her Hispanic clients with housing counselors she trusted. The U.S. Department of Housing and Urban Development lists more than 100 counseling agencies in the state of New York.
Many such agencies provide services to Spanish speakers. HUD lists housing counseling services on its website by way of an interactive map of the United States.
“The counselor will do discovery with them, helping them figure out if they are ready,” Mercado said. “If they are ready, have good credit, know the dos and don’ts, they’ll come back to” the real estate agent who referred them.
Over time, Acosta said, the wave of Hispanic buyers will influence not just realtors, but also the entire housing industry.
When construction starts up again, he speculated that the designs for new homes would start to reflect, subtly, the particular desires of the biggest and fastest-growing minority, with larger living rooms for family gatherings, and more bedrooms to accommodate extended families.
The slow economy and rental boom temporarily have obscured a dramatic transformation of the housing stock of America. Not the buildings, yet; what is beginning to change is who occupies them.