Rise in Home Ownership Among Hispanics

Mortgage lenders may find it profitable to heed a significant increase in homeownership among Hispanics. The last census shows that over the decade, home ownership among Hispanics grew to 46 percent from 42 percent. The home ownership rate among all Americans rose to 66 percent from 64 percent. However, there were significant differences among Hispanic groups in home ownership rates in 2000: Hispanic households of Cuban ancestry, 58 percent (up from 51 percent in 1990); Mexican households, 48 percent; Puerto Rican households, 35 percent. Other homeownership rates in 2000 were: blacks, 46 percent; whites, 72 percent; and Asian households, 53 percent.

However, a new study by Harvard economist George Borjas (Professor of public policy at the John F. Kennedy School of Government) found a widening gap in homeownership between native-born and immigrant households. The study was released by the Research Institute for Housing America, an affiliate of the Mortgage Bankers Association. Overall in 2000, the homeownership rate was 67 percent for native-born households but only 47 percent for immigrant households. A decade earlier, the gap was only 15 percentage points, instead of the current 20 percentage points. Borjas also found that the homeownership difference relative to native-born households was particularly wide for groups of Hispanic origin, even after adjustment for income and household composition.

Annual immigration volume during the 1990s was nearly double the levels experienced during the 1970s. Nearly half of foreign-born households came from Latin America during the 1990s, and almost one-third came from Asia. If the past is any guide, the homeownership gap closes over time as immigrant households assimilate into housing markets and their incomes rise. The immigration wave of the 1990s is likely to significantly boost demand for housing and mortgages. Rental markets are affected first, but demand for homeownership follows. The Mortgage Bankers Association estimates that immigrants could create demand for 4 million more new homes over the next two decades. Doug Duncan, MBA Senior Vice President and Chief Economist told Inside Mortgage Finance that "the study clearly points out that foreign-born households will have an important influence in many housing and mortgage markets in the coming years. We will see the greatest impact in areas of the country such as Los Angeles and many other Western cities, as well as Miami and New York, where large concentrations of immigrants are already living."

Interestingly, ethnic enclaves that attract new immigrants of the same national origin may have a positive or negative influence on subsequent homeownership rates. On the one hand, such enclaves can increase new arrivals' job opportunities and provide an important support network. However, if new arrivals become reluctant to leave such enclaves, it can hurt their chances of obtaining better-paying jobs and reduce incentives to learn the culture and language in the host labor market. Lenders who wish to tap the demand for homeownership in such enclaves will have to develop outreach programs that utilize or emulate the support networks already in place in these communities.