Lack of New Housing Crashes Latinos' Affordability to Own a Home

Homeownership is a sign for many Latinos that they have made it in America, proving they achieved the American dream. And it's a goal shared by an increasing number of Latinos and Hispanics in the U.S., says the Pew Research Center, which highlights in a recent report that homeownership rates for this group are rising.

Hispanic homeownership rates, says the Pew, rose slightly between 2010 and 2021, from 47% to 51%. While that means that currently more than half of the almost 63 million people who identify themselves as Hispanics or Latinos are homeowners, the rate trails that of all U.S. households, which is 65%.

One of the reasons for the low rate of Latino homeownership can be traced to the low disposal of new housing, a situation that takes a toll on the Hispanics' odds of finding and buying a house.

"The real estate market is doing well, neither the high-interest rates nor the high cost of living prevent Latinos from deciding to buy a house, the real problem is that there are no houses and when we find one that my client likes, we find that it already has more than 10 offers and then it becomes an auction," Cecilia Cepeda, a Realtor for Fairfax Realty Premier, told The Latin Times.

"Most of my clients are Latinos who look for me because I serve them in Spanish, but for several consecutive years, many of them have not achieved the dream of owning their home because of the scarcity that forces them to offer much more than the price that appears in the MLS (Multiple Listing Service), something that is very uncomfortable for the client and for the realtor," sad Cepeda, who has more than 10 years of experience in Washington, D.C. metro area.

In fact, there are not enough existing homes and new construction to meet demand. According to the Harvard Joint Center for Housing Studies, there were fewer existing homes available for sale in January 2022 than at any point since the late 1990s, down 17.5% from the record low a year earlier. The lack of housing supply is compounded by a decade-long shortfall in new construction, says the latest National Hispanic Real Estate Professionals (NHREP) Hispanic Ownership Report.

Cepeda adds that Latinos are mostly first-time buyers, so they can only aspire to low-cost small homes, making them the most affected segment of the entire population, considering that these are the least available on the market.

According to Realtor.com, 70.5% of homes on the market had a list price below $350,000 in July 2015, compared to 38.5% in October 2022. As of December 2022, the national median listing price was $400,000.

In the face of those prices, the Pew Center details that household income among Hispanics is $59,000 per year, below the U.S. median of $67,800, meaning that the average Hispanic family has less money to afford to pay for shelter.

LESS HOUSES NATIONWIDE

Up for Growth, an organization that uses data to help solve the nation's housing shortage and affordability crisis, said in a report that housing underproduction in the U.S. reached 3.9 million housing units in 2021, an increase of 3% from 2019.

The number of counties in the U.S. experiencing housing underproduction increased by 32%, the study 'Housing Underproduction in 2023 in the U.S.' reveals, adding that shortage is also shifting from urban areas to outlying areas, with only a minimal increase in availability in urban areas.

The top 10 states with the most severe housing underproduction, according to the Up for Growth study are California, Idaho, Utah, New Hampshire, Oregon, Washington, Minnesota, Colorado, Arizona, and New Jersey.

Some of the most affordable markets for Latino homebuyers are in the Midwest and markets that haven't traditionally had large Latino populations on the East Coast. Columbia, South Carolina was considered the most affordable, where the median Hispanic household income was more than $30,000 higher than the income needed to afford the median-priced home in that market.

However, it is possible that as the housing shortage crisis continues to worsen, states that are still considered affordable may soon become unaffordable. For example, except for Florida, South Carolina was the state with the largest year-over-year increase in home prices a year ago, at 13%. Florida had 18%. Other states considered affordable include Atlanta, Illinois, Tennessee, and Texas.

Texas, traditionally known for its low home prices, has recently seen a market shift that some are calling Texas-Californication. Atila Almeida, NHREP National Board Director, told The Latin Times that there may have been a slight increase in home prices in Texas as a result of several factors, "but we are still the state with the best prospects for Hispanics who want to be homeowners. "Texas is a state where you can find three-bedroom, two-bath homes in great neighborhoods for less than $350,000," he added.

In comparison, the least affordable states for Latinos are California, New Jersey and Washington. California, the state with the largest Latino population, is home to some of the least affordable markets. When comparing the median Hispanic household income in metropolitan statistical areas (MSAs) to the income needed to afford a median-priced home, the San Francisco market was the least affordable, with a gap of more than $150,000.

The fact that California is the state with the largest Latino population is indicative of the national situation. A report by UnidosUS shows that the homeownership gap in California disproportionately affects Latinos.

The report shows that in 2021, only 45.4% of California Latinos were homeowners, 18 percentage points lower than California's non-Hispanic white population (63.6%). Notably, California Latinos lag behind the national Latino homeownership rate of 49.4%.

The greatest opportunity for Latino homeownership growth also exists in markets where Latinos are mortgage-ready and where affordability is reasonable. Freddie Mac and NAHREP have identified the top 25 markets with the most Latinos age 45 and under who are considered mortgage-ready, ranked by the share of those who can afford the median-priced home. Based on this ranking, McAllen, Texas offers the greatest opportunity, followed by the Brownsville and El Paso, Texas metropolitan statistical areas.