Latino Homeownership Approaches 50% as Rates Continue to Climb in the U.S.

Even though 2023 was a difficult year for the real estate market, with mortgage rates in decade-high levels and tight inventories, Latinos kept becoming homeowners, increasing overall figures and being just shy of a significant milestone: for half of all households to reach homeowner status.

The figures come from a new report by the National Association of Hispanic Real Estate Professionals (NAHREP), which has been tracking Latino homeownership rates since the beginning of the century.

Its tracker showed a quick climb between the years 2000 and 2007, when the amount of Latino homeownership reached 49.7%. The figure decreased during the financial recession, a situation which later also combined with a quick increase in Latino migration to the country (something evident given the fact that the number of households who were homeowners increased but the overall rate decreased).

Rates and number of households started climbing in unison since 2014 and have done so sustainedly ever since, going from 45.4% and 6,864,000 a decade ago to the current 49.5% and 9,555,000 households who can call themselves homeowners.

The report explained that last year's challenging conditions included 30-year fixed interest rates of 7.79%, the highest weekly average since 2000. "The rapid rise in interest rates
following the historic lows seen during the COVID-19 pandemic had a massive impact on prospective Hispanic homebuyers, making qualification more difficult and increasing mortgage payments."

"While rising interest rates affected all homebuyers, this impact was more pronounced among Hispanic households, many of whom are first time buyers with lower median incomes and who live in higher priced markets," the study added.

However, "Latinos persisted in finding innovative ways to turn dreams of homeownership into reality, growing their homeownership rate more significantly than any other racial or ethnic group last year." Overall, there was a net gain of 377,000 homeowners from the demographic.

But other challenges remain, especially unaffordability. Even though price appreciation slowed dramatically in April 2023 compared to the year prior (up 2.3%, when the inter-annual rate was 19.5% in April 2022), "an increasingly smaller share of homes on the market are considered affordable."

This is illustrated by the fact that, according to Realtor.com, less than 14% of all houses listed in 2023 were priced under $200,000, when this category comprised the largest share of homes for sale in 2016. Last year the largest share of homes on the market were listed at $500,000 or more.

Another challenge is the continuously low level of inventory available for purchase, which the study describes as being at "crisis levels." Even though 2023 saw a slight increase, the overall figure is down 42% than in 2019. Increased rates and decades of slowdown in single-family construction were cited as reasons for this.

But Latinos resorted to two main ways to buy homes: moving to lower-cost areas and taking on co-borrowers. Looking at the first item, NAHREP agents have noted willingness to move from costly areas such as California and Florida to areas like Colorado, Texas, the Carolinas, among others. The Covid-19 pandemic provided a boost to this trend, increasing people's desire for "more space and greater affordability."

As for the second one, NAHREP agents described a "noticeable increase in the share
of buyers requiring a co-borrower compared to years prior." "Co-occupant, co-borrowers are more common in places where homes can be adapted to comprise multiple living spaces. In other cases, family members or friends agreed to serve as a co-signer for a buyer with the intention of coming off the loan at some point in the future," the study added.

Programs aimed at lessening the financial burdens of a home purchase provided by homebuilders, state and local governments and financial institutions were also listed as tools used when seeking to purchase a home.