It’s difficult to predict the future, and it can be even harder to plan for it. Yet, analysts continue to gaze into their crystal ball of data hoping to do both.
By that standard, Hispanic and Latino homebuyers are a demographic that real estate experts believe is poised to be a possible wellspring of clients for years to come.
The Hispanic/Latino homeownership rate increased to 48.4% last year—up from 47.5% in 2019—which translates to 657,000 new owner households during that period, according to an annual report from the National Association of Hispanic/Latino Real Estate Professionals (NAHREP).
While the pace of homeownership growth moderated slightly last year, the increase is on par with a seven-year growth trend that has demonstrated the mounting potential among Hispanic/Latino buyers.
According to NAHREP President Gary Acosta, low inventory, strong demand and strained affordability were primarily to blame for the slowdown.
“It was arguably the most competitive market that we can recall,” he says. “That makes it very tough for first-time homebuyers who don’t typically have a lot of cash. They are competing with affordability issues and with institutional buyers.”
Despite the obstacles in the 2021 market, Hispanic/Latino consumers have consistently shown they are primed to purchase a home.
The cohort accounted for 51% of the nation’s population growth in the past decade, which NAHREP expects to continue in the coming years, with Hispanics and Latinos forecasted to account for 78% of net new workers between 2020 and 2030.
Predictions show that between 2020 and 2040, the cohort could account for 53.1% of household formations, while the number of non-Hispanic White households are projected to decline.
According to Acosta, that’s primarily due to the age difference between Hispanics and Latinos in the market and other demographics.
“Latinos are aging into those prime homebuying years, while the rest of the population is actually aging out of those prime homebuying years,” he says.
With a median age of 30, NAHREP’s report shows that Hispanic and Latinos are 14 years younger than the non-Hispanic White population and continue to be in their prime homebuying years. Nearly two in three Hispanic and Latinos are aged 40 or younger.
“Latino youth, high workforce participation and unwavering commitment to homeownership attainment reassure that future growth in the homebuyer market remains largely dependent on the Latino population,” the report stated.
Engaging the Future
According to Flavio Jimenez, Fathom Realty’s VP of business development in Hispanic/Latino markets, real estate brokers and companies need to acknowledge the mounting wave of opportunity coming out of the Hispanic/Latino community.
“Seventy percent of real estate transactions will be done by Hispanics, and that doesn’t just mean purchasing,” he says, referring to a 2021 report from the Urban Institute, which predicted that Hispanics will account for 4.8 million out of 6.9 million net new homeowner households between 2020 to 2040.
“That also means selling and refinancing, so the number is even bigger,” Jimenez adds.
If forecasts pan out as expected, the Hispanics Latinos are poised to provide a steady trove of business for real estate agents to tap into over the next two decades.
That said, real estate experts warn that agents will need a targeted approach to making inroads with Hispanic buyers now and in the future if they want to win additional business.
Understanding Hispanic and Latino Buyers
Hispanic/Latino buyers come from an inherently diverse background, making it essential for agents to familiarize themselves with the needs and preferences of the demographic.
For example, the terms Hispanic and Latino are often used interchangeably in conversation, but they mean two different things. Hispanic refers to people who speak Spanish and/or are descended from Spanish-speaking countries, while Latino refers to people who are from or descended from people from Latin America—e.g. Central and South America and Islands like the Dominican Republic and Puerto Rico.
Despite the cultural and geographical nuances of the cohort real estate experts agree that people from the community have a common thread when it comes to business and economic drivers.
“Latinos—especially those that are immigrants or have immigrant parents—come to this country for economic opportunity, so they are largely entrepreneurial,” Acosta says. “People don’t always get that about the Latino community. It’s a very aspirational aspect of the population and it transcends national origins.”
For brokers looking to capitalize on opportunities with aspiring Hispanic buyers, he says recruiting agents who speak Spanish and who are from the same communities can be invaluable assets for companies.
“If I had one silver bullet that would do the most to increase Latino homeownership in the country, it would be to double the number of Latinos in the real estate and mortgage banking industries,” Acosta says. “There is nothing that is going to replace that.”
Understanding what drives Hispanic/Latino consumers is another crucial factor, according to Acosta, who says they typically do business with someone they trust.
“If they trust you and you have their best interests in mind, they’ll do business with you,” he says. “Not only will they do business with you, but they’ll also refer everyone they know to do business with you.”
While Jimenez agrees that speaking Spanish or having a bilingual team will be necessary for agents and brokers looking to capture a share of the Hispanic/Latino market, he also says that providing financial guidance will be an essential service.
“Hispanics have a lot of acquisition power, and the only thing that is missing is financial advice, which is how real estate agents can benefit,” he says.
According to Texas-based broker Adriana Osorio of HomeSmart in Houston, brokers should also prepare to get creative when helping clients finance their homes.
That’s the approach that she and her team have taken, collaborating with local mortgage partners and private organizations to meet the needs of their clients.
“We find people and organizations that have liquid money and are looking for that one person who is willing to go with a shorter-term loan with a little higher interest rate as a 15-year loan at an 8 to 10% interest,” Osorio says, adding that some consumers also need credit guidance.
“Sometimes it takes a little time to get them to work on the credit and the savings, and work on the items that bring positive marks to their credit,” she says.
NAHREP’s study showed that Hispanics and Latinos are twice as likely to use Federal Housing Administration (FHA) programs to finance their homes than their non-Hispanic White counterparts, putting them at a competitive disadvantage in the current market conditions.
Hispanics and Latinos experienced a 19.1% home purchase denial rate for conventional loans and were 81% more likely to be denied than their non-Latino counterparts, according to NAHREP’s report.
While the data suggests that Hispanic/Latino homeownership is poised for significant tailwinds for the next two decades, Jimenez thinks that many agents will likely miss out on the wave of business.
“A lot of real estate agents don’t look at us as an opportunity, and that’s a factor,” he says. “The median purchase price of a Hispanic buyer is between $50,000 to $100,000 less than a non-Hispanic, so to a real estate agent, you’re talking about maybe a couple of thousand dollars less in commission by representing a Hispanic.”
As a result, Jimenez indicates that “the appetite” to work with Hispanic and Latino clients isn’t as prominent as in other demographics because of the commission difference.
However, he notes that the careless assumption could cost agents in the long run.
“If I represent a Hispanic and they are happy with my representation, they will refer everyone and their mother to me,” he says. “In the end, one client is easily giving me ten to 12 referrals throughout the year, and I’m making ten times more than the non-Hispanic real estate agents.”
Osorio expressed a similar notion, adding that developing trust and loyalty with Hispanic/Latino clients can go a long way toward building a longstanding relationship that can significantly boost an agent’s business in the coming decade.
“That’s how we are working to build that clientele—one family at a time, and a Hispanic family tends to be a pretty big family,” she says.
Jordan Grice is RISMedia’s associate online editor. Email him with your real estate news ideas, email@example.com.