2022 began with an extremely hot real estate market fueled by record low interest rates. Competition for single-family homes was at an all-time high in almost every major market in the country, driving record home price appreciation. However, after several months of double-digit inflation, the Federal Reserve began an aggressive series of interest rate increases—the sharpest in decades. In a span of seven months, mortgage rates rose from 3 to 7%. The combination of higher interest rates and rising home price appreciation made affordability for first-time buyers more difficult than at any time in recent history.
Notwithstanding strong headwinds, Latinos remain the only demographic to post eight continuous years of steady homeownership gains. In NAHREP’s annual survey, “The State of Hispanic Homeownership Report,” a qualitative study released this week, a consistent theme among top-producing real estate practitioners emerged, showcasing the resilience and persistence of Hispanic homebuyers, which continues to elevate Hispanic homeownership in America.
Here are the top 10 highlights from this year’s report:
- Latinos are the only demographic that saw nearly a decade of consistent homeownership growth. The Hispanic homeownership rate reached 48.6% in 2022, marking 8 years of steady homeownership growth.
- Despite record-breaking affordability challenges, Latinos continue to increase their homeownership rate. In 2022, Latinos added a net total of 349,000 homeowner households, one of the largest single-year gains for Latinos in the last 10 years.
- Latinos are forming new households rapidly, a key precursor to homeownership. In 2022, Latinos formed 628,000 new households, the largest single-year gain in over a decade, the largest of any demographic group, and more than double that of non-Hispanic White households.
- Latinos are young and buying houses younger. With a median age of 30, Latinos are eight years younger than the general population. They also trend younger as homeowners. Latinos have the highest share of homebuyers under the age of 25, and 70.6% of Latinos who purchase a home with a mortgage in 2021 were under 45.
- Homeownership is the least affordable it’s ever been. In April of 2022, home price appreciation hit a new record high of 20.1%. At the same time, interest rates on the average 30-year fixed-rate mortgage started to climb, reaching over 7% in October of 2022, the highest in 20 years. A rise in interest rates from 3% to 7% translates into a purchasing power loss of 30%. Due to a rise in interest rates, Phoenix, Los Angeles, Houston, Riverside, Chicago, and San Antonio MSAs saw an increase in monthly mortgage payments of at least 40%.
- Latinos are more mortgage-ready than ever before. In 2022, there were 7.9 million Latinos aged 45 or under who have the credit characteristics to qualify for a mortgage and 2.8 million who are near mortgage-ready. Latinos have the largest share of the near mortgage-ready population of any racial or ethnic group.
- Despite affordability challenges, the rise in interest rates may benefit some first-time homebuyers. While the rise in interest rates compounded affordability issues, it also had a cooling effect on the market, greatly reducing competition. Nearly half, 11 out of 25 participants, in NAHREP Top Real Estate Practitioners Survey said their first-time buyers had a harder time getting their offers accepted in the first half of the 2022 market than in the second half.
- Latinos will get creative in order to overcome affordability challenges, including living in multigenerational households and co-borrowing among family. Latinos are among the most likely demographic to live in a multigenerational household at 31.7%. In 2022, 7 out of 25 participants in NAHREP’s Top Real Estate Practitioners Study saw an increase in multigenerational buyers last year, while 19 out of 25 reported an increase in co-borrowing, particularly among family members.
- The state of Texas offers the greatest opportunity for Latino homeownership. Texas has consistently topped the list for most Latino net migration, best opportunity markets, and producing the greatest number of new Latino homeowners. Between 2020 and 2022, Texas saw a net gain of nearly 150,000 Latino residents. McAllen, Brownsville, and El Paso, Texas also made up the top three opportunity markets for Latinos, based on the number of mortgage-ready Latinos and affordability. Houston, Texas was the third highest-ranking market that added the greatest number of new Latino homeowners, adding a net total of nearly 60,000 homeowner households in the last two years.
- The increase in Special Purpose Credit Programs (SPCPs) could play a promising role in closing the non-Hispanic White and Latino homeownership gap. Recent legal clarity by the Department of Housing and Urban Development (HUD) has encouraged more lenders to bring SPCPs to market, opening the door for new programs that could address common underwriting issues, such as debt-to-income ratios and non-W2 incomes, two factors that disproportionately impact the Latino community.
To view the full report, see: State of Hispanic Homeownership Report