Hispanic households increased their rate of homeownership for the fourth year in a row, growing to 47.1 percent in 2018 from a low of 45.4 percent in 2014.[1] Additionally, the popularity of low down payment mortgages amongst Hispanic and Latinos is perhaps due to a simple fact: on average, it would take a Hispanic family 15.7 years to save for a 20 percent down payment but only 4 years to save for 5 percent.[2]
Left to right: Noerena Limón, SVP, Public Policy Industry Relations NAHREP, Ralph McLaughlin Deputy Chief Economist CoreLogic, Jerry Ascencio, Chair, HWP NAHREP, Pete Carroll, Executive, Public Policy & Industry Relations CoreLogic.
Why does it take this long? Simply put, Hispanic and Latino families spend more of their incomes on housing and have higher opportunity costs of commuting when compared to other groups. As of 2017, and including the opportunity cost of commuting, Hispanic renters spent 67.6 percent of their income on housing compared to 50.7 percent for non-Hispanic Whites.[3] According to the Current Population Survey (CPS), Hispanics are the ethnic group most likely to move to find more affordable housing resulting in more time commuting, living father out from job centers, and thus sacrificing a larger share of their potential earning hours getting to and from their place of employment. This puts Latino households much further behind the starting line when it comes to saving for a down payment, and thus further behind in reaping the wealth-generating benefits of homeownership.
[1] 2019 State of Hispanic Wealth Report. NAHREP. http://hispanicwealthproject.org/annual-report/
[2] Calculations derived by taking median household income today of 25-34 year-olds, projected their income growth looking at the median household income of 45 – 54 year-olds in same group, assumed 10 percent savings rate of after-housing-cost net income, and projected home price growth using the past 20 years of CoreLogic Home Price Index growth. Author conducted calculations at metro-level and derived at national average using population weights for each metro area.
[3] Opportunity costs calculations derived by using ACS commute costs and calculating 75 percent of average hourly wages. Housing costs include mortgage or gross rent, insurance, taxes, heating, cooling, HOA fees.
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