New data from CoreLogic indicates that the Hispanic community will make up over two-thirds of the homebuying populace by 2040. While the Urban Institute predicts that approximately 70% of all new homeowners will be Hispanic by that time, the current landscape paints a challenging picture for these potential homeowners due to skyrocketing home prices and interest rates.
Hispanic homebuyers are noticeably younger than their non-Hispanic counterparts. CoreLogic said 2022 data revealed that 40% of Hispanic homebuyers were under 35, as opposed to 36% of non-Hispanic homebuyers. This age bracket, brimming with first-time homebuyers (FTHBs), often grapples with limited savings, potentially limiting their ability to enter the market.
Majority-Hispanic areas, defined as census tracts with over half of their population being Hispanic or Latino, have seen a rise in their share of all first-lien home purchase loan originations. Based on the Home Mortgage Disclosure Act (HMDA) and CoreLogic public records, the share of home loans in these areas increased from 6.6% in 2022 to 6.8% in 2023.
These majority-Hispanic areas appear to lean towards Federal Housing Administration (FHA) insured loans, typically popular among low-income and high-minority areas, more than conventional loans. So far, in 2023, there has been a slight uptick in the share of both FHA and conventional loans in these regions.
However, a disparity arises when assessing denial rates between Hispanic and non-Hispanic borrowers. In 2022, Hispanic borrowers faced a 13% denial rate for home-purchase loans, 4 percentage points higher than the 9% rate faced by non-Hispanic borrowers. The primary denial reason is a high debt-to-income ratio, notably 3 percentage points greater among Hispanic applicants.
Despite the hurdles, optimism abounds for the Hispanic community's role in the housing market. With the Hispanic demographic being one of the fastest-growing in the U.S., the FTHB share is set to rise in the coming years, especially as the majority of this community approaches the average age for first-time homebuyers.
