Homeownership Plans among Hispanic Renters: Ethnic Differences or Geographic Differences?<br />Russell N. James III<br />Jorge H. Atiles<br />University of Georgia<br />
U.S. Hispanic demographics<br />The U.S. has the 2nd largest Hispanic population of any nation at 45.5 million in 2007 (Spain 40.4 million; Mexico 108.7 million)<br />By 2020, approximately 15% of all United States households will be Hispanic (Masnick and Belsky 2006).<br />
U.S. Hispanic homeownership<br />In 1980, 1990, and 2000, Hispanic households in the United States had the lowest rate of homeownership of any major ethnic group, falling below non-Hispanic white, non-Hispanic black, Asian, and other non-Hispanic households (Cortes, et al. 2006). <br />Conversely, more recent data suggest that since 2000, Hispanic homeownership levels grew faster than either non-Hispanic white or non-Hispanic black homeownership levels (Cortes, et al. 2006). <br />
Factors motivating private rental sector renters to become homeowners<br />Personal, family, and cultural norms can set expectations or norms for tenure (Morris & Winter, 1978). <br />Environmental realities also affect these preferences. <br />For example, to the extent that homeownership is seen as a profitable investment strategy, renters may be more motivated to purchase.<br />Appreciation is a key factor separating owning from renting. <br />
Ethnic differences in appreciation?<br />Simple differences in population distributions throughout the country may lead to different appreciation expectations based upon the appreciation experiences in particular regions. <br />Mixed evidence on the direct impact of homeowner or neighborhood ethnicity on appreciation (Flippen, 2004; Coate and Vanderhoff, 1993)<br />
Study<br />Examined the homeownership plans of renters in the private rental sector from 1995-2007<br />Nationally-representative dataset (Survey of Consumer Finances)<br />
Initial findings<br />Data indicate that Hispanic renters experienced a dramatic upsurge in saving for homeownership – relative to renters of other ethnic backgrounds – during the 1998, 2001, and 2004 surveys. <br />This relatively higher propensity to save for homeownership largely disappeared in the 2007 survey<br />
Percentage of renters listing “buying own house” as one of the top two most important reasons to save<br />
Hispanic status predicting currently planning for a home purchase (whether saving or not) among renters <br />Control variables included : Single male, Single female, Number of household members, liquid assets, Income, <High school diploma, Some college, Bachelor’s degree, Graduate degree, Age, Minor child in household, Years at current job<br />
Hispanic status predicting presence of saving for a home purchase among renters<br />Control variables included : Single male, Single female, Number of household members, liquid assets, Income, <High school diploma, Some college, Bachelor’s degree, Graduate degree, Age, Minor child in household, Years at current job<br />
Explanation for the trend<br />One possibility is differential price appreciation<br />The SCF dataset has no public data on location of respondents<br />However, we can project typical Hispanic housing appreciation observations based on state-level data<br />
States with the highest percentage of Hispanic population (over 10%)<br />New Mexico 579,224 (38.2%)<br />California 7,687,938 (25.8%)<br />Texas 4,339,905 (25.5%)<br />Arizona 688,338 (18.8%)<br />Colorado 424,302 (12.9%)<br />New York 2,214,026 (12.3%)<br />Florida 1,574,143 (12.2%)<br />Nevada 124,419 (10.4%)<br />
Discussion<br />The “bubble” in Hispanic renter homeownership plans corresponded with relative housing price appreciation trends in states with large Hispanic populations such as Southern California and South Florida. <br />This suggests that the move to homeownership planning may have been more of a regional economic trend, rather than an ethnic one. <br />
Future of renting and owning<br />Post-crash housing demand suggests a systemic shift in preference from homeownership to renting.<br />Higher mortgage default experience<br />More stringent future mortgage underwriting obligations<br />All suggest a higher demand for renting in the future.<br />
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