Homeownership Plans Among Hispanic RentersPresentation Transcript
Homeownership Plans among Hispanic Renters: Ethnic Differences or Geographic Differences? Russell N. James III Jorge H. Atiles University of Georgia
U.S. Hispanic demographics 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) By 2020, approximately 15% of all United States households will be Hispanic (Masnick and Belsky 2006).
U.S. Hispanic homeownership 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). 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).
Factors motivating private rental sector renters to become homeowners Personal, family, and cultural norms can set expectations or norms for tenure (Morris & Winter, 1978). Environmental realities also affect these preferences. For example, to the extent that homeownership is seen as a profitable investment strategy, renters may be more motivated to purchase. Appreciation is a key factor separating owning from renting.
Ethnic differences in appreciation? Simple differences in population distributions throughout the country may lead to different appreciation expectations based upon the appreciation experiences in particular regions. Mixed evidence on the direct impact of homeowner or neighborhood ethnicity on appreciation (Flippen, 2004; Coate and Vanderhoff, 1993)
Study Examined the homeownership plans of renters in the private rental sector from 1995-2007 Nationally-representative dataset (Survey of Consumer Finances)
Initial findings 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. This relatively higher propensity to save for homeownership largely disappeared in the 2007 survey
Percentage of renters listing “buying own house” as one of the top two most important reasons to save
Hispanic status predicting currently planning for a home purchase (whether saving or not) among renters 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
Hispanic status predicting presence of saving for a home purchase among renters 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
Explanation for the trend One possibility is differential price appreciation The SCF dataset has no public data on location of respondents However, we can project typical Hispanic housing appreciation observations based on state-level data
States with the highest percentage of Hispanic population (over 10%) New Mexico 579,224 (38.2%) California 7,687,938 (25.8%) Texas 4,339,905 (25.5%) Arizona 688,338 (18.8%) Colorado 424,302 (12.9%) New York 2,214,026 (12.3%) Florida 1,574,143 (12.2%) Nevada 124,419 (10.4%)
2004 housing price appreciation
2007 housing price appreciation
Discussion 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. This suggests that the move to homeownership planning may have been more of a regional economic trend, rather than an ethnic one.
Future of renting and owning Post-crash housing demand suggests a systemic shift in preference from homeownership to renting. Higher mortgage default experience More stringent future mortgage underwriting obligations All suggest a higher demand for renting in the future.