Hispanics likely to drive next wave of housing demand
Nearly 4 million Hispanics aspire to purchase a home when they move, but only a fraction of that number is financially prepared to do so, according to a new report from a nonprofit think tank. Those findings have important implications for the housing sector, according to the report's authors.
In the new report, The Demand Institute concludes there is significant business opportunity in meeting the housing and community demand of Hispanic households between now and 2020. Hispanics added about 200,000 owner-occupied households in 2013.
Demand for homeownership is strong, with more than half of Hispanics surveyed saying that they plan to move in the next five years and 28 percent saying they plan to purchase a home. Just 19 percent of non-Hispanics surveyed shared those aspirations, according to The Demand Institute.
The report uncovered a gap of 2.5 million households that lack the down payment, income or credit to follow through on their dream of homeownership. Researchers said about four of every 10 new households that form in the U.S. in the next five years will be headed by someone of Hispanic descent, far outpacing any other single racial or ethnic group. Of the 4 million in this cohort who say they'd like to purchase a home, only about 1.5 million have the means to do so.
"Hispanics were hit especially hard by the financial crisis and housing crash, and the outlook for home ownership is uncertain," said Louise Keely, president of The Demand Institute. "The home ownership rate among Hispanic households now stands at 44 percent and continues to decline. Still, Hispanics are a large and fast growing segment of the housing market, and their distinct demand for communities and housing could stimulate innovation for a wide range of businesses, including financial services."
Nationally, the homeownership rate has fallen to 30-year lows across the country. The Hispanic home ownership rate peaked at nearly 50 percent in 2007, but has declined since then. Researchers cite various barriers Hispanics face, including high rents where they tend to live and declining incomes for most of the last 15 years.
Despite the obstacles, a vice president at The Demand Institute described Hispanics as "this generation's baby boom," noting they're expected to make up 37 percent of household growth between 2013 and 2020. That compares to 28 percent for non-Hispanic whites.
The report also finds that more Hispanics are moving to the suburbs, even though Hispanics are still more likely than non-Hispanics to live in urban areas. "Hispanic households are still most likely to be family households," said Jeremy Burbank, who is a vice president at The Demand Institute and leads the American Communities Demand Shifts Program. "Hispanics are moving to the suburbs for more space, better schools and more affordable housing - they're looking for places to raise their families," said Burbank.
Hispanics & Home Ownership: Closing the Gap is the first report from The Demand Institute's American Communities Demand Shifts Program, which provides insight on the future of American communities and the ever-evolving housing sector. The program is an extension of more than four years of in-depth research conducted by The Demand Institute, and will help business leaders and policymakers better anticipate and address the needs of consumers and citizens.
The Demand Institute is a non-advocacy think tank jointly operated by The Conference Board and Nielsen. The Institute helps government and business leaders align investments to where consumer demand is headed across industries, countries and markets.