Lack of Home Buying Information Stalls Mexican Americans

Ownership Desires Says New Tomas Rivera Policy Institute Study Report Shows How Housing Industry Can Add 2.2 Million Latino Homeowners Nationwide

LOS ANGLES, Andrea Gutierrez, Tomás Rivera Policy Institute 213-821-5615; Brad German, Freddie Mac 703-903-2437 August 4, 2004 – A lack of trusted sources of information is a key barrier to homeownership facing Mexican Americans and keeping hundreds of thousands of Latino families from achieving the American Dream, according to a new study from the Tomás Rivera Policy Institute at the University of Southern California entitled El Sueño de su Casa: the Home ownership Potential for Mexican-Heritage Families.

El Sueño de su Casa also found that when looking for trustworthy information about home buying, Latinos of Mexican origin look first to real estate professionals, followed by friends, coworkers, and family says the report, which was funded by Freddie Mac, one of the nation’s largest investors in residential mortgages.

“Homeownership is often considered the first step to wealth creation for a family,” said Dr. Harry Pachon, president of the Tomás Rivera Policy Institute. “The Latino community in the United States is projected to increase at record levels over the next few decades. It is essential that policymakers, real estate professionals, community groups, and business leaders find new and innovative ways to reach this market and help bridge the home buying information gap.”

The report’s findings are timely because of the Latino community’s explosive growth and strong desire for homeownership. Based on current projections, the Latino community is expected to account for 31 percent of the nation’s household growth between 2000 and 2010, making it the fastest growing minority group. At the same time, the new report says 84 percent of Latino renters “strongly” desire to buy a home and 55 percent plan on buying in the next five years.

As a result, the Tomás Rivera Policy Institute estimates at least 1.5 million Latino households will buy homes by 2010. But, the report says, the housing industry could help another 700,000 Latino families become homeowners by taking several proactive steps such as providing more Latino renters with bi-lingual outreach, counseling, and access to innovative mortgage products.

In that case, the report predicts a total of 2.2 million new Latino homeowners by 2010 and the Latino community would account for 19 percent of this decade’s jump in the national homeownership rate.

“Freddie Mac applauds the Tomás Rivera Policy Institute for conducting this vital research on perceptions and participation in the home buying market,” said Jim Park, vice president of Industry Relations and Housing Outreach. “El Sueño de su Casa provides the housing industry with a new and previously unavailable level of detail about this rapidly growing market.”

Based on a survey of 1,400 Atlanta, Houston and Los Angeles families of Mexican origin – the largest of the Latino national origin groups in the United States -- El Sueño de su Casa provides an unprecedented look at this fast-growing community’s home owning ambitions, neighborhood preferences, and concerns and expectations about buying a home in the United States. The report also profiles individual families and uses fictitious names to protect their identities.

Latinos Rate Homeownership Information Sources

Despite the Latino community’s rapid growth, the report warns that Latino homebuyers face several special hurdles to home buying, especially getting accurate information about qualifying for a mortgage and buying a house.  

Specifically, the chief difficulties anticipated by respondents who plan to buy within the next five years were a lack of familiarity with the mortgage process (64 percent), saving for a down payment (53 percent) and finding a trustworthy advisor (53 percent).

In selecting trustworthy advisors, 38 percent of the likely homebuyers surveyed picked real estate professionals, followed by friends and co-workers (17 percent), and family members (16 percent). By contrast, relatively few respondents named home buying seminars or classes (12 percent), financial institutions (9 percent), community organizations (6 percent) and church groups (3 percent).

The National Association of Hispanic Real Estate Professionals (NAHREP) hailed the results as testimony to the real estate industry’s role in expanding home ownership opportunities. “The report supports what we at NAHREP have found to be true in the marketplace that real estate practitioners have the most influential role in assisting Latino families who want to buy homes,” said Gary Acosta, Chairman and co-founder of the National Association of Hispanic Real Estate Professionals. “As trusted, well-informed advisors, practitioners have the ability to help an entire generation of Latino families achieve the American dream.” 

Dreamers, Planners, Doers and Achievers

El Sueño de su Casa stresses that not all Mexican American households are alike and the housing industry must understand the differences in order to craft outreach and mortgage initiatives that target each group’s specific home buying needs.

“We took an innovative approach to understanding the path to homeownership, conceiving home buying as a process with certain stages and milestones,” said Dr. Jongho Lee, Tomás Rivera Policy Institute senior research associate and report co-author. “In doing so, we were able to provide a clear picture of the potential Latino homeowner and the obstacles that stand in their way of owning a piece of the American Dream.”

To more precisely track specific needs and opportunities in the Latino housing market, the Tomás Rivera Policy Institute breaks the market down into three distinct home buying groups.

These groups include Dreamers (29 percent), who want to own, but say they are unlikely to buy within the next five years; Planners (44 percent), who expect to become owners within next five years; and Doers (11 percent), who are actively shopping for a house or in contact with a lender.

The remaining 16 percent are considered Visitors and indicated that they do not plan on buying a home. The report also polled 374 Achievers, households that bought their first house within the last two years.

Overall, the report says, Dreamers and Planners are 34 years old, 72 percent are foreign born, 63 percent are married and the average household has 1.7 children. Regarding their financial picture, only 38 percent of Dreamers and Planners report incomes over $35,000, 52 percent have bank accounts and 50 percent have credit cards.

Dreamers and Planners say they are unable to buy a home in the immediate future because they cannot find a house they can afford (43 percent), face an insecure financial situation (27 percent), may leave their current city soon (6 percent) or are waiting to have children (4 percent).

By contrast, the average age among Doers and Achievers is 38 years old; 79 percent are married, 64 percent are foreign born, and the average household has 2.0 children. These two groups are also more financially developed, the report says. Forty seven percent have incomes above $35,000, 67 percent have bank accounts, and 60 percent have credit cards. In addition, 74 percent of Doers and Achievers are U.S. Citizens or permanent legal residents, compared to 58 percent of Dreamers and Planners.

“This new report clearly shows how Latinos can financially empower themselves and achieve homeownership when they work with formal banking institutions” said Arturo Vargas, Executive Director National Association of Latino Elected and Appointed Officials (NALEO) Educational Fund. “I want to applaud the Tomas Rivera Policy Institute and Freddie Mac for showing how the housing industry’s capacity to increase Latino homeownership opportunities depends on our success at bringing more Latino households into the American financial mainstream.”

Home buying Readiness, Capacity Vary Widely

The readiness and capacity to become homeowners varied widely among the different groups, the report says. For example, 51 percent of Doers said they were familiar with the mortgage process compared to only 29 percent of Dreamers and Planners. But, large percentages of each group believe that U.S. banks will not lend to a non-U.S. citizen (55 percent of Dreamers and Planners and 51 percent of Doers and Achievers) although many lenders now routinely make mortgages to legal residents who are not U.S. citizens.

The groups also anticipated different difficulties along the route to homeownership. Although 62 percent of Dreamers and Planners expect down payments to be a problem, only 43 percent of Doers expressed the same concern. Similarly, more than half (51 percent) of Dreamers and Planners said they are uncomfortable using English compared to 40 percent of the Doers.

Finally, when shopping for a home, 43 percent of the Dreamers, Planners and Doers said they want to buy a house in or near their current neighborhood, with 32 percent saying they want to move to a different neighborhood, 18 percent planning to move to a different city and 8 percent saying they plan to move to a different state.

In fact, first time homebuyers ended up purchasing in or near their old neighborhood 41 percent of the time, in a different neighborhood in the same city 36 percent of the time, in a nearby city 14 percent and in a different state 9 percent of the time.

Prospective homebuyers also said the most desirable qualities they look for in a new neighborhood were a low crime rate (44 percent), good public schools (39 percent), and friendly neighbors (24 percent). Less important qualities include access to public transportation (10 percent), proximity to relatives (9 percent), and other Latinos (6 percent).

Copies of El Sueno de su Casa: The Homeownership Potential of Mexican-Heritage Families can be obtained by calling 213-821-5615, or by downloading the PDF file at www.trpi.org/PDFs/El_Sueno.pdf.