The housing market continues to make a strong comeback and Hispanic homebuyers are a significant reason for the rebound, but with housing inventory shortages and rising prices the dream of homeownership for many families could be derailed, a new study suggests.
The study, "State of Hispanic Homeownership," produced by the National Association of Hispanic Real Estate Professionals, suggests that a combination of economic and demographic trends shows that the Hispanic community will be the force behind revitalization and growth of the nation's economy. But experts worry that the tight housing supply coupled with higher prices could significantly slow the economic comeback.
"I tell my clients, 'Look, right now we have a perfect storm,'" Gerardo "Jerry" Ascenio, a real estate agent in Southern California's San Fernando Valley, told HispanicBusiness.com. Many of his clients have put out multiple full-price offers only to be pushed aside by lower, all-cash offers from investors. "We have low interest rates and low prices -- everyone wants to buy. This isn't a speed race, it's an endurance race. There's no magic wand."
2012 Real Estate Trends
The report looked at 2012 real estate trends and found that:
-- Hispanics accounted for 355,000 (51 percent) of the total net increase of 693,000 owner households in the U.S.
-- Home ownership for Hispanics grew from 4.2 million in 2000 to 6.7 million in 2012, a 58 percent increase. The rest of the U.S. population saw just a 5 percent increase.
-- Hispanics are expected to account for 40 percent (5 million) of the estimated 12 million to 14 million net new households within the next decade.
-- More than 1 million Hispanic households were formed in 2012, compared to a decrease of 704,000 white households.
The study also noted that homeownership is important for Hispanic families. Approximately 56 percent said that the major reason for buying a home was because it represents a symbol of success or achievement. Less than a third of non-Hispanics have the same view.
These kinds of statistics should have real estate agents taking note, said Gary Acosta, CEO of NAHREP and editor of the study.
"If you are a (real estate agent) in markets such as North Carolina, Idaho, Utah, California, Arizona or New Jersey, you need to have a strategy to target this (demographic)," Acosta said. "If you don't, you might consider another business."
Acosta said real estate firms need to hire employees who are familiar with the Hispanic culture and develop marketing and collateral material specifically for the growing demographic.
While the Hispanic community was hit hard by the economic downturn in which many first-time buyers lost their homes to foreclosures, Acosta said, Hispanics have been remarkably resilient despite the soft economy.
"It really speaks to the core reason why so many Hispanics buy homes," Acosta said. "They are looking for economic opportunities, and homeownership provides a more stable economic environment."
But, as Ascenio indicated, that dream could be greatly slowed because the housing inventory is at near-record lows. The market is especially tough for single-family homes that sell for less than $250,000. Investors are snapping them up and turning them into rental properties -- a situation that is not ideal for communities, Ascenio said.
Homeowners tend to have a greater investment in their community, such as keeping up their homes and involvement in the local schools, he said.
Financial institutions have little incentive to get maximum value from distressed or foreclosed rental properties, Ascenio said. Instead, the banks are more interested in clearing the asset from their books. Lower but all-cash offers are more appealing to them because the transaction can be completed in a matter of days, not weeks.
A Growing Bubble?
Ascenio believes lawmakers need to mandate that the Federal Housing Administration (FHA) and HUD get the most money they can for distressed or foreclosed properties. That would allow qualified buyers who have financing to compete with all-cash investors, he said. While it would help level the playing field, it's not a cure-all.
"Right now there is no motivation or pressure being put on them (financial institutions) to do the right thing," Ascenio said. "All they are interested in is getting rid of these (distressed) assets."
With rapidly rising prices and scarce inventory, some experts think the U.S. could be positioning itself for another real estate bubble. Ascenio isn't so sure, but he is cautious.
"It would beg the question, 'Are we creating a second bubble on (bank-owned) properties?'" Ascenio said.
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