On May 6th, 2020, Urban Wire posted an article about Hispanic homebuyers and the post-COVID housing market recovery—Hispanic Homebuyers Will Be Critical for the Next Housing Market Recovery. Here’s Why They May Struggle. The following quote quickly summarizes the article: “The youth and high labor force participation rates of Hispanics position them well to help the housing market recover from the current crisis, but to unleash the power of this demographic, we’ll need to support potential homebuyers and address issues regarding access to homeownership.”
Some Critical Urban Wire Data
Urban Wire uses the following data to claim that Hispanics could lead the housing market recovery:
- Hispanic homebuyers contributed significantly to the post-2007 housing market recovery.
- The Hispanic population is growing quickly, making up 57.6% of population growth (2018), and making up 40.4% of household formation in the last decade.
- The Hispanic population falls mostly in prime homebuying demographics, provided they financially weather COVID-19 well.
Urban Wire also notes several barriers that could prevent Hispanic homebuyers from this potential:
- A high median DTI ratio (42%), with over 1/3 above 45%.
- Most Hispanic families can only afford small down payments, with a 2018 median of 3.5%.
- The Hispanic population largely has vulnerable incomes.
One of Urban Wire’s five recommendations to strengthen Hispanic homeownership was down payment assistance, and, at CBC Mortgage agency, we couldn’t agree more. We’ve already spent a lot of time sharing how down payment assistance can unleash the power of underprivileged potential homebuyers.
The benefits of down payment assistance are enormous, and the risks surprisingly small. For example, a fairly recent Harvard study showed that down payment assistance doesn’t significantly affect the risk of loans—great news, because down payment assistance can be used to overcome most of the barriers that Urban Wire identified. Let’s use Chenoa Fund as an example. Many Hispanic borrowers are held back by high DTI ratios—however, about two-thirds of these borrowers have a DTI of 45–50% (or below), which is within Chenoa Fund guidelines. Thus, these borrowers still have an option to help them break into the home market. Additionally, most Hispanic homebuyers can only afford small down payments, the median being 3.5%; well, Chenoa Fund provides 3.5% down payment assistance on FHA and conventional loans, exactly what these borrowers need. These borrowers can be responsibly assisted into homeownership, begin wealth accumulation and a pattern of intergenerational wealth, and they don’t have to be held back by poor circumstances. Even better, helping Hispanics (and other minority groups) can help the economy bounce back faster following the COVID-19 epidemic.
CBC Mortgage Agency’s own data also supports Urban Wire’s positions. First, borrowers that used Chenoa Fund accumulated an average of $27,000 in equity from 2016 to 2020—real wealth gains, great for both the borrower and the economy. This is also wealth that, for the most part, could not have been generated otherwise, as about 90% of Chenoa Fund’s borrowers would not have been able to buy a home without assistance. In short—everything we have suggests that Urban Wire is right, at least with regard to down payment assistance and the potential power of minorities.
We also want to applaud Urban Wire for the other solutions it proposed that could help Hispanic communities more easily access homeownership; no one solution, alone, will bring homeownership to minorities, or help the housing market resurge. Federal aid, more robust income assessment measures, and land-use and zoning reform could positively change generations of Hispanic families by putting more in homes today. CBC Mortgage Agency lends its voice in support of all efforts to responsibly improve homeownership. We also suggest reading Urban Wire’s article directly—it’s worth every word.