Minority households are projected to make up 85% of household growth in the next 20 years. Radian has been developing programs and products to reach these diverse groups, ensuring that the next generation of homebuyers will be well-informed about their choices and ready for sustainable homeownership. We sat down with Zoe Devaney, Radian's SVP of marketing and customer experience, to learn more about reaching first-time and minority homebuyers.
HousingWire: Why is the diverse markets strategy critical to Radian’s future success?
Zoe Devaney: According to the Harvard Joint Center on Housing Studies’ 2015 report on the State of the Nation’s Housing, over the next 10 years (2015-2025) minorities will make up 76% of household growth in America and fully 85% over the next 20 years. That’s a big change from the overall household composition in recent decades. It underscores a shift, already well underway, toward a permanently more diverse nation; there are already more minority births than Caucasian births in the U.S., and Census researchers believe that the makeup of the U.S. will become “majority minority” in 2044.
Of the 17 million new households expected to be created by 2025, it is projected that roughly 41%, or 7.1 million, will be Hispanic; 18%, or 3.2 million, will be African American; and 16%, or 2.7 million, will be Asian or other minorities. As we work to help develop responsible, sustainable homeownership in America, it is critical that we effectively reach these groups—and to do so, we need to make sure we understand their cultures and priorities, adapt our services with those factors in mind, and build strong personal relationships with groups and professionals that help minority homebuyers finance their American Dream.
Radian’s mortgage insurance business helps homebuyers who have solid credit but lack the typical 20% down payment required to purchase a home. In many cases, these are hardworking families trying to save enough money to put down on their first home. These diverse, first-time homebuyers will continue to become a greater part of the U.S. mortgage market.
For Radian, we want to ensure that the new generation of American homebuyers is well informed about their home buying options, particularly for low- to moderate -income borrowers with limited savings for a down payment.
HW: What are some of the unique attributes of each diverse segment?
ZD: Each diverse segment has their unique attributes. For instance, over the near term, Hispanics will represent the biggest growth in new homeowners as the Hispanic population has increased nearly six fold since 1970, and one in five millennials is Hispanic. Today the nation’s 54 million Hispanics have a collective buying power of $1.5 trillion and are increasingly college-educated, technology savvy and keen on being homeowners.
Seventy percent of Hispanic homebuyers are in the market for their first home. Unlike the overall home buying population, these homebuyers are more likely to have non-occupant co-borrowers and/or multiple co-borrowers, thin credit files and to be self-employed, or have seasonal or non-traditional income sources. More are also likely to have non-permanent residency.
Household formation growth is one of the most important predictors of potential homeownership gains. In 2014, Hispanic households grew by 320,000 accounting for 40% of total U.S. household growth in that year alone. In terms of household composition, Hispanic households are more likely to be comprised of married couples with children and have a multi-generational component where parents reside with their children or children reside with their parents.
With an expected addition of 3.2 million households between 2010 and 2025, African Americans are also an important customer segment for housing professionals to engage. African Americans are younger than the U.S. population as a whole – their median age is 32, and 47% are millennials. Their buying power is expected to be $1.1 billion this year, and the average income for households nationwide is $47,290. Additionally, 35% of households earn over $50,000 and 10% earn over $100,000.
In 2011, Asian Americans made up approximately 5.8 % of the U.S. population. That’s 18.2 million people of primarily Chinese, Filipino, Indian, Vietnamese, Korean, and Japanese descent. According to Pew Institute, this demographic is the fastest growing racial group, making up the largest share of recent immigrants.
With a median annual income of $72,797, Asian Americans are the highest-income, best-educated group in the U.S. of diverse segments. Their buying power will continue to grow, and is projected to reach $1 trillion by 2017. They also tend to be buyers with a median home buying age of 36 years old. And since 2008, Asian Americans have represented the highest users of conforming, conventional purchase money financing in the US.
HW: FHA has traditionally had a large market share within the first-time and minority borrower segments. What is Radian doing to capture more of this business?
ZD: A lot of Radian’s focus today is on attracting first-time home buyers through awareness and education. There are a lot of people that we believe could qualify for a mortgage, but for whatever reason they think they might not. There’s still a perception in the market that people need more money than they actually do to buy a home. They still believe that they need to put down 20% to buy a home and don’t know that they can get a house for as little as 3% down.
Second, people hear how hard it is to get a mortgage, and become reluctant to purchase a home. We have to demystify the process and have created a website: www.achievethedream.com for individuals to learn more about low down payment options. The bottom line is that we want consumers to get the best priced mortgage option available in the market that they can qualify for. We need to educate consumers and industry professionals alike so that these first time and minority borrowers are given the best option possible.
Earlier this year, we also launched Radian MortgageAssure to help bring borrowers back into the market. It is unemployment insurance for consumers who are getting a 3% down loan. Under the program, if a participating homeowner falls behind on their mortgage payments due to an involuntary job loss and meets the conditions of the program, Radian MortgageAssure will provide up to six monthly mortgage payments, for a maximum monthly benefit of up to $1,500 or total protection of $9,000 during the two-year coverage period. Radian Guaranty is covering the cost of the two year protection so it’s at no cost to the borrower or the lender.
HW: Radian has formed exclusive partnerships with organizations such as NAHREP, NAREB and AREAA. What’s the rationale behind these?
ZD: At Radian, we believe deeply in the power of building strong relationships, and that’s why we are proud to have exclusive partnerships with leading industry organizations focusing on the African-American, Asian, and Hispanic communities, such as the Asian Real Estate Association of America (AREAA), the National Association of Real Estate Brokers (NAREB), and the National Association of Hispanic Real Estate Professionals (NAHREP). These trade associations are focused on diverse market segments in the real estate and housing industry and also are staunch advocates of sustainable homeownership in America. Working with these esteemed groups has enabled us to join together in a collective effort to ensure that the new generation of American homebuyers is well informed about their home buying options.