Hispanic homebuyers and the dream of homeownership

These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:

Victoria Wickham: Pulled from the hottest topics coming across our news desk, I’m Victoria Wickham and this is “HousingWire Daily.” Today’s episode features the eighth installment of “Honest Conversations” that features an interview with Fernando Paez, who is a franchise sales consultant specifically working on expanding homeownership in the Latino community. But before we listen, here’s a brief word from our sponsor. 

Brena Nath: Caliber Home Loans is committed to helping customers at all stages of homeownership. Whether you’re the first in your family to buy a home or just a first-time homebuyer, our focus is on getting you into the home of your dreams and helping you stay there. Contact Caliber Home Loans if you’d like to learn more. 

Alcynna Lloyd: Hello, listeners. Welcome to “Honest Conversations,” the show that examines the state of minority homeownership in America. Today I’m joined with Fernando Paez, a franchise sales consultant specifically working on expanding homeownership in the Hispanic community. 

Fernando Paez: Thanks for having me. 

Alcynna Lloyd: Of course. Fernando, as you know, 2020 was a year unlike any other as the COVID-19 pandemic impacted communities across the world, and social and political unrest kept Americans divided at the polls. Well, all of these factors could seemingly impact anyone’s dream of homeownership. Data shows the American dream of homeownership remains resilient in Hispanic communities despite high unemployment, high COVID-19 infection rates, and greater loss of reduction of income compared to non-Hispanic whites. In order to better understand Hispanic homeownership in America today, let’s examine some of the history. 

Historically speaking, Hispanics and blacks in America have faced their fair share of housing discrimination. And when it comes to economic distress, data shows it disproportionately impacts their communities. In fact, as recently as the Great Recession, data from the Urban Institute shows that Hispanic households suffered the greatest losses of household wealth of any racial or ethnic group. And while Hispanic households are now the biggest force behind the national homeownership growth, there is still work to be done. Fernando, as a member of the Hispanic community, what are some of the stories you grew up hearing about housing? Or how was homeownership discussed with you personally? 

Fernando Paez: Thank you for this first question. I was born and raised in Argentina. I’m an immigrant to this wonderful country. And I think we agree that homeownership is the foundation for building wealth. And I grew up, you know, dreaming, and this is the American dream, of owning a house, being a homeowner. And you read some key points that happened especially in the last year with, you know, COVID and many issues. And for Hispanics, I think we need more education. We need to understand that we can have access to, you know, mortgages, that we can buy a house, and we need to know the details. And I think we can talk more about some of the details in our discussion today. But I think it’s very important to understand that we are here to make sure, especially in my position now with RE/MAX, to reach, you know, the Hispanic community and make sure they’re aware that they can own a home, they can have access to, you know, a mortgage, and they can afford to buy a home. 

Alcynna Lloyd: And as we talk about housing education, we need to talk about the history that impacted what is going on today. To start, let’s revisit 1948 when the landmark Supreme Court case Shelley vs. Kraemer ruled that enforcement of racially restrictive covenants were a violation of the Equal Protection Clause of the 14th amendment. That being said, many people of color were still subjected to housing segregation in the years that followed. In fact, data shows that by the 1960s, the homeownership rate for Latino Americans still trailed behind their peers, as local developments were able to prevent them from settling in particular areas due to practices like redlining. So, Fernando, why even after such rulings were Latino Americans still facing hardship in the housing market? 

Fernando Paez: We have to understand that while now is illegal redlining, which is the discriminatory practice of denying credit-worthy applicants a loan for housing in specific neighborhoods. We know that even though, you know, this is happening, you know, there are many people that are eligible for loans, and this has played a significant role in the homeownership disparities between minorities, in this case, Hispanics and white families all across the United States. From our perspective, the real estate industry is in a great position to help address this racial wealth gap. Number one, by advocating the importance of Hispanics, and especially, you know…and also minority homeownership. Again, going back to my first point, I think we have to work on educating people and work against these, you know, trends. 

Alcynna Lloyd: Let’s fast forward to the 2000s and discuss former President Barack Obama and Donald Trump’s views on immigration, which undoubtedly impacted the homeownership dreams of Latino Americans across the country. According to Pew Research, during Obama’s presidency, it was reported that deportations reached a record level rising to an annual average of nearly 400,000, which is about 30% higher than the annual average during the second term of the Bush administration and about double the annual average during George W. Bush’s first term. And while Latino deportations fell under Trump’s administration, his rhetoric on illegal immigrants contributed to the apprehension of nearly 900,000 migrants at the U.S.-Mexico border from October 2018 to September 2019 alone, marking the highest annual level in 12 years. 

This is important considering a study from Brigham Young and Cornell universities showed that increased deportations between 2006 and 2008 lead to a higher rate of foreclosure in the years that followed among Hispanic households as compared to other ethnic groups. Fernando, how do you think Obama and Trump’s stance on immigration impacted household formations for the Latino community? 

Fernando Paez: Let me use RE/MAX CEO Adam Contos’ quote, and he often quoted our co-founder Dave Liniger. And he said, “You cannot do business looking in the rearview mirror.” And while I can go back to the previous administration and this administration, my hopes for this new administration has different points. I hope this new administration addresses the labor shortage. I hope this administration reverse some zoning and land use restrictions, includes, you know, a bill that would target housing and infrastructure in many estates in many parts of the country. Work on reform, zoning, and land use. And I think we also need to start looking at credit, you know, how do we protect people that are going through hard times during this pandemic be able to access credit, especially for first-time homebuyers? 

I think this administration can do some work on addressing the labor shortage, hoping, passing, you know, comprehensive immigration reform so we can incorporate strategies for providing the construction industry with this labor. And this will definitely, you know, keep up with the housing demand. And we’ve seen this and we’ve seen this in different part of the countries. 

Alcynna Lloyd: Right. So kind of like what you’re saying about not looking in the rearview mirror, we have to focus on what’s happening right now despite the impacts of deportation on the Hispanic community. Fernando, in August of last year, a survey from the National Association of Hispanic Real Estate Professionals found that 40% of Hispanics who did not currently own a home had plans to buy within the next five years, marking the highest among any demographic. This data shouldn’t be surprising as U.S. Census data has shown Hispanics have consistently been driving homebuying demand. That being said, there’s still hurdles for Hispanic homebuyers. Fernando, what are some of these hurdles? 

Fernando Paez: One trend that we are seeing right now is the lack of available housing inventory. And that’s probably the main barrier right now, and especially in Hispanic ownership growth. And actually, you mentioned NAHREP which is a partner of RE/MAX. RE/MAX National Housing report show that the monthly supply of inventory decreased to 1.8. And that’s six months supply that indicates a market balance equally between buyers and sellers. And I think too inventory shortages are considerably pronounced in some states, in especially metropolitan statistical areas with high concentration of Hispanic residents. And the construction labor market also prohibited, you know, builders all over the country from constructing the homes that are necessary to meet housing demand, especially for this group of Latino that are homebuyers. 

We talk about immigration policies that makes this problem even harder. We know that a large group that work in this construction industry depends heavily on immigration, or the best worker come from immigration. So the great opportunity that we have right now is Latino purchasing power, it’s 1.7 trillion. And this trend will indicate the Latinos are driving demand for homeownership. And there’s no question that this is a great opportunity, a market opportunity that hasn’t been fully optimized. And this is where RE/MAX can make an impact. And you mentioned NAHREP, the National Association of Hispanic Real Estate Professionals, we work closely with that. They’re our partners. 

Alcynna Lloyd: Right. So and one of former President Donald Trump’s administration’s last acts, the U.S. Department of Housing and Urban Development declared the Federal Housing Administration would once again back mortgages for immigrants under the Deferred Action for Childhood Arrivals, also known as DACA program. Prior to the announcement, the FHA single-family housing handbook indicated that non-U.S. citizens without lawful residency in the U.S. were not eligible for FHA-insured mortgages. All of this language was incorporated into the FHA handbook by the Obama administration in September 2015, was incorporated into FHA guidelines in 2003, and predated the creation of the DACA program, which created controversy on how the FHA should handle mortgages for DACA recipients. Now that this has been altered, Fernando, what will this mean for the many DACA recipients who probably had dreams of homeownership? 

Fernando Paez: Yes, on January 19th, the Trump administration got rid of the rule, roughly about 700,000 recipients of the DACA, the Deferred Action for Childhood Arrivals, from being able to get mortgages insured by the FHA, the Federal Housing Administration. I think allowing DACA recipients to access FHA loans opens a door to homeownership for those immigrants and also to immigrants who are not in the program. If DACA recipients could get loans from traditional lenders, community lending organizations will have more funds to distribute to others who have nowhere else to go for loans. 

Alcynna Lloyd: All right. So I’m assuming that this will also heighten homebuying demand, which is interesting. And as we talk about that, data from the Urban Institute shows all the homebuying demand is growing in Latino communities. Of the 100 cities they analyzed in 2019, only 2 have reversed the racial homeownership gap, and had higher rates of Hispanic homeowners today than non-Hispanic white homeowners. Those cities were El Paso and Laredo, Texas. At the time the research was gathered, the Hispanic homeownership rate in El Paso was 63.9% and 61.5% in Laredo, Fernando, what do you think is driving the growth in these markets? 

Fernando Paez: Well, you mentioned something that it’s interesting because, well, you know, this gap is growing between minorities, and especially Latino homeowners, and white homeowners, El Paso and Laredo are the exception to this rule. And some numbers, we have about 4.9 million millennials with credit characteristic to qualify for mortgages, you know, and many of these come from Texas. And in 2018, the Houston market had the most Hispanic owners, and Texas benefit the most from Latino immigration parents adding an increase of 102,000 Latinas. 

Here, there are two factors, I think, that are very interesting and very unique in El Paso and Laredo. I was in El Paso last month. And there, we have a boom of contraction because there’s a high demand for new construction. And that’s one characteristic. Another thing that I heard many realtors, you know, people that we work with is [inaudible 00:13:50], this is a big part of the booming creating demand. And also is the affordable housing market. The reason why El Paso came as a top 10 is because the average price of a home in El Paso it’s about $150,000, and the amount of the down payment required to purchase a home it’s affordable compared to 60,000 salary or less, that is the average in El Paso as well. 

So, if you look at some, you know, statistics from 2015 to 2018, Latino migration patterns underscored these trends. We know that markets like, you know, California and New York where the medium home price is higher, then we have, you know, that in Texas that’s lower. So we see that this migration, people coming especially from cities in the border, Laredo and El Paso, reversing this trend that we’re talking between, you know, minorities and white homeowners. 

Alcynna Lloyd: Okay. Fernando, as someone heavily involved in expanding homeownership in Hispanic communities, what are some of the common questions you hear on a regular basis? 

Fernando Paez: Oh, the most common question that I get is education, like I said, in the beginning. Many broker-owners or agents need to work with the community and educate, you know, them about what’s needed to buy a house. Credit, some of the most typical problems that we have are language barrier. It’s very difficult for a prospect homeowners that want to buy a house, but have to read these pages, sometimes 50 or 60 pages that are in English then understanding. That’s very difficult. And that’s where agents have to work with the community. I’ve seen, for example, in El Paso, you know, some agents doing some workshops with the Hispanics in what’s needed to qualify for a mortgage and things like that. 

Alcynna Lloyd: We’ve heard of people going into communities and talking directly to these people, or holding webinars or seminars to get them more involved in the homeownership process. And now this brings me to my favorite part of the interview, as I like to ask each “Honest Conversation” guest the same two questions. What is your biggest area of concern for minority homeownership today? And what can the industry do to address the gap? 

Fernando Paez: Our industry needs more Hispanic on real estate businesses. And this is to help people…or to help guide people through homeownership process. This is a very complicated process. And if you’re somebody that comes to the country, and even if you have a basic, you know, knowledge of the language, but when you get into the process of buying a house, the mortgage, the title, and all the papers you have to do, it gets very complicated and it can be intimidating and challenging. I’ll give you my own example when my family moved from New York to Texas, and we have to go through the process. And we have to read the 100 pages paper that includes all the lingo that comes with buying a house, it’s a challenge. And that’s for real estate professionals who have got the skill sets, the ones who understand the nuances of various communities like Hispanic community, are the resource in helping and facilitate this homeownership that we have in this country. So I think increasing diversity in the real estate and mortgage industry, especially in the senior leadership, and encouraging minority business utilization will improve performance. 

Alcynna Lloyd: I hope so too. These are things that I know we’ll be looking for for this year and next year as we go into the future, hopefully getting minority homeownership back on par so there’s no longer a gap there. Fernando, I want to say thank you for joining us today. And, guys, join us next week for some more “Honest Conversations.” Thank you, Fernando. 

Fernando Paez: Alcynna, thank you for having me. 

Alcynna Lloyd: Now more than ever, the housing industry is looking towards leaders for answers. That’s why each week, the Housing News podcast invites a new mortgage, fintech, real estate executive to the show to provide its listeners with more perspective on the announcements and news stories crossing HousingWire’s news desk. Hosted by Sarah Wheeler, produced by Alcynna Lloyd. Housing News podcast is now available on iTunes, Spotify, Apple, Google Podcasts, and more. 

Victoria Wickham: Thanks for listening to “HousingWire Daily.” Don’t forget to hit that subscribe button so you never miss an episode, and we’ll catch everyone back here again tomorrow.