Clarification: The original version of this story mistaked Melissa Vivas' down payment.
For the past two weeks, Nicaragua immigrant Melissa Vivas has arrived home to her newly purchased two-story Washington home feeling like she has achieved part of her American Dream. The $210,000 four-bedroom with a patio, hardwood floors, and beige walls is the type of home she dreamed of providing for her two young U.S.-born children.
“I feel like, wow, I did it,” said the 31-year-old administrative assistant at a local charter school.
And if she wants to paint the walls a brighter hue, she said, she can do it without needing someone’s approval first. Her kids also get their own room, something they didn’t have when she was living temporarily with her mother. “I wanted a place for them to grow up, to have their own space, and to run freely,” Vivas said.
Despite a sluggish economy, slow job growth, and a credit crunch, in the past year Hispanics like Vivas are making positive gains in the housing market, signaling that homeownership, which has long been viewed among many Hispanics as a path to building family wealth, is within reach to a new section of the workforce.
She represents an early entrance into what one observer calls a Hispanic “homebuyer mega-market” in coming years.
The latest U.S. census figures, for June, show year-over-year Hispanic homeownership increased by 7.3 percent, from 6.2 million to 6.7 million. For black-owned households during the same time, the numbers dipped by 1.3 percent, from 6.3 million to 6.2 million. Likewise, whites' homeownership also saw a slight decrease of about 1 percent, from 58.4 million to 57.8 million.
“If you took out the new Hispanic homeowners, you’d have a net loss of homeowners because of foreclosures, people moving from homeowners to renters,” said James M. Parrott, senior adviser for the White House National Economic Council, during an event in Washington examining the economic status of Hispanics. “The fact that we’re not in the red is solely the result of growth of Hispanic homeownership.”
The national total June-to-June for housing ownership grew 0.2 percent, from 74.7 million to 74.8 million.
Some believe that the recovering housing market will depend largely on Hispanic homebuyers in the U.S. By 2020, Hispanics will be half of all new homebuyers, according to a recent Forbes article.
Gerardo (Jerry) Ascencio, president of the National Association of Hispanic Real Estate Professionals, said that record-low mortgage rates and some of the cheapest housing prices since the all-time peak in 2006 is leading to what will likely be a Hispanic “homebuyer mega-market” in the next few years.
“The Latino community is poised to have the ability to push the sluggish housing market forward to a more vibrant market,” Ascencio said from his office in Southern California.
Booming Latino population growth, increase in government-backed loans to Hispanics, and low mortgage-loan rates are several factors fueling this surge, he said. Last year, the Hispanic population surpassed the 50 million mark and is projected to account for nearly 30 percent of the population by 2050, according to the Pew Hispanic Center.
At the same time, the purchasing power of this group surpassed $1 trillion. In just five years from now, the purchasing power is expected to increase by 50 percent to $1.5 trillion.
Government-backed loans also have increased for Hispanics, making homeownership accessible. Since 2008, nearly 600,000 Hispanic families have purchased or refinanced a home using a Federal Housing Administration-backed loan, Secretary Shaun Donovan, told a group of Hispanic leaders in July. Of Hispanics who purchased a home last year, 45 percent did so with FHA financing, he said.
FHA-backed loans appear to be on a decade-long upward trend for Hispanics and other minority groups. Such loans typically have low down-payment options, and flexible income, debt and credit requirements. In 2010, FHA provided access to mortgage credit to 58.8 percent of Hispanic and 59.8 percent of black homebuyers, compared with less than 10 percent just four years earlier, according to a Center for American Progress analysis.
There’s also a strong desire to become homeowners. “These immigrants from Michoacán, Mexico, and everywhere in Latin America—all of us Latinos--aspire to purchase a little piece of America,” Ascencio said. “While the American Dream, when it comes to real estate, is under fire and being questioned by the general market, that’s not happening in the Latino community.”
On a warm Saturday, Vivas pushed her daughter Lily, 3, down a plastic slide in her fenced backyard. The little one asked her brother Luis, 14, to catch her on the way down.
Vivas, who arrived to the U.S. when she was 5 years old, said she attended an educational program for first-time homebuyers at the Latino Economic Development Center before purchasing her Northeast Washington home. The basics included learning how to shop for a mortgage, understanding how credit works, and adhering to a budget.
She had saved for months to pay off debt and accumulate $2,000 toward the down payment and closing costs, which allowed her to qualify for a $4,000 grant to apply for closing costs. In addition, the Latino Economic Development Center helped her obtain for no-interest second trust loan totaling $39,354 through the DC Home Purchasing Assistance Program, all of which went toward the down payment for her FHA-backed mortgage loan.
Vivas wanted to ensure that she never faces foreclosure or even risks it, a predicament embroiling so many Hispanic and black homeowners who have lost their homes or entered foreclosure since 2006. “I got all the information of what it takes to buy a house,” she explained, adding that it took her six months to collect the necessary financial documents before she began looking for a place.
Lessons From the Past
In the years leading to the housing market troubles, Hispanic homeownership reached record-high numbers—49.8 percent in 2006— allowing for Latinos' collective wealth to increase, according to data from the Pew Hispanic Center. By 2011, their homeownership rate fell to 47.9 percent.
Jim Carr, a former chief business officer of the National Community Reinvestment Coalition, says a good number of people have lost their homes because of predatory lending, a family illness, or a weak economy, rather than financial irresponsibility.
During the housing boom, Hispanic and black borrowers were three times more likely to get higher-interest, high-risk loans, compared with whites. For example, 21.7 percent of Hispanic borrowers with credit scores above 660 had high-risk loans, compared with 6.7 percent of whites. More than 14 percent of blacks with good credit scores also were steered toward high-risk loans.
“There’s a perception that they are in trouble because of their own doing,” Carr said. “The vast majority are victims of circumstances.”
When the housing bubble burst, this community experienced huge setbacks, and the recovery of the Hispanic community, “for purely economic reasons, will be central to the recovery of the housing market—just because of the numbers,” Parrott said.