The Hispanic housing boom: during the next few years, lenders will be doing their best to tap growing demand from Hispanic homebuyers. The numbers all indicate this is where a large slice of new home-buying demand will come from.

Author:Bergsman, Steve
Position:COVER REPORT: BUSINESS OUTLOOK
 
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EARLIER LAST YEAR, THE FIRST AMERICAN CORPORATION, SANTA ANA, CALI-FORNIA, announced it had a formed an alliance with the National Association of Hispanic Real Estate Professionals (NAHREP), San Diego, a trade organization for Latinos in the real estate industry. The alliance is designed to enhance the capabilities of NAHREP brokers. First American also announced it had joined forces with MSN Latino, the Hispanic arm of Microsoft[R] Corporation's MSN, to create a homeownership portal for the U.S. Hispanic market. [??] In April, First American's rival in the title and mortgage industry, Stewart Information Services Corporation, Houston, appointed Jose Menendez as its first national director of emerging markets. [??] To the north, in January 2004 Milwaukee-based Mortgage Guaranty Insurance Corporation (MGIC) introduced Building a Life in America--the first mortgage insurance program to provide coverage on loans to immigrant borrowers with income tax identification numbers (ITINs). The ITIN is an identification number issued by the Internal Revenue Service that does not require proof of residency and is used to report income and file taxes. [??] In October, MGIC followed that up by forming a partnership with NAHREP to distribute information about the Building a Life in America program to its affiliate chapters. As Geoffrey Cooper, MGIC's director of emerging markets, notes, "While this is our primary program for reaching the immigrant market, it is also our primary initiative targeting the Hispanic market."

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Whether it's called the Latino, Hispanic or simply the Spanish-speaking marketplace, the sector is suddenly the place to be for America's mortgage lenders--and for good reason. Over the next two decades, new homeownership is expected to increasingly come from the emerging markets (a grab-bag of customers that might include first-time, moderate to low-income and minority homebuyers) and, in particular, the fast-growing segment comprised of Hispanics.

"One of the huge components of the Spanish-speaking emerging market is the immigrant market, and studies show their homeownership rate will increase by 50 percent over the next six years," says Stewart Information Services' Menendez.

Other numbers are even more compelling.

Deciphering the data

The industry should expect a "tidal wave of Latino homebuyers," says Gary Acosta, chairman and founder of NAHREP. Citing a study by the Joint Housing Center for Studies at Harvard University, Cambridge, Massachusetts, he points out that over the next 10 years, 40 percent of all new homebuyers will be minority and immigrant, with half of those being Latino. "If you go out 20 years, that number doubles again. That means 80 percent of first-time homebuyers will be minority or immigrant and 40 percent Latino."

NAHREP touts other numbers as well:

* 48 percent of Hispanics who do not own a home say they are likely to purchase a home in the next two or three years.

* Between 1990 and 2000, Hispanics were the fastest-growing segment of the middle class (a 116 percent increase), with income of $35,000 or more.

* Between 1994 and 2001, Hispanic homeownership grew at a rate of 16.7 percent, while that of Caucasians grew only 6.6 percent.

* By 2050, Hispanics will comprise 25 percent of the total U.S. population.

"The Latin boom will soon hit the housing market in a big way," Acosta adds.

The mortgage companies do not disagree--which is why there is so much focus on the Latino market today.

"Hispanics have become the largest minority group, having surpassed African Americans," reports Paul Mullings, a senior vice president with Chase Manhattan Mortgage Corporation, Edison, New Jersey. "By 2010, the Hispanic population is projected to be 44 million, a very significant number."

However, the big opportunity that attracts Chase and other mortgage bankers lies in these numbers: Using Department of Housing and Urban Development (HUD) 2004 numbers, it appears that while the Caucasian portion of the U.S. population has attained a homeownership rate of 75 percent, the Hispanic population only has a homeownership rate of 47 percent. That huge gap is where opportunity lies, says Mullings.

"When you have almost 80 percent white homeownership, there is not much opportunity there," adds Angelo Mozilo, chairman and chief executive officer of Countrywide Financial Corporation, Calabasas, California. "Where you have 47 percent Hispanic homeownership, that is where the economic opportunity is. That gap will get much narrower. Over the next five years, we are going to close the gap."

All those numbers take into account only the documented Hispanic segment of the population. But there is obviously a huge undocumented...

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