Long-Term Increase in Asian and Hispanic Homeownership Rates Underappreciated

Friday, October 21, 2016 by Zelman & Associates

As of the 2010 Decennial Census conducted by the Census Bureau, 64% of the population was characterized as being of White race, down from 69% in 2000 and 76% in 1990. Depending on immigration assumptions, demographers estimate that the White population will shrink to a minority within the next 30-40 years. This is relevant for housing demand because minority races have traditionally had more people per household and lower homeownership rates, even after controlling for variances in age and demographic circumstances.

While it is true that homeownership rates are highest for White households versus Black, Hispanic or Asian households, and outsized growth of the non-White population will have a downward mix impact on the aggregate homeownership rate, we do not believe that the shrinking differential between White and Hispanic and Asian homeownership rates over the long term is fully appreciated.

For example, as of 2010, White households owned their home 72% of the time versus 58% for Asians, 47% for Hispanics and 45% for Blacks. However, as compared to 1990, Asian and Hispanic homeownership rates improved by 530 basis points and 510 basis points versus 320 basis points for Whites and 90 basis points for Blacks. From 1990-2010, Asian (up 149%), Hispanic (up 132%) and Black (up 42%) household growth far surpassed Whites (up 12%), leading to negative mix on the total homeownership rate, which improved 90 basis points over this period. However, we do not believe that this tells the entire story.

The overall gains in homeownership rates across races benefited from the aging of the population, as older households historically have higher homeownership rates given better income and/or savings. Thus, looking at age-specific homeownership rates best isolates longer-term shifts. We split each race into 14 age brackets, ranging from 18-19 through 80-plus. For both the Asian and Hispanic populations, 13 out of 14 age cohorts had a higher homeownership rate in 2010 than 1990, despite the severe cyclical drag from the Great Recession. For comparison, only seven and five cohorts improved for Whites and Blacks, respectively. In fact, out of the 56 cohorts analyzed in total, eight of the ten largest improvements were within the Asian and Hispanic races.

In summary, while faster household growth among races with lower homeownership rates without question is a mathematical headwind to the national homeownership rate, we believe it is important to realize that as second and third generations of immigrants improve their economic standing, homeownership rates should continue to improve and close the gap with White households.

Long-Term Increase in Asian and Hispanic Homeownership Rates Underappreciated

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