Burgeoning Population & Growing Purchasing Power Fuel a Demand for Homes
Since the beginning of the 21st century, Hispanics have cropped up as a dominant force in American life. They are now a consumer powerhouse that is reshaping America’s markets: Hispanics are not only a major driver of the nation’s population growth but also of its workforce, entrepreneurial endeavors, educational attainment and homeownership achievement.
The emergence of Latinos as an economic power house is significant in Arizona, which ranks sixth for having the nation’s largest Latino population (1.9 million) and fourth for having the largest Latino share of total population (30%).
Hispanics will account for 40% of net new U.S. households in the next decade.
Arizona was one of the hardest hit housing markets during the subprime debacle. However, a real estate rebound is occurring in the state, especially in Phoenix, which is bringing more first-time homebuyers into the market. If Arizona proactively opens up homeownership opportunities for everyone, its housing recovery could be broader and more enduring.
The past several months have provided increased evidence that Latinos now constitute a mega homeownership market. Consider these underlying forces:
Burgeoning Population. Hispanics are a huge engine of US population growth. By 2010, the Hispanic community had surpassed 50 million and accounted for more than half the decade’s overall US growth. Over the next decade, they will account for 40 percent of the 12 million net new U.S. households, a huge predictor of future housing demand.
Educational Attainment. From 2009 to 2010, the number of Hispanic young adults enrolled in college grew by 349,000 (a remarkable increase of 24 percent). In 2010, 73 percent of young Hispanics completed high school, up from 60 percent in 2000, and 32 percent of young Hispanics were enrolled in college, up from 22 percent in 2000. From 2000 to 2011, the number of Hispanics with at least a bachelor’s degree nearly doubled from 2.1 million to 3.8 million.
Income Growth. In 2010, 40 percent of Hispanic households earned over $50,000 a year and more than 12 percent earned over $100,000 a year. Nearly 1.6 million Hispanic households now earn more than $100,000 a year. In 2010, the average annual Hispanic household income in Arizona was $51,400 and is expected to grow steadily.
Latino income has grown because of gains in education and professional jobs, the increased number of Hispanic women working, Hispanics’ high labor force participation, and their penchant for working extra hours, holding more than one job, and having multiple wage earners in a household.
Hispanic purchasing power is projected to grow by nearly 50% between now and 2016.
Labor Force Participation. Latinos filled 1.4 million or 60 percent of the 2.3 million jobs added to the economy in 2011. The growth in jobs by Hispanics has been high enough to raise their employment levels 4 percent higher now than at the start of the Great Recession. Hispanics are expected to account for 74 percent of the growth in the nation’s labor force from 2010 to 2020.
Consumer Behavior.The Hispanic market made up over 50 percent of real growth in the U.S. consumer economy from 2005 to 2008. During that time span, the $52 billion in new Hispanic spending outpaced the $40 billion in new spending by non-Hispanics. Overall, Hispanic consumers tend to spend twice as much as much as the average consumer, spend more time and more money per shopping trip, and bring more family members with them to shop. They make up one third of the overall revenue growth for companies that produce consumer goods. In Arizona, Hispanics account for $40 billion in consumer spending annually.
Enterpreneurial Zest. Three million Hispanic businesses are generating $420 billion in sales annually and are expected to reach $540 billion this year. In Arizona, there are now 60,000 Hispanic-owned businesses, a third of them owned by immigrants and more than a third by Hispanic women. Today, one out of every 20 businesses in the U.S. is owned by Hispanics.
Purchasing Power. Hispanic purchasing power in the US increased from $258 billion in 1985 to $1.1 trillion in 2011. It is projected to grow by nearly 50 percent to $1.6 trillion in 2016.
Drivers of Demand for Homeownership. The large numbers of Latinos who strongly aspire to own a home constitute a big chunk of the pent-up demand for homeownership that has rapidly accumulated over time. During the third quarter of 2011, Hispanic homeownership grew by 288,000 units, accounting for more than half of the total growth in owner-occupied units (53 percent) in the nation during that period.
From 2000 to 2011, 5.9 million owner-occupied units were added in the U.S. Of these, nearly 2.1 million were acquired by Hispanics, compared to 3.8 million units acquired by the rest of the population. The total growth in homeownership units for Hispanics during this time period represents an impressive 49.3 percent increase.
Prospects of Homeownership for Latinos in Arizona
Nationwide, a housing recovery can no longer rely on traditional trade-up buyers, many of whom are unwilling to sell because of huge price declines or are unable to sell because they are underwater. In Phoenix, however, several big employers including Amazon.com and Intel are hiring, and both investors and first-time homebuyers are scooping up the relatively low supply of homes available.
Because of the housing recovery, home prices increased by 2 percent in Phoenix during the fourth quarter of 2011, the biggest increase of any major metro area in the country. Investors, including those from Canada, have gained a larger share of the market (29%) and are renting many of the homes they buy, thus preempting many potential first-time homebuyers from buying, especially mortgage-ready Latinos.
The outlook for Latino first-time homebuyers, however, is promising. According to Olivia Pineda, a member of the Phoenix chapter of the National Association of Hispanic Real Estate Professionals (NAHREP), homes are now being bought quickly by both Latino investors and first-time homebuyers who are playing a significant role in the upsurge of housing in Arizona.