Still saddled with a huge overhang of distressed properties and lackluster demand, it seems the housing market could really use a knight in shining armor to slay the metaphorical dragons choking its growth.
According to a study released this month, that white knight could come in the form of Latino homebuyers who are expected to provide a deep well of housing interest over the next decade, propelling demand for condos, starter homes, and trade-up homes.
"The demographic trends all line up for Hispanics to be a prime demographic for homeownership," says Gary Acosta, co-founder and acting executive director of the National Association of Hispanic Real Estate Professionals. "We're seeing very strong indicators that Hispanics are going to be 40 to 50 percent of all new homebuyers for the foreseeable future."
There are a few factors that make Acosta and other industry experts think that. For starters, Hispanics have been a huge engine of population growth over the past decade, and over the next decade they're expected to account for 40 percent of the estimated 12 million net new U.S. households, a huge predictor of future housing demand.
Hispanics also have the highest labor force participation rate in the nation, according to the report, with nearly two thirds of all working-age Latinos employed.
Even considering the scourge of subprime lending and foreclosure crisis, which disproportionately hurt Hispanics especially in states such as California, heightened housing demand among Latinos is already starting to materialize, Acosta says.
"It was sort of surprising to us. The resilience within the Latino community for homeownership seems as strong or stronger than ever," Acosta says. "They view homeownership as a vehicle for stabilization to create a better living environment for their family and not as much as an investment. Because of that, the enthusiasm for homeownership hasn't waned a whole lot."
During the third quarter of 2011, the Hispanic homeownership rate rose to almost 48 percent, accounting for more than half of the total growth in homeownership over that period. Drilling down to the raw numbers, Hispanics bought almost 300,000 housing units in the third quarter of 2011, compared with 190,000 units bought by African-Americans, 66,000 by Asians, and just 18,000 by non-Hispanic white households.
Still, many obstacles confront would-be Hispanic buyers, not least of all difficulty getting a mortgage.
"I would say the desire [for homeownership] is there, but if there are any limitations around demand it's really due to, in our view, the lack of affordable mortgage credit," Acosta says. "The pendulum, quite frankly, has swung a little too far the other way."
And it could make the difference between a housing market that continues to limp along and one that starts seeing more signs of life.
"FHA is really the only game in town when it comes to anybody who has less than 20 percent to put down on a mortgage, and that has made it much more difficult for folks that we believe have not only the desire but the capacity to be successful homeowners," Acosta says. That's especially true when it comes to Hispanics, who as a whole are relatively light consumers of credit. "It's not that these folks necessarily have bad credit, they just have little credit."
Hispanics also tend to be concentrated in areas particularly hard hit by the housing crash—California, Nevada, Arizona—which means a good chunk of the housing stock on the market is distressed properties. That's set up an environment of competition between prospective buyers and cash investors, Acosta says, and it's usually the cash investors who win out with banks in the end.
"Banks, servicers, [and] GSEs have shown a pretty strong bias toward cash buyers even if [the average buyer] is willing to pay more than a cash investor," Acosta says. "The lenders are taking those cash deals [because] there's much less risk for fallout and they'll probably get a faster close on the transaction."
"It's a challenging environment in those states right now for that reason," he adds.