By the Gonzales Group
RISMEDIA, August 28, 2008-Turn on the nightly news, open the morning paper or click on your favorite news blog and the story of the current decline in the housing market and credit crisis is front and center. We now know the effects of this down turn and indeed we are entering “uncharted waters” in many ways. But what does this mean to the growing multicultural markets that we believe will be the new economic power source for the housing market moving forward?
During the last 15 years, homeownership rates soared: the U.S. reached a homeownership rate of 75% and the gap for multicultural homeowners was closing at respectable rates. Today’s market conditions can potentially reverse that trend and leave one to question what will become of the multicultural consumer segment. Do the current market conditions present an opportunity for sustainable homeownership in these communities?
The Growing Demand: In 2006, multicultural home buyers made up 27% or $677 billion dollars of all loan originations according to HMDA (Home Mortgage Disclosure Act). This number is expected to grow through the balance of the decade and beyond. It is estimated that in the next several years, the Hispanic population in the U.S. will reach 18 million with many entering the prime home buying age bracket of 25-44. During that same time period, the retiring baby boomer population is expected to be leaving the housing market.
Supply of affordable housing: The influx of bank foreclosures into the market, the slowdown in housing starts coupled with declining home prices has created a supply of affordable housing stock that means new opportunities for multicultural home buyers who were left out of the market during the boom years when prices soared out of reach for this consumer segment. The plunge in prices has made some areas of the country fertile territory once again for first-time buyers and investors.
In a recent article by Lori Weisberg and Emmet Pierce of the San Diego Union Tribune, they highlight Jose Vargas, 33, who after four years of sharing one room with his wife and two children in a cramped rental house, became a homeowner again. Vargas paid $166,000 for the three-bedroom house in City Heights, San Diego, which sold for more than twice that – $340,000 – in 2004. These sharply falling housing prices have become an unavoidable reality, yet an opportunity for first-time multicultural home buyers.
New Loan Products in a Changing Regulatory Environment: The tightening of the credit markets has changed the landscape of conventional loan products available to many first-time home buyers and will mean less flexibility in down payments and underwriting guidelines. The migration to government-sponsored FHA financing has already become the order of the day for many including the multicultural community. While tighter restrictions in mortgage funding will help the sustainability of homeownership and stability in the housing market, the short-term effect means a longer qualifying time for homeownership for many in the multicultural markets.
The Real Estate Practitioner: Historically, downturns in the housing market mean a downturn in the number of real estate agents in the business. Many associations of Realtors are estimating that their memberships will decline in the near term while others have already experienced significant attrition rates. Sales agents that stay in the business will require skill sets that they have not utilized in the past to keep pace with the opportunities that the evolving home buying market will require as we leave this current downturn and returns to normalcy. Awareness of the new economic power source in the multicultural markets and learning the skills that are required for this consumer will be essential.
Reaching the multicultural consumer requires providing reliable products, prompt and responsive service, front-line staff that are empowered to resolve problems, knowledgeable staff, empathy with the customer, and community trusteeship.
To be effective, your strategy requires understanding the psychographics of the various cultures to accommodate nuances and subtleties.
The opportunities in a seemingly bleak market have only begun to present themselves. With a growing population and buying power, the economic power source of the Multicultural home buyer will be fueled by trends that have not been seen in the industry in over a decade in many markets.
For more information, visit www.thegonzalesgroup.com.
The Gonzales Group and RISMedia are excited to introduce a ground-breaking White Paper that takes a realistic and practical in-depth look at the changing face of modern-day real estate. In “The New Economic Power Source: Increasing Profitability with Multicultural Home buyers,” the authors will help you unlock the potential of the multicultural market by answering the questions and clarifying the assumptions often associated with this consumer group. To order the White Paper, click here.