The Asian Real Estate Association of America (AREAA) is a national non-profit trade organization dedicated to improving the lives of the Asian American and Pacific Islander (AAPI) community through homeownership. AREAA is a powerful national voice not only for its members—housing and real estate professionals—but also, the communities they serve. AREAA represents more than 17,000 members across 41 chapters.
The 2019 – 2020 State of Asia America Report, an annual AREAA publication, provides a snapshot of the state of AAPI homeownership pre-COVID-19. The report presents disaggregated regional, demographic, socioeconomic and housing data for the most diverse and fastest-growing population in the United States, providing a comprehensive resource for industry professionals, leaders and decision-makers as they map ways to better serve this community.
Using Census estimates, AREAA presented disaggregated data for the AAPI community, showing the vastly different socioeconomic situations between Asian Americans and Pacific Islanders. There is approximately a $26,000 earning gap between Asian American and Pacific Islander households, while there is roughly a $126,000 difference in median house value. The housing rate of the two groups also has a difference of more than 15 percent.
Looking more specifically at AAPI subgroups, there is an earnings gap of $74,510 between the highest earners, Indian Americans, and the lowest earners, Burmese Americans—a 62 percent difference. There is also a 38.7 percent difference between Taiwanese Americans, who have the highest homeownership rate, and Micronesian Americans, who have a homeownership rate of just 29.4 percent. When benchmarked against non-Hispanic whites, there is only a difference of 1.5 percent for Taiwanese Americans. Three groups—Taiwanese, Vietnamese and Japanese Americans—are above the national average (according to the Census) of 63.9 percent, and six groups—the previous three, plus Chinese, Laotian and Filipino—are above the aggregated Asian homeownership rate.
In 2018, Asian Americans generated 223,906 conventional loans, which amounted to $86.4 billion in loan value. Asian borrowers continue to be the highest minority users of conventional (GSE-backed) loans by number (223,906) and dollar amount ($86.4 billion). Just 6 percent and 2 percent of Asian loan applications are for FHA loans and VA loans, respectively. There are a few possible reasons for this:
- A prevailing belief that 20 percent or more is required for down payment
- Not wanting to pay PMI
- A desire to avoid the additional paperwork and requirements of FHA loans, or sellers’ aversion to working with FHA-financed buyers in highly competitive markets
- Additional closing costs associated with VA loans
The report also found that more than 4.1 million AAPIs were potentially “mortgage ready” as of 2018, which, in rough estimations, could amount to $145.9 billion in potential loans. Additionally, it found another 0.8 million AAPIs would be mortgage-ready if not for their limited, but clean, credit history (meaning they do not have enough credit history to generate a score). Adding these two groups together, we would be looking at $174.4 billion in potential loans by better serving the AAPI homebuyers of tomorrow.
However, continued housing shortages in the high-cost areas AAPIs wish to buy in—and the length of time it takes to save enough for a down payment—continue to make the goal of homeownership that much more elusive for AAPI buyers. Affordability also continues to be an issue. With a median house price of $444,307 and concentrations in some of the least-affordable housing markets, AAPI borrowers, even with some of the highest incomes of any borrower group, have the longest time to save for a 20 percent down payment at 24.6 years.
Additionally, one of the greatest reasons for denial for Asian borrower applications after DTI is incomplete credit applications. When they do have credit scores, Asian borrowers have the highest median credit scores overall and across most enhanced loan types. However, because AAPI families prefer to make their purchases in cash in order to avoid debt (only making large purchases when cash is available), AAPIs have historically struggled with credit qualification as a result of limited credit history.
Millions of young New Americans, and people of color, including AAPIs, pay their bills on time, yet are not considered “credit-worthy,” according to federal housing finance standards. These “credit-invisible” or “credit-thin” applicants have a harder time getting loan approval, face higher financing costs or are steered toward more expensive loans. Using alternative credit scoring could allow as many as 300,000 potential AAPI homebuyers to have credit scores that meet underwriting requirements and score as many as 40 million previously unscored consumers. Additionally, consumers with low credit or thin credit history could increase their scores, and loan underwriters could have a more accurate financial predictor of one’s ability to repay a loan, leading to better lending options for consumers in general.
Additional findings from the 2019 – 2020 State of Asia America Report:
- AAPI homeownership rate varies widely in the top 20 metropolitan statistical areas (MSAs) by AAPI population. AAPI homeownership in Riverside is more than 70 percent, while homeownership in New York metros is just 50 percent.
- Homeownership varies widely by AAPI subpopulation, too. Japanese homeownership is around 65 percent, while Nepalese homeownership is less than 30 percent.
- Many AAPI are buying houses and moving to large MSAs in California, Texas and the Northeast.
- AAPI loans are more likely to have three or more borrowers compared to non-Hispanic whites, possibly due to multigenerational households.
- In aggregate, AAPI borrowers tend to be younger, have higher credit scores and income than the overall population.
Some of the least affordable areas for AAPIs are:
- San Jose-Sunnyvale-Santa Clara, Calif.
- Kahului-Wailuku-Lahaina, Hawaii
- San Francisco-Oakland-Berkeley, Calif.
- Urban Honolulu, Hawaii
- Flagstaff, Ariz.
- Los Angeles-Long Beach-Anaheim, Calif.
- San Diego-Chula Vista-Carlsbad, Calif.
- Seattle-Tacoma-Bellevue, Wash.
- Boston-Cambridge-Newton, Mass.-N.H.
- New York-Newark-Jersey City, N.Y.-N.J.-Penn.
- Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
The 2019 – 2020 State of Asia America report is sponsored by RE/MAX. For more information, or to receive a copy of the State of Asia America Report, please visit areaa.org/saa.
Sabrina Baranda Ruiz is policy & communications manager at AREAA.