Asians, Latinos Create a New Market Model
As did the multitudes of World War II veterans and baby boomers who transformed Southern California in decades past, a great influx of Asian and Latino immigrants is leading to epochal shifts in the region’s housing market.
New studies show that one in every five home buyers in Southern California is foreign-born. That ratio is expected to rise dramatically in the coming years as more immigrants establish themselves and enter prime home-buying age.
The surge in immigrant buying, which surfaced during the recession and is adding fuel to the latest run-up in housing prices, has prompted the industry to converge on this once-ignored segment of the market. The biggest thrust is aimed at Latino home buyers.
Mortgage lender Countrywide Credit of Calabasas, as part of its national “Hispanic Initiative,” is hiring 70 additional bilingual officers and opening storefronts in Latino strongholds such as Santa Ana. Real estate brokerage owner Fred Sands is trying to establish 10 new franchises dedicated to Spanish-speaking markets in the Southland. Other lenders and builders, at swap meets and in new Web sites, are aggressively targeting immigrants with zero-down-payment mortgages and slick multilingual ads, even driving through ethnic neighborhoods in Winnebagos like ice cream vendors.
Their pitches are rousing the immigrant buyer. “It is a sleeping giant that’s waking up,” USC demographer Dowell Myers said of the immigrant home buyer. “We now have in place a population that is going to push up housing prices regardless of what happens in the global economy.”
The immigrant demand for homes is expected to keep brokers, lenders and builders in California busy even as much of the nation faces a projected slowdown amid an aging U.S. population. Florida and New York, among a few other states, also have high expectations for the immigrant home buyer.
Taking More Notice of Immigrants
Smaller brokerages and builders have been tuned in to the multiethnic market since the burst of immigration from Mexico and Asia to California began two decades ago. But what awakened the industry giants like Sands was the latest recession, when immigrants emerged as some of the most active buyers in an otherwise dormant market, propping up property values in South Los Angeles and parts of the San Fernando and San Gabriel valleys.
In the 1980-95 period, immigrants made up 23% of the growth in California homeowners--slightly lower than their current share of the state’s overall population, according to housing demographer John Pitkin. But in an upcoming report for the Fannie Mae Foundation, Pitkin projects that the foreign-born share of homeowner growth in California will as much as double to 46% over the next decade. That translates into about 764,000 new immigrant homeowners from 1995 to 2010, most of that in Southern California.
“That is a big number; it is not a flash in the pan,” said Pitkin, who heads Analysis & Forecasting Inc. in Cambridge, Mass.
The expected growth of immigrant home buyers is akin to the huge demand created by GIs flocking to Southern California after the war in the late 1940s and by baby boomers passing into adulthood in the mid-1970s.
In the few years following both those spurts, California housing prices surged dramatically, sometimes 30% or more annually, as the industry scrambled to meet the demand.
“Why did the San Fernando Valley grow in the ‘70s?” asked Barbara Zeidman, director of the Los Angeles office of Fannie Mae, the nation’s largest source of home mortgages. “It was the bulge of baby boomers hitting home-buying readiness.”
Now Zeidman sees the Valley being remade by Latino home buyers, many of them immigrants. The share of Latino homeowners in Van Nuys, Panorama City and Sylmar, among other places, increased by more than 10% from 1990 to 1996, according to a study of homeowner surnames by UCLA demographer Nancy Bolton.
In Orange County, Latino immigrants and natives have reshaped Fullerton, Anaheim and Santa Ana.
A similar transformation, but in this case brought about by Asians, has occurred in the San Gabriel Valley cities of El Monte, Rowland Heights, Temple City and Walnut.
“Thanks to the Chinese community, we did pretty good” during the housing downturn, said Danny Grohs, owner of Mur-Sol Construction Inc. Based in Arcadia, the specialty builder has been targeting Asian buyers for more than a decade, but in recent years has been doing work exclusively for Chinese Americans and immigrants. “We have 50 jobs going right now; they’re all for Chinese,” Grohs said.
With Asian buyers fueling demand, it is no wonder that the median price of a new detached house in the San Gabriel Valley has leaped from $289,900 in mid-1996 to $355,990 in this year’s second quarter, according to the Meyers Group, an Irvine-based research firm.
At Ed Doud’s brokerage in Hacienda Heights, most of the 70-plus agents are Asian or Latino. The storefront window says Mulhearn-TPA Realtors, and underneath are two large Chinese characters in red, hong fu--or “big blessing.”
Change in Financing
That is writing on the wall for some of the few monolingual agents in the office. “I’m becoming a minority in this business,” said Jackie Baccaro, a veteran who is planning to retire soon. “Even my Caucasian sellers think they need to list with Asian agents.”
The change also is apparent in the staffing and marketing at lenders and builders, who are trying to attract more Latinos. Upland-based Lewis Homes has joined a Latino chamber and designed floor plans with bedroom-convertible garages for multi-generational households. Bank of America has just opened new home sales offices in Inglewood and Downey, two fast-growing Latino communities.
“In Southern California, the ethnic diversity is the most important mega-trend in the market,” said Liam McGee, president of BankAmerica Corp.’s Southern California operations. “Increasingly, the first-generation immigrants are fueling our economic growth.”
And fueling the growth of immigrant home-buying is a new generation of financing deals that have eased qualifying requirements and dropped down-payments ever lower--from the traditional 10% or 20% to 5%, 3% and even zero.
Oscar Zapata, 39, perked up recently when a B of A teller in North Hollywood told him about the bank’s new zero-down plan. Not long after that, Zapata and his wife, Sylvia, spotted a three-bedroom house for sale a few blocks from their apartment on Laurel Canyon Boulevard.
‘Tired of Paying Rent’
The Zapatas are now in escrow on the home. Both have had steady jobs as machine operators at a local printing company. Between them they earn about $40,000 and have good credit histories--good enough to qualify for a $134,000 mortgage. Oscar Zapata figures he’ll need to come up with just a few thousand dollars for closing costs, which isn’t a problem. The Zapatas have two teenage sons and have been renting for 12 years, ever since arriving in this country from Nicaragua.
“We’re getting tired of paying rent,” Zapata said.
Moving into a house will raise the Zapatas’ monthly housing costs from the $675 they now pay in rent to a mortgage payment of nearly $1,000. But the couple are determined to keep up with the mortgage payments.
Most lenders say they have not been disappointed in doing business with immigrants. Even with little or no equity down, most lenders say their rate of default on home loans to immigrants is low.
Like the Zapatas, most of today’s immigrant home buyers arrived in the U.S. in the 1980s. It typically takes a decade or more of living with relatives or renting here before the newcomers are ready to buy their first home.
Immigration to California has been even heavier in the 1990s, exceeding 200,000 in some recent years.
Studies show that immigrants from Latin America have been slower to progress into homeownership, most likely reflecting the higher percentage of poverty, youth and lack of information in their numbers. But as such, Latinos also represent the group with the most potential.
In the last census, about two-thirds of all Latinos 16 and older in Southern California were immigrants. As they assimilate, mature and accumulate wealth, the expectation is that they will outnumber other foreign-born groups in attaining homes.
“When 2010 comes around and L.A. is 50% Latino, we want to be ready,” said Antonio Valdez, a former marketing executive at La Opinion newspaper who is leading Countrywide’s “Hispanic Initiative.” In the last five years, he says, Countrywide has made 65,000 loans to Latinos, including immigrants. That’s but a fraction of the company’s overall volume, but Valdez says, “We’re beefing up now for a long-term process.”
But there are some qualifications to the industry’s high expectations for immigrants.
Besides the uncertainty of how long the economy and interest rates will remain favorable, one big potential constraint is affordability--an issue that is looming once again as sales and prices heat up in Southern California. Depressed prices during the recession, coupled with new financing plans, enabled moderate-income households, including many Latino and Asian families, to buy homes.
Supply of Entry-Level Homes May Thin
Most Latino home buyers in California are first-time owners. The median price of an existing home bought by Latinos, including immigrants, in Southern California last year was $128,000--compared with $219,000 for whites, $190,000 for Asians and $118,000 for blacks, according to a survey of sales. On average, the Latino home buyer last year put down $5,050.
Lower-priced houses have appreciated at a slower rate in the latest recovery, but their values are edging up as well. For example, in South-Central Los Angeles, a favorite among Latino immigrants who have been moving into what was once a black community, median sale prices rose to $111,000 in the second quarter--up 3% from a year earlier, according to Acxiom/DataQuick.
As sales and prices rise, it will thin the supply of entry-level homes. And it isn’t helping that more of the homes being built now are in the higher price range, putting them out of reach of many immigrants and natives alike.
Some studies also suggest that the immigrants of the ‘90s are less educated and start out with less than their predecessors, which could slow their movement into homes.
There also is evidence that Latino immigrants, once they acquire homes, stay in them longer than other groups because of cultural and economic factors. That could also constrain both the available stock of first-time homes and the vitality of the trade-up market, which depends on the mobility of all classes of homeowners.
Will these supply and affordability factors put a damper on the immigrant market? “It’s too early to tell,” said G.U. Krueger, an economist at the California Assn. of Realtors, “but you can’t be naive about these issues.”
A CAR survey last year found that Latino home sellers had lived in their homes for an average of 10 years before moving out--about two years longer than other groups.
“In Mexico, when you buy a house, you buy it forever and pass it on from one family member to another,” said Gilberto Cortes, an 18-year veteran of the San Fernando Valley real estate market.
Says Highland Park homeowner Luis Roldan: “I’m not planning to move. If I have another child, I’m going to build another room in the patio.”
But for all caveats, analysts say there are other factors that could, in fact, boost the immigrant-buying projections.
Tawni Hoang, owner of City Funding & Real Estate in Westminster, has noticed that many adult children of Vietnamese immigrants are now helping their parents buy homes in Orange County’s Little Saigon area. That reflects the arrival of many Vietnamese in the middle and late ‘70s whose U.S.-born and better-informed children are now reaching adulthood.
“The trend in the Vietnamese buyer has shifted--brothers, sisters, parents are all giving a little bit on housing,” said Hoang, who started the mortgage company nearly a decade ago and had her best sales in the last two years.
Hoang says that the new relaxed loan-qualification rules have helped, but she added that Vietnamese Americans, like many other Asian immigrants, prefer to come in with a hefty down payment, typically 20%.
But more than anything, it is the sheer size of the immigrant population and its maturation that will drive the trend.
“This market is going to play a significant role no matter what happens. The numbers are just massive,” said Alex Espinoza, president of California Capital, a mortgage banker in Ontario that specializes in the Latino market. Espinoza and brothers Jimmy and Alfonso also operate a real estate sales business and an escrow company, and they own and manage apartment buildings in the Inland Empire.
Gambling on the Latino Market’s Future
The Espinoza brothers saw what was coming back in February 1981. The nation was then mired in recession and mortgage interest rates averaged 15%. But the Espinozas quit their jobs cutting hair and selling insurance and gambled everything on the future Latino market.
It was a profitable decision. They say their sales have grown every year, even during the recession and the housing slump. By advertising in Spanish-language papers and by targeting Latino immigrants at flea markets, where they distribute pictures of houses with big yards, the Espinozas and their dozen agents have built up their sales to about 400 houses annually. Virtually all their business is with Latinos in the Inland Empire.
Jimmy Espinoza recalled how he and his 12 siblings grew up in a humble adobe house on a Colorado farm, where they earned a living thinning beets and picking watermelons. As with his own family, Espinoza says many Latinos have a burning, cherished desire to live in their own homes.
“The Latino family is young,” he says. “They’re growing up and going to college and getting good jobs. They’re going to be able to afford and compete for these homes. I think the future looks good.”
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What $175,000 Will Buy
Home shoppers with about $175,000 to spend will quickly discover that their money will go much further if they head inland. The same amount buys a small condominium in Santa Monica or a new four-bedroom house in Corona.
Los Angeles County
City: Santa Monica
Price: $175,000
Median price: $439,500*
Type: 33-year-old condominium
Size: 950 square feet
Bedrooms: Two
*
City: Los Feliz
Price: $176,000
Median price: $255,000 (Downtown Los Angeles/Central city)
Type: One-story bungalow
Size: 1,004 square feet
Bedrooms: Two
*
City: Valencia
Price: $177,990
Median price: $212,500
Type: Two-story townhouse
Size: 1,433 square feet
Bedrooms: Three
*
City: Northridge
Price: $174,990
Median price: $268,000
Type: 41-year old recently remodeled house
Size: 1,413 square feet
Bedrooms: Three
*
City: Quartz Hill
Price: $174,900
Median price: $82,000 (Palmdale)
Type: 11-year-old home on quarter-acre lot
Size: 2,700 square feet
Bedrooms: Four
Orange County
City: Anaheim Hills
Price: $176,900
Median price: $176,250 (for Anaheim)
Type: Two-story townhouse
Size: 1,210 square feet
Bedrooms: Three
*
City: Garden Grove
Price: $175,000
Median price: $170,750
Type: 44-year-old one-story house
Size: 1,138 square feet
Bedrooms: Three
*
City: Irvine
Price: $174,900
Median price: $272,000
Type: Condominium
Size: 981 square feet
Bedrooms: Two
Riverside County
City: Corona
Price: $173,990
Median price: $154,750
Type: Two-story home
Size: 1,885 square feet
Bedrooms: Four
*
City: Wildomar
Price: $175,990
Median price: $151,750
Type: Two-story home
Size: 2,704 square feet
Bedrooms: Five to eight
*
City: Menifee
Price: $174,900
Median price: $118,000
Type: Detached house on quarter-acre lot near lake
Size: 2,140 square feet
Bedrooms: Four
*The median home price for July includes prices for housing, condominiums and new homes.
Source: California Assn. of Realtors
Where Latinos and Asians Are Buying
On The Map
Like the baby boomers in the 1970s, many Latino and Asian immigrants are now entering their prime home-buying years. As their length of residency and wealth increase, they will be driving the housing market for years to come. So far this decade, their home buying has dramatically altered the makeup of communities in Los Angeles and Orange Counties. This map, based on surname analysis, highlights areas where Latino and Asian buyers, many of whom are immigrants, have boosted their share of homeownership by at least 7% from 1990 to 1996.
Homeownership Increase, 1990-96
Areas where Latino or Asian homeownership has increase by 7% or more (by ZIP Code, by ethnic group)
Source: Nancy Bolton, UCLA
Snapshot of Home Buyers
According to a recent survey, home buyers in Southern California show striking differences according to their ethnic background.
*--*
Black Latino Asian White First-time buyers 60% 70% 55% 34% Average age 39 35 37 40 Immigrant 8% 38% 83% 4% Self-employed 5% 9% 25% 15% Median income $50,000 $48,000 $60,000 $80,000 Median purchase price $118,000 $128,250 $190,000 $219,000 Median down payment $3,520 $5,050 $34,700 $32,200
*--*
Source: 1997 Calif. Assn. of Realtors survey
