A report out today shows that minorities and immigrants are fast replacing baby boomers as the biggest force in the housing market-a trend that mortgage lenders are scrambling to address.
The Harvard University report, "The State of the Nation's Housing," finds minorities and immigrants fueled a homebuying boom from the end of 1994 to the end of 1997, as 4 million households became homeowners. The previous three-year record, 3.8 million, was set in the early 1970s, when the oldest baby boomers entered the prime homebuying ages of 25 to 34.
Responding to this trend, lenders are adopting tactics ranging from bilingual marketing to homebuying fairs. And many are confident that blacks, Hispanics, and other minority groups will help sustain growth in housing-despite dwindling demand from the postwar generation.
"Those customers are the customers of the 21st century," said Daniel Russell 3d, vice president of affordable housing at Norwest Mortgage. "Growth has to be in those markets that have traditionally been underserved."
Studies show that 80% of first-time homebuyers will be immigrants by 2010, noted William Schenck, chairman and chief executive of Fleet Mortgage Group. "You have to be prepared with customers of a different culture, how to address people, what their expectations are."
Baby boomers created a record surge in homeownership in the 1970s, when they entered their prime homebuying years. And their passage through middle age continues to exert a strong influence on home building and homebuying trends.
But the Harvard report found that minorities contributed 42% of the growth in homeownership between 1994 and 1997, and echoes Mr. Schenck in concluding that they "will account for a growing share of first-time homebuyers in many markets" in coming years.
Many of the new homeowners had postponed buying because of lagging incomes and high housing prices in the 1980s.
The growth in minority homeownership is partly because the number of minority households is growing more quickly than white households. Also, Hispanic households are younger on average than black or white households, which means more are in their peak homebuying years, the report says.
Still, minority homeownership continues to lag. While 72% of white households owns their homes, only 45.4% of black households and 43.2% of Hispanic households are homeowners.
Robert M. O'Toole, senior staff vice president of the Mortgage Bankers Association, said mortgage bankers are responding to the surge in minority homebuying with new loan products that require smaller down payments and less of a credit history.
"But probably even something bigger than that" is going on, Mr. O'Toole said. Lenders are making "a conscious effort to educate and come into contact with a whole new group of borrowers," he said.
Using targeted advertising, multilingual loan officers who are also familiar with immigrant groups, and homebuying fairs in minority and immigrant communities, lenders are reaching out to those outside the homebuying mainstream, Mr. O'Toole said.
"Our principal strategy is built on the philosophy that you meet the customer where the customer is," said Mr. Russell at Norwest. "Building a multilingual sales force is going to be much more important going into the 21st century than it has ever historically been."
Mr. Russell said that the share of Norwest's total retail originations that go to low- and moderate-income homebuyers and minority homebuyers is "approaching 40%."
And the growth of Norwest's lending to these homebuyers is outpacing total origination growth, Mr. Russell said.
Countrywide Home Loans, Calabasas, Calif., set out in March to add 70 bilingual employees who understand "the idiosyncrasies involved in the Spanish-dominant market," said Antonio Valdez, vice president for retail business development.
Fleet is working to educate realtors and mortgage brokers, "getting them aware of what they're going to need to do to serve these markets," Mr. Schenck said.
