As the fastest-growing demographic in the nation, Latinos play and will continue to play a big role in shaping the housing industry.
There are about 65 million Latinos in the US, and that is expected to reach 100 million in the next 20 to 25 years, according to L'ATTITUDE co-founder Sol Trujillo. The demographic, which skews younger than other groups, also generates $3.2 trillion in gross domestic product — which would make it the fifth largest global economy.
As a result, this group will make up a greater share of homebuyers over the next decades, but they face many barriers to entry.
"It's important for any business to understand where the growth is coming from, and to target consumers, and to do it cost-effectively and cost-efficiently and to service them well," Trujillo told Yahoo Finance Live (video above).
Nationwide, the Hispanic population growth rate has outpaced other races and ethnicities, contributing significantly to demographic shifts and economic dynamics, according to the Pew Research Center. Collectively, the group’s consumption and purchasing power grew 2.1 to 2.4 times faster than non-Latino counterparts.
Latinos are significantly younger, too, meaning more of them are just hitting their peak years for homebuying.
For instance, Latinos are creating more new households than any other demographic group. Last year, the group added 628,000 new households, more than double that of non-Latino white households and making up 38.7% of all household formations in 2022, according to the National Association of Hispanic Real Estate Professionals (NAHREP).
"That's the good news because if you're a homebuilder, if you're D.R. Horton, the biggest homebuilder in the country, you should know who's about to buy your next home that you build," Trujillo said.
So far, the homeownership rate among Latinos remains just below 50%, or about 25 percentage points lower than that of non-Hispanic white Americans, according to data from the US Census Bureau.
But since 2014, 2.3 million new Latino homeowner-households have been created, making up 24.4% of all homeownership growth.
"Homeownership rates have been low historically. One, because it's a youthful cohort," Trujillo said. "Two, it's growing now faster than virtually every other cohort where right now it's accounting for over 50% of all new home mortgages taken out."
In fact, there were 7.9 million mortgage-ready Latinos between the ages of 45 and under last year, per the NAHREP 2022 report, and 2.8 million who were almost mortgage-ready. Data from Freddie Mac showed 39% of Latinos aged 45 and under and without a mortgage already had the credit standards to be approved for a home loan.
Additionally, many young Latinos are purchasing homes to live with their parents. About a third of Latino households are multigenerational, which include two parents living with their adult children. Experts say the trend could continue, with 19 out of 25 real estate practitioners reporting an increase in co-borrowing, particularly among family members, according to NAHREP.
This bodes well for builders who want to capitalize on the multigenerational living trend like Lennar Corp.(LEN), which offers specialized homes called "Next Gen" that come with a private suite that can accommodate multigenerational families.
Still, headwinds exist for Latinos when it comes to homebuying.
The average Latino worker earns less than $0.80 for every $1 earned by the average worker in the United States, per data gathered by Wells Fargo.
Meanwhile, affordable housing remains a huge challenge for all buyers. Rising home prices, elevated mortgage rates and limited inventory have pushed up the amount of income necessary to qualify for a mortgage. Higher prices also mean heftier down payments, posing yet another hurdle for first-time and middle-income buyers.
To help homebuyers get past those barriers, Fannie Mae, for example, recently announced new resources and programs that aim to give Latinos access to homeownership opportunities within the country.
"We want to help people get into and stay in their homes for a long time," Fannie Mae CEO Priscilla Almodovar said in a statement. "Downpayment assistance and homeownership education can help the Latino community and achieve both goals."
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.