Multigenerational Hispanic households are feeling growing economic pressure

Juan Espinoza, far left, with his family.

A combination of rising interest rates, high home values ​​and limited inventory has squeezed potential buyers – and perhaps few know it better than Juan Espinoza.

The 23-year-old resident of Santa Ana, Calif., has been looking for a budget-friendly home for three years that includes all four of his own family members — and his parents.

“We’re living in an apartment right now, just waiting for the market to go down a bit,” Espinoza said. “We’ve been outbid so many times that I’ve lost track of how many homes we’ve seen.”

The family faces two trends that have made the search particularly difficult. The first is that house prices, although starting to fall, have jumped sharply over the past year. And the Espinozas searched Orange County where the median home price was $987,950 in the third quarter, up 11% from the year-ago period, according to ATTOM Data.

The second is that the Espinozas are among the millions of people with multiple generations residing under one roof. In March 2021, there were 59.7 million U.S. residents in this lifestyle, up from 14.5 million in 1971, according to Pew Research.

Mortgage rates have also risen as the Federal Reserve tightens monetary policy to curb inflationary pressures not seen in about 40 years. The rate on a 30-year fixed mortgage hit 6.66% on Oct. 6, according to Freddie Mac. It was 2.99% on October 7, 2021.

“We’re going to land them, but interest rates have gone up and their buying power has gone down,” said Imelda Manzo, a Murrieta, Calif.-based real estate agent who works to find new homes for the Espinozas.

Multigenerational households

Families of color are more likely to share a home with multiple generations, Pew found. About a quarter of Asian, Black and Hispanic Americans each lived in multigenerational households in 2021, compared to 13% of those who are white.

Living with relatives can provide benefits: more family members residing under one roof means you can pool multiple streams of income, for example. And in households with young children, grandparents can help with childcare.

“Latinos are more likely to live in multigenerational households,” said Gary Acosta, co-founder and CEO of the National Association of Hispanic Real Estate Professionals.

“But being a big, multi-generational family comes with complications if you’re trying to be a landlord,” he said.

For example, it may be more difficult for them to qualify for a mortgage, even if they bring multiple sources of income to the table. “The perception is that these aren’t permanent storylines, so the underwriter’s instinct is to look at everything else more aggressively,” Acosta said.

Larger families also have housing needs to meet, making it difficult to find the perfect home when inventory is tight. “It’s not just square footage, but do you have a yard, more bedrooms,” Acosta said. “You want more utility.”

“The growth of working from home has pushed buyers into the suburbs and into more utilitarian homes, such as extra bedrooms that can be used as a home office,” Acosta said. Institutional buyers also flocked to affordable neighborhoods to buy homes, he added. Indeed, a May report from the National Association of Realtors found that in 2021, market share for institutional buyers grew in 84% of states, as well as the District of Columbia.

For the Espinoza family, the ideal home would have at least three bedrooms, a backyard, and proximity to Santa Ana jobs and schools.

These issues are also compounded by the fact that first-time home buyers like the Espinozas have faced fierce competition from cash buyers.

“We would have counter offers,” Manzo said. “[Sellers] would ask for the highest and the best within a time.”

Aggressive bidders are also willing to up the ante to buy a home, including waiving inspections and appraisal contingencies, she said. And others just bring more money to the table.

In one situation, the family lost their bid on a home to another buyer who was willing to pay $125,000 on top of the request, Manzo added.

Seek a balance between higher rates and lower prices

As homeownership becomes increasingly unaffordable, different states are crafting laws to address the issue.

Last year, California Democratic Governor Gavin Newsom signed into law the California Housing Opportunity and More Efficiency Act. The measure simplifies the process for owners to divide their residential land or build a duplex on their property.

The law also makes it easier for landlords to build secondary suites on their property, Acosta said, which can also help accommodate multigenerational households.

“These extra units are usually called granny flats and can be used as an extra bedroom or as a small apartment inside another property, which increases density,” he said.

Another proposed bill in New Jersey would allow buyers bidding on foreclosed homes to pay a 3.5% down payment, provided they make the property their primary residence for at least seven years. Normally, buyers of these foreclosed properties would be required to put down a 20% deposit.

For the Espinoza family, the next steps are to wait for the market to cool enough – and to keep an eye on interest rates, even as the Fed continues its policy tightening regimen.

“We’ve started to see some sellers cut prices on their listing; they’re not selling like they were six months ago,” Manzo said. “We are in a waiting period at the moment, but we will continue to watch and see what happens towards the end of the year.”

By Admin

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