Academic journal article Economic Perspectives

The Relationship between Hispanic Residential Location and Homeownership

Academic journal article Economic Perspectives

The Relationship between Hispanic Residential Location and Homeownership

Article excerpt

Introduction and summary

For many families, homeownership is a foundation for financial asset building and future wealth accumulation. Increased homeownership has been linked to improved property maintenance, higher property values, greater community involvement, and enhanced neighborhood stability (Glaeser and Shapiro, 2002; Rohe and Stewart, 1996; and Cox, 1982). The opportunity for homeownership, therefore, contributes to a community's overall economic stability and growth.

The potential benefits of homeownership are not equally distributed across ethnic groups and ethnic communities. Although Hispanics represent the fastest growing minority/immigrant population in the U.S., their homeownership rate is among the lowest of any ethnic group. In 2000, close to 70 percent of U.S.-born households were homeowners; householders from Europe had a homeownership rate of 63 percent; and householders from Asia had a rate of 52 percent. By comparison, the homeownership rate for Latin American immigrants was 41 percent and 39 percent for Mexican immigrants specifically (U.S. Census Bureau, 2001).

Over the last few years the homeownership gap between Hispanics and non-Hispanics has narrowed. Between 1994 and 2002, the rate of homeownership for Hispanics increased by 17 percent, from 41.2 percent to 48.2 percent; while the rate for non-Hispanics increased by 6 percent from 65.9 percent to 70 percent (U.S. Census Bureau, 2003). Retsinas and Belsky (2002) suggest that the narrowing of this gap can be attributed in part to the increase in mortgage loans to low-income and minority households. Even so, as of 2002, more than a 20 percentage point gap in homeownership rates remained between Hispanics and non-Hispanics. (1) Recent increases in unemployment and foreclosures on homes owned by poorer minority families are stark reminders that closing the wealth gap through homeownership remains a challenge (Fleishman, 2002).

The Hispanic population in the U.S. has traditionally been concentrated in only a few states and in particular urban areas (Bartel, 1989). For a large proportion of immigrants, particularly those from Mexico or other Latin American countries, housing needs remain critical. For example, Mexican and other Latin American immigrants are much more likely to live in crowded and severely inadequate housing and/or to experience a severe housing cost burden (Lipman, 2003). (2) As a consequence, community development initiatives that respond to emerging and traditional immigrant communities may be very important. (3)

This study seeks to identify the socioeconomic, demographic, and life-cycle characteristics that influence the location choice and the homeownership decision for Hispanic immigrants. We ask two basic questions. First, is homeownership more or less likely for Hispanics who choose to reside in an ethnic location; and second, is the location decision jointly or endogenously made with the homeownership decision? Our findings suggest that, indeed, the location and homeownership decisions are jointly made. Furthermore, the decision to reside in a Hispanic enclave has a positive, significant influence on the likelihood of owning a home.

Overview of the literature

Most previous research on this subject has looked at immigrant homeownership within specific urban areas. For example, Schill et al. (1998) analyzed the experience of immigrants in New York City; and Hamilton and Cogswell (1997) looked at Hispanics in Syracuse. Our study contributes to the literature by examining the implications of ethnic geographic concentration on the homeownership decision of Hispanic households in the Chicago metropolitan area.

Research suggests that disparities in homeownership between immigrants and non-immigrants can be explained by differences in socioeconomic and demographic characteristics (for example, Pitkin et al., 1997; Myers and Lee, 1996 and 1998; and Myers et al. …

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