March 2003 Emerging Markets

Attending the International Builder Convention in Las Vega proved to be an eye opener. The were many excellent speakers representing Fannie Mae, Freddie Mac, HUD, FHA and VA. One seminar in particular stood out, its topic was the increase in our nation's immigrants and the housing demand created by his expansion.

America's immigrant population is not only growing, but more and more immigrants are becoming homeowners, according to Fannie Mae's chief economist David Berson. A recent report by the Joint Center on Housing Studies at Harvard University tell us immigrants, minorities and also Baby boomers will be the key drivers of housing demand in the near-term.

Apparently this country processes immigrants into middlle-class citizens who are homebuyers faster than any other nation. Home ownership is the best single indicator of economic well being, and when emigrants have been here 10 to 15 years, their homeownership goes up to the national average and in most case surpasses it.

According to the experts, about 65 percent of America's population growth in the next two decades will be minority and particularly Hispanic and Asian immigrants. It is a great new market an emerging market which offers great opportunity for providers of housing as well as those who finance these homes. Immigrants now in the U.S. could create the demand for 4 million or more new homes over the next decade, according to MBA Senior Vice President and Chief Economist Douglas Duncan. "This will create a significant boost on the demand side and give support for real house price appreciation," he said.

Achieving success in reaching immigrants and bringing them into the home buying and mortgage lending process involves more than confronting and overcoming obstacles such as language and erroneous beliefs regarding the home-buying process. Successfully breaking into these markets involves a learning process, including an awareness of cultural differences, training and education.

To meet the opportunities and challenges presented by immigrants and other minorities, Fannie Mae and Freddie Mac have developed programs for lenders and borrowers as well as special loan products. One of those products, Fannies Mae's "Welcome Initiative: A new home in a new country," lets borrowers apply for a home loan while in the process of obtaining a green card. Other loan products include mortgages that require as little as $500.00 form the borrower toward closing costs, mortgages with rates that decline as much as one percentage point after 24 consecutive on-time payments and its Expanded Approval Mortgage that, through Desktop Underwriter, provides homebuyers with credit blemishes access to loans that are up to two percentage points lower that non-tradional alternatives. Freddie Mac also provides a range of homebuyers outreach and education programs including "El Camino a su Propia Casa (The Road to Your Own Home), its Spanish-language homebuyer education website.

In addition to the emerging minority and immigrant markets, the entry of the Baby Boomers into their peak earning years will result in another home purchase boost during this decade. It is the area of second-home purchases that Baby Boomers will have their greatest impact.

Demographically this should be the time for second homes based upon Baby Boomer demand. Combine this with the burgeoning minority and immigrant home buying markets, this could and will mean a busy time for everyone.

For comments Michele Francis can be reached at Beechwood Capital Company, LLC. 500 N Broadway, Jericho NY 11713 or by phone at 516-935-5600.

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