AMERICA IS GROWING INCREASINGLY diverse. Mostly as a result of immigration, minorities increased as a share of all households from 21 percent in 1993 to 27 percent in 2003. Over the next 10 years, minorities are likely to account for at least two-thirds of household growth. But today's minorities are already a strong force in housing and labor markets.
Yet minorities are mostly underrepresented in the construction labor force, and especially in its professional, sales, and managerial positions. The mortgage lending industry has awakened to the fact that having multiculturally diverse loan officers and managers allows them to more effectively serve their minority customers. The time has come for the home building industry to reach the same conclusion.
Evidence that minorities are a growing part of the housing market is undeniable. In 1992 and 1993, minorities made up less than one-fifth of all home buyers. Today, one in four home buyers is a minority. Even more dramatic, minorities were just a fifth of first-time buyers in 1993, but now account for fully a third of all households buying their first home. Growth in shares that big over such a short 10-year window underscores the pace at which housing market demand is changing.
The minority contribution to rental markets is even larger and growing even faster. In 1993, minorities were 31 percent of all renter households, but today they are fully 43 percent. The market for new homes is no exception. From 1989 to 1993, minorities accounted for only 13 percent of new home buyers, but from 1999 to 2003 they accounted for 22 percent.
Minority markets that have been long neglected or poorly served by many industries are now being called “emerging markets,” such as the nations of Asia were when they began to industrialize. Witness the speed with which emerging markets emerge: Today, China is an economic engine of the global economy while its neighbors in Singa-pore, Thailand, and South Korea have become significant markets. As outreach expands, minority markets will grow at a rapid pace.
Minority markets are by no means monolithic. The tendency now is to focus on the Asian and Hispanic markets because these are growing the fastest. When several leaders in the housing industry—building materials manufacturers, home centers, and large public builders—were asked recently about their strategies for serving the minority market, no mention was made of blacks for 45 minutes, and might not have been at all except for the prodding of the moderator.
But consider this: The black share of households currently is larger than the Hispanic share. Further, between 1980 and 2000, when Hispanic and Asian household growth rates dramatically outstripped that of blacks, the growth in the number of households in the middle two quartiles of the income distribution—what we might call middle class—was divided into 1.8 million blacks, 1.8 million Asians, and 2.7 million non-Hispanic whites. In the South especially, blacks are the largest minority market for new and existing homes. Just because a market has long been neglected (or in today's parlance, underserved) does not mean it does not constitute a market opportunity. In fact, the opposite is the case.
Still, the attention being paid to the Hispanic and Asian buyer segments is not undeserved. Unlike the black market, which is largely native born and not being as quickly bolstered by new immigrants, the Hispanic and Asian markets are growing rapidly. Nationally, Hispanic households increased by 60 percent between 1993 and 2003 while Asian households increased by 32 percent.
Not only do Hispanic and Asian immigrants come from diverse cultures, nations, and economic and educational backgrounds, many, of course, speak a foreign language. They may speak little English or prefer to conduct business in their native languages, especially when it comes to significant transactions.
Buying a home and getting a mortgage meet these criteria. That is why materials prepared by the major lenders—including Fannie Mae and Freddie Mac—that explain the home buying and mortgage process come in dozens of languages. It is also why most lenders have been actively recruiting minority loan officers and managers over the past 10 years. It is also why the past decade has seen the proliferation of trade associations of minority affinity groups, including those for Hispanic and Asian real estate brokers.