- Asian mortgage applicants have low denial rates overall, but those who are denied are disproportionately denied because of a high debt-to-income ratio (DTI).
- Largely concentrated in more expensive areas, Asian mortgage borrowers in 2022 purchased homes that were 42% more expensive than the U.S. median mortgage buyer overall.
- Pacific Islander-headed households have the lowest homeownership rate among all races across the lowest and highest income levels.
, /PRNewswire/ — A new Zillow® study finds Asian and Pacific Islander (API) families, despite relatively high income levels, bear the highest housing payment burdens among all races, highlighting the unique financial strains many within the communities encounter.
Many Asian and Pacific Islander (API) homeowners are heavily concentrated in expensive markets nationwide, so the homes they purchase are typically priced higher than homes overall. In 2022, the typical value of a home purchased by Asian mortgage buyers was $575,000, while Pacific Islander mortgage buyers purchased homes valued at a median of $465,000, surpassing the overall median of $405,000 for all U.S. mortgage buyers. Primarily for this reason, API homeowners stretch their budgets to achieve homeownership more than other races.
“Many API-led households live in pricier coastal metros like New York, San Francisco, San Jose, and Los Angeles, which possibly helps drive up demand and thus the price home buyers can expect to pay,” said Nicole Bachaud, senior economist at Zillow. “Residents of these communities tend to prioritize living in these areas because they offer a strong sense of community, access to cultural amenities and proximity to ethnic enclaves where they can find familiar cultural and social networks that often help facilitate area jobs.”
Over the past decade (from 2011 to 2021), Asian homeownership surged by 5.1 percentage points, reaching a record high of 63.1%, outpacing all other racial and ethnic groups. Pacific Islanders followed closely with a 4.6 percentage points increase. However, despite these gains, both communities allocate a substantial portion of their household income to mortgage and rent payments. Nationally, when comparing across similar income levels, Asian-headed households allocate a higher percentage of their income towards housing payments than all other races except for Pacific Islanders.
Although Asian mortgage applicants have the lowest mortgage denial rate among all races, they are disproportionately burdened by a high debt-to-income (DTI) ratio. According to preliminary 2022 Home Mortgage Disclosure Act (HMDA) data, 41% of Asian applicants and 39.2% of Pacific Islander applicants who were denied a mortgage had their denial attributed to a too high DTI ratio, surpassing the 33.6% of denials for all races being based on DTI. They also face a higher proportion of denials due to insufficient funds to cover closing costs and lack of collateral compared to other racial groups.
While some signs point to housing gains, it’s important to note that the API community is a diverse landscape of several different nationalities. Significant disparities in homeownership, household income, and mortgage denials exist among different Asian and Pacific Islander populations, with these gaps widening over time. Each subgroup presents unique challenges that need to be addressed.
“High incomes and homeownership gains may overshadow the significant housing affordability challenges still faced by many API households,” said Bachaud. “Expanding housing inventory and implementing policies and solutions to enhance affordability are crucial for promoting homeownership and advancing housing equity in the United States.”
|
Share of Income Spent on Housing Payments Across the U.S |
|||||
|
Asian |
Black |
Hispanic |
Pacific |
White |
|
|
Income Spent on Housing Payments (Based on middle household income) |
23.5 % |
21.3 % |
22.5 % |
25.1 % |
19.7 % |
|
Income Spent on Housing Payments |
85.1 % |
69.4 % |
70.2 % |
94.0 % |
58.8 % |
|
U.S. Homeownership Rates |
|||||
|
Year |
Asian |
Black |
Hispanic |
Pacific |
White |
|
2011 |
58.0 % |
43.8 % |
46.5 % |
41.0 % |
72.1 % |
|
2021 |
63.1% (+5.1%) |
44.3% (+0.5%) |
50.6% (+4.1%) |
45.6% (+4.6%) |
73.4% (+1.3%) |
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SOURCE Zillow
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A recent article from the National Low Income Housing Coalition (NLIHC) examines housing payment burdens across the nation. Specifically, the article examines disparities faced by Asian and Pacific Islander-headed (API) households. The findings of this report, entitled, “The Gap in Affordability for Asian and Pacific Islander Households,” indicate that these households face higher housing cost burdens in comparison to other races.
The report found that more than fifty percent of Asian and Pacific Islander households face a housing cost burden. This means that these households are paying more money toward housing than is advised, with thirty percent paying over half their incomes toward rent or housing costs. Thus, API head of households are more burdened than the average household, which faces a housing burden of forty-seven percent.
Furthermore, the NLIHC echoes the National Association of Realtors finding that minorities tend to be priced out of homeownership. The report also notes that API renters are more likely to seek out lower-cost housing options, crowd into homes, or live in substandard units. All of these factors contribute to the high housing cost burden of this population.
Notably, the findings of the report were consistent across the country, not significantly fluctuating between states or even counties. Though the report noted that there are some regional disparities, and that those tend to be found in locations with larger API populations.
In response to the findings, the NLIHC hopes that policy makers will take into account the housing insecurity of API households during their decision-making. This report should be used as an assertion that these populations need to be taken into account when creating and implementing policy, as well as when developing affordable housing initiatives.
Overall, the findings of the NLIHC are concerning, indicating that API households face significant pressure when dealing with housing costs. It is clear that policy makers should use this data to further their efforts in addressing this inequality.
