Troubles Ahead For AAPI Homebuyers

Troubles Ahead For AAPI Homebuyers

Asian American and Pacific Islanders face specific challenges achieving homeownership

Asian American and Pacific Islanders, known by the classification shorthand AAPI, are one of the fastest-growing demographic groups in the United States.

Yet AAPI homebuyers are facing a challenge as their numbers increase: the time to save for a down payment and housing shortages in desired areas for those borrowers have posed a challenge. That’s the conclusion of the annual "State of Asia America Report," published by the Asian Real Estate Association of America.

AAPI homebuyers are moving to metropolitan statistical areas in California, Texas and the Northeast. However, some of these areas, California in particular, have been known to struggle with housing supply. This makes it more difficult to find the desired home. In addition, the cost of homes are higher, which means AAPI buyers will have to fork out more money for a larger down payment. "The unique barriers to homeownership for our community loom large—from language barriers, to antiquated credit scoring models and underwriting standards that do not account for the self-employed, entrepreneurial AAPI buyer as well as dire shortages in major housing markets—as we try to move the needle on the AAPI homeownership rate," said James Huang, 2020 president of the Asian Real Estate Association of America.

Huang added that AAPI borrowers tend to have higher credit scores when they can obtain it. Limited credit history, he said in his intro to the annual report, is one of the top reasons for AAPI application denial, despite having the lowest delinquency rate of any group. Almost a million AAPIs are considered “mortgage weak” due to their “thin, clean credit files,” meaning they do not have bad credit, but rather, insufficient credit histories to generate a credit score.

That should be seen as an opportunity for mortgage brokers. Huang said presents a huge opening, not only in financial education, but also in reaching a market of potential homebuyers who are otherwise well positioned to buy a home.

The unique barriers to homeownership for our community loom large.

AFFLUENT MARKET

Asian Americans are an affluent market to pursue. According to the AAPI report, the Asian American media household income is $87,243, which is 41% above the national average. Pacific Islanders aren’t as affluent but are within four-tenths of a percent of the national average. Both segments have real estate well above the median house value: Asian Americans at $445,000, 98% above average; and, Pacific Islanders, $319,600, 39% above average.

The AAPI also skews younger when it comes to age. The median age of the population of the United States is 38.2 years compared with 37.3 years for Asian Americans and a much younger 32.5 years for Pacific Islanders.

The West has the most AAPI population at 8.5 million, which is 10.9% of the population of Washington, Oregon and California. The Northeast, which encompasses the Middle Atlantic states of New York, Pennsylvania, and New Jersey, as well as the six New England states, has an AAPI population of 3.75 million, or 6.7% of the region’s population.

James Huang, 2020 president of the Asian Real Estate Association of America.