Celebrating Asian American and Pacific Islander Heritage Month Through Learning

5.05.2022 | Category: Homebuying

May is Asian American and Pacific Islander Heritage Month and is a time to celebrate the achievements these communities have made and will continue to make for generations to come. According to the Pew Research Center, the U.S. Asian American and Pacific Islander (AAPI) population is a vastly diverse group with over 22 million residents with roots traced to more than 20 countries throughout Asia and the Indian subcontinent.

Unfortunately, the Asian American Real Estate Association of America (AREAA) reports that even though Asian Americans and Pacific Islanders are the fastest-growing segments of the U.S. population, the average homeownership rate continues to be lower than the national average.

While homeownership among Asian Americans and Pacific Islanders is greater than any other non-white group, this community still faces challenges and cultural barriers related to how this population manages their finances, pursues career goals, and chooses where to live.

To better understand the individual needs of AAPI borrowers and their financial circumstances, Amy Kong, Immediate Past President of AREAA suggests real estate professionals should learn more about individual AAPI groups, their home countries, and how each group values homeownership to better serve this growing U.S. population.

“The barriers to AAPI homeownership may be high, but the solutions are apparent,” said Wong in her article Removing Barriers to Asian American Homeownership published in Chicago Agent Magazine. ”Concerted effort and advocacy is needed to ensure solutions are put into place to afford greater access to the American dream for the more than 18 million AAPI members.”

To help overcome challenges to homeownership, we’ve laid out the unique challenges the AAPI communities face and how prospective homeowners can take steps to achieve homeownership.

Reluctance to Take on Debt Leads to a Thin Credit History

Many AAPI individuals don’t come from cultures that embrace debt so for many generations, households didn’t typically have credit cards, car payments, or other means of building credit. Establishing a solid credit history is one of the most important factors in being approved for a home loan and without a strong credit file, many would-be homeowners find themselves without the credit score needed to qualify.

Solution: One of the easiest ways to start building credit is to apply for a credit card with a bank or credit union. Use the credit card to pay for purchases already included in the budget like gas or groceries and pay it off every month. Once your credit is established, you can seek larger limits on lines of credit. Continue to pay the balance of your credit card purchases on time and in full, and your credit score will soon be well established enough to qualify for a home loan.

Career Pursuits Including Entrepreneurship and High-Cost degrees, Cause Barriers

Entrepreneurship is popular among AAPI workers. The U.S. Small Business Administration cites that about 10% of all business owners are Asian-American-owned and 1% of all small business owners are Native Hawaiian or Pacific Islander. However, the risks associated with entrepreneurship can often lead to insufficient savings and overbalanced debt.

Solution: To avoid overextending credit limits and save for a healthy down payment, prospective AAPI homeowners can look to small business grants or loan forgiveness programs designed specifically for small business owners. And while more income verification may be needed, self-employed home buyers purchase properties every day, sometimes with the help of friends, families, or co-borrowers, to achieve the American dream of homeownership.

A Preference for Diverse Coastal Cities Causes Stiff Competition

Like generations of Asian American and Pacific Islander immigrants before them, today’s AAPI perspective homeowner prefers major metropolitan cities like New York, Los Angeles, and San Francisco or its nearby suburbs. These cities have deep roots traced to the history of Asian American migration with well-known landmarks like Little Tokyo in Los Angeles and Manhattan's Chinatown in New York. These areas are also home to excellent schools, well-paying jobs, and typically safe neighborhoods - all top attributes of an ideal community for an AAPI homeowner.

However, with stiff competition in many of these cities, AAPI homeowners often hesitate to buy homes in these high-cost neighborhoods and instead rent.

Solution: Still, prospective homeowners find their stride in safe suburban commuter neighborhoods outside major metropolitan cities finding a balance between affordable homes and well-paying jobs. And many millennial homeowners are taking advantage of FHA loans to assist with qualifying for low down payments, then refinancing once they've earned 20% in equity.

We All Have a Responsibility to Uphold Diversity

While the housing industry has long worked to ensure there are policies in place to help promote diversity in homeownership and prevent discrimination, there’s still work needed to undo systemic barriers to homeownership. Continuing to stay educated and informed of these policies will help continue to strengthen AAPI homeownership trends for generations to come.

You can also speak at your local city council meetings or county supervisor hearings to support developments for affordable housing and help incentivize homeownership with policies that work like tax credits, down payment assistance, and financial literacy programs.

Homeownership offers one of the safest, most economically sound ways to build generational wealth across demographics. To learn more about promoting AAPI diversity in homeownership, visit www.areaa.org/ or meet with a mortgage loan specialist to learn more about your local housing market trends.