The home building and remodeling industries are largely back on track in the United States. The remodeling industry will rise about 5% in 2015, according to a recent report from Harvard, driven by large projects such as kitchen and bath renovations; associated areas such as the vanity and cabinet industry have grown by just over 4% per year in the last five years. Home sales are close to pre-recession levels in many regions.
Companies that participated in the recent Orlando Home and Garden Show say they’ve seen an uptick in business, too. But Orlando homebuyers, and particularly local Hispanics, are still struggling to recover from the national housing crisis.
According to a new analysis of federal mortgage data carried out by real estate and research company Zillow, about 17% of mortgages were denied in the Metro Orlando area in 2013. That’s five points above the national rejection rate of 12%.
This could be because prospective buyers have low credit, but other factors such as a high number of distress sales in the area may also be contributing to the problem. About 25% of the single-family homes sold in Florida last December were foreclosures or short sales, and loans for either can sometimes be denied due to problems with the properties themselves.
Andy Insua, Florida director of mortgage for Fifth Third Bank, recently explained to the Orlando Sentinel that Orlando was hit particularly hard in the market’s crash. So it’s not completely surprising that recovery will take longer.
Minorities Struggling to Get Approved
Zillow’s study, however, revealed another troubling fact: that minority homebuyers are struggling more than other buyers, with Hispanics facing the biggest challenges of any group in the Orlando area.
In the four-county region surrounding Orlando, 28% of Hispanic homebuyers were unable to secure a mortgage in 2013. About 25% of black applicants and 13% of white applicants were denied in the same timeframe.
Nationally, 22% of Hispanic buyers were rejected, as opposed to 27% of black and less than 13% of white applicants.
The institutions that underwrite mortgages are not allowed to explicitly consider race when assessing applications, but differences in income, debt, job history and past loan repayment often occur along racial lines.
Hispanic and black would-be homebuyers have an average income that is $20,000 less than that of whites.
Many Hispanic homebuyers also bought homes at the peak of the market, then lost their homes and accompanying equity in the housing crisis.
According to Zillow’s chief economist, Stan Humphries, the upside is that home values in heavily Hispanic and black housing areas are expected to rise more quickly in 2015, and that new financing options such as loans backed by the federal government will offer help to minority communities.