Freddie Mac Report Looks at Asian Homebuyers in the U.S.

Many Asians in the U.S. state that their lack of knowledge about the homebuying process could delay or prevent them from purchasing a home, and that they need to feel financially ready, stable and secure before they can consider buying a home, according to focus group participants.

Freddie Mac, one of the nation’s largest investors in residential mortgages, compiled the focus group results into a new report, “Homeward Bound: An In-depth Look at Asian Homebuyers in the United States”, which is available online at http://www.freddiemac.com/corporate/reports/.

Freddie Mac conducted 30 focus groups in mid-2005 of nearly 300 Chinese, Korean, Vietnamese, Asian Indian and Filipino immigrants; American-born Asian consumers; and Asian real estate professionals to gain a better understanding of the cultural norms and expectations of Asian first-time homebuyers. Although the focus groups revealed many differences among ethnicities, the report highlights recurring themes across groups that may lead to a greater understanding of the needs and expectations of Asian consumers. The key findings include:

• the need to feel financially ready, stable and secure before they can consider buying a home;
• an aversion to debt and the need to determine the most cost-conscious financing package; and
• a lack of knowledge about the homebuying process.

“Homeownership is a family value, one that ensures social and economic benefits that enhance entire communities,” said Rep. Mike Honda (D-Calif.). “I commend Freddie Mac on the release of their report to help increase the participation of Asian and Pacific Islander American families in this slice of the American Dream.”

“Expanding housing opportunities for all families is at the core of Freddie Mac’s mission,” said Dwight Robinson, senior vice president of Freddie Mac. “We wanted to determine what motivates the Asian community to become homeowners, as well as what prevents them from doing so. It is our hope that this report can help the real estate and residential mortgage industries better understand and reach this burgeoning minority market.”

Asians represent the second fastest growing minority population in the United States, and many of these immigrant households will become homeowners in the coming decades.

At 59.9 percent, the homeownership rate for Asians and Pacific Islanders is higher than that of Latinos and other minority groups, but it lags behind the national average of 69.1 percent and the 75.7 percent rate for non- Hispanic whites. (Based on Census Bureau data.)

Focus Group Findings
The focus groups uncovered certain cultural norms, beliefs and behaviors associated with Asians that affect their feelings of readiness to purchase a home. These factors may delay Asian consumers’ timeline for buying a home by years, and may discourage eligible low- to moderate-income buyers from entering the market altogether.

Participants described the many challenges they face as immigrants to a new land. These challenges include being unfamiliar with the U.S. financial system and, for some immigrants, not speaking the language.

Above all, participants described their need for stability and security as a major factor affecting their readiness to buy a home. Participants defined readiness in different ways, such as having:

• enough money for the down payment and/or being able to safely afford the monthly mortgage payments;
• a steady job, feeling established in an area, or obtaining a Green Card;
• a business that has reached a certain level of stability; or
• money to pay for a child’s college education and having enough savings set aside for emergencies.

For most focus group participants, the source of their down payment comes primarily from savings. However, a good number also said they have funds from other sources, such as monetary gifts or loans from family. A small number of participants said their parents had helped or planned to help with the down payment. Borrowing from friends is also an acceptable, common practice. In addition, participants noted that funds might be sent from their homeland, including money from family or their own money kept there.

Many participants said they would put down a 20 percent down payment because they thought that was the standard practice. The reality is down payments today are much less, often 5 percent of the loan amount or less.

Focus group participants said that when they are ready to buy a home, they often start by researching the neighborhoods in which they are interested and home prices. Participants said their primary sources of information at this initial stage are family, friends and co-workers, especially those who have previously purchased a home.

A majority of participants, especially fluent English-speakers, said they also use the Internet to search for real estate agents, properties or interest rates. Other sources of information include in-language newspapers and fliers that are commonly distributed in local, ethnic supermarkets and stores. Some participants said they get information from their banks.