January 30, 1998 - From the January, 1998 issue

Who’s Buying Housing in California? UCLA Finds its Hispanics

In the following piece from the December 1997 “UCLA Anderson Forecast for the Nation and California,” author Nancy Bolton charts the growing presence of minority homebuyers in California’s metropolitan housing markets. 

In this report we will look at the ethnicity of buyers of owner occupied houses in California. This study is based on real estate transactions in California from January 1989 through May 1995 for twenty-nine California counties. The counties included contain 95% of California's population. Ethnicity was determined by the last name of the buyer. Transactions were included in the study only if the buyer was not a bank, developer or other institution. The last name of buyers were classified as 1) Hispanic 2) Asian/ Pacific Islander or 3) Neither Hispanic or Asian. We estimate that the surname list used identifies approximately 90% of Hispanic buyers and 70% of Asian buyers. The data presented here has not been corrected for under identification. In this report we will concentrate on Hispanic buyers. In future reports we will look at the patterns of Asian buyers.

Regional Changes in Buyers 

The twenty nine counties were divided into five regions. The Bay Area (10 counties) is composed of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz, Solano and Sonoma counties. The Sacramento region (four counties) is composed of EI Dorado, Placer, Nevada and Sacramento Counties. The Central Valley region (six counties) consists of Fresno, Kern, Merced, San Joaquin, Stanislaus and Tulare counties. The Central Coast region covers Monterey, San Luis Obispo and Santa Barbara counties. Southern California is comprised of Los Angeles, Orange, Riverside, San Bernardino and San Diego. 

The region with the highest percent of Hispanic buyers is the Central Valley, followed by the Southern California region and the Central Coast. The large percentage of Hispanic buyers in these areas is not surprising since these three areas also have the highest concentration of Hispanics. The rapid rate of increase, however, is notable. This could, of course, be caused by a relative decline in the number of Non-Hispanic buyers, even if the absolute number of Hispanic buyers has not changed significantly. This is at least part of the explanation, but the participation of Hispanics in the real estate market has also increased.  

In Chart 2 [in the original report], the number of buyers in each year is compared to the total in 1989, thus showing the relative change in the number of Hispanic buyers for the five regions. By 1996, the absolute number of Hispanic buyers had increased significantly above 1989 levels in the three southern areas. In the Bay area, the count of Hispanic buyers rose modestly while in Sacramento it declined. 

By contrast, Chart 3 [in the original report] shows that the absolute number of Non-Hispanic buyers declined in all five regions during the period, with the largest decline being in the Sacramento region. Surprisingly, the Southern California region had a smaller decline in the absolute number of Non-Hispanic buyers than did all the other areas except for the Bay Area. Thus, the general trend was that while the total of Hispanics participating in the home-buying market was increasing (except Sacramento), the number of Non-Hispanics participating was declining. The result, especially in Southern California, was a very rapid rise in the percent of buyers who are Hispanic. 

In all three of the southernmost areas the increase of Hispanic buyers has been much higher than of the increase of the Hispanic population. Table I shows the percent of Hispanic homebuyers in 1990 and 1995 compared to the percent of Hispanic population in the five regions during that same period. The change in the percent of population that is Hispanic has been modest compared to the change in the ethnic composition of home buyers.

Regional Changes in Prices

In 1995, according to the Census Bureau, the median income of Hispanic families was about 60% of the median of all families. It is thus not surprising that the price paid for housing would be lower for Hispanics than for Non-Hispanics. Accordingly, the average price paid by Hispanic buyers in the five regions ranged from 57% of the Non-Hispanic price in the Central coast counties to 77% in the Sacramento region. Charts 4 through 8 [in the original report] depict the average price paid by Hispanic versus Non-Hispanic buyers in each of the five regions. The average price of homes bought by Hispanics are lower partially because the homes purchased by Hispanics are lower partially because the homes purchased by Hispanics are smaller than those purchased by Non-Hispanics. That is true for each of these regions—but varies by region in the magnitude of the gap. 

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Only in the Bay Area has the price paid by Hispanic buyers begun to rise. By contrast, prices began to rise for Non-Hispanic sales in 1994 and even in Southern California prices began to ascend for Non-Hispanic sales in 1996. In the Central Valley and Sacramento regions, prices have yet to begin to rise for either group of buyers. 

Chart 9 [in the original report] shows the relative change in price per square foot for Los Angeles County Hispanic buyers compared to Non-Hispanic buyers over the study period. This chart indicates that the rate of change of prices on a per square foot basis decline less for Hispanic than for Non-Hispanic buyers during the first par f the study period. This is most likely related to changes in the location of homes being bought. We will be exploring these issues in more detail in later studies. 

The Bay Area and Southern California 

The percentage of buyers who are Hispanic, by county, for the first two years of the study period compared to the last two years of the study period is shown in Chart 10 [in the original report]. The four northern counties of the Bay Area have been grouped into a category called the Wine Country in the chart. Chart 11 [in the original report] shows the same data for the Southern California region. Riverside and San Bernardino Counties, two areas that have experienced considerable population growth in the past decade, have also seen very large increases in the number of Hispanic homebuyers. In San Bernardino County, Hispanics now represent 40% of all homebuyers.

Summary

In the past nine years Hispanics have represented a rapidly increasing percent of homebuyers, particularly in Southern California. This has been because of both a larger absolute number of Hispanic buyers and a declining number of Non-Hispanic buyers. These effects are partially economic and partially demographic. Since 1991 real estate prices have been declining in California and older homeowners who would in past years have "traded up" have not been participating in the market—either to sell their current home or buy another home. A disproportionate number of those older homeowners would be Non-Hispanic. In the past few years, first-time buyers have been a larger than normal share of the buyers’ market. Clearly a large proportion of these new entrants to the home-owning market have been Hispanics. 

In recent years there has also been a large outmigration from California, particularly of people aged over 45 years. Many of these migrants sold their California homes and bought homes in other states. By ethnic group, these migrants have been dominated by Whites. This out-migration has undoubtedly reduced the number of Non-Hispanic homebuyers in California.

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