More than one-third of California’s adult population claims Hispanic heritage, which in recent years has fueled an increase in Latino homebuying demand in major cities across the largest housing market in the U.S.
With nearly 15 million housing units, California accounts for roughly 20% of all U.S. housing value, overweighting nearly every national housing index to the West Coast.
Latinos’ share of home purchase loans in California rose to 31% in 2024 from around 25% back in 2018, according to a new analysis of Home Mortgage Disclosure Act data by LatinoProsperity, a national advocacy group developing policy proposals to help close the Latino homeownership gap.
Only 46% of Hispanic households in the state own their homes, compared to roughly two-thirds of white households, according to a 2024 homeownership trends report produced by the National Association of Hispanic Real Estate Professionals. LatinoProsperity says the housing gap amplifies an existing rift in Latino wealth creation.
But the group believes more fundamentally that California’s mortgage market reveals a “defining” paradox: that Latino households drive nearly one-third of home purchase demand in the state but disproportionately lack the access to banking services typically relied on to leverage the benefits of homeownership into long-term wealth creation.
Nevertheless, Hispanic homebuyer demand in California has increased at the same time broader mortgage production volumes have fallen from pandemic-era peaks, underscoring the growing importance to the broader market of Latino borrowers’ access to mortgage credit.
Nonbanks may do more to help Latinos achieve homeownership, but wealth building through home equity gains, regular retirement contributions and a balanced investment portfolio remains the specialty of banks, not nonbank mortgage lenders, according to the report.
“Latino households are driving homeownership demand and sustaining housing market activity even as overall lending contracts,” the report states, “yet the institutions best positioned to provide stable, long-term mortgage access — traditional banks — remain largely absent from the communities where Latino families live and buy homes.”
LatinoPropserity’s call for banks to return to mortgage lending echoes an ongoing endeavor by regulators to do the same. Last month, the Federal Reserve’s vice chair for supervision, Michelle Bowman, proposed two mortgage-related regulatory rules designed to enhance banks’ role in the mortgage market.
But regulators’ desire to bring banks back into mortgages has more to do with avoiding market distortions from overregulation than closing the Hispanic homeownership gap. It was roughly a year ago that Federal Housing Finance Agency Director Bill Pulte terminated special purpose credit programs (SPCPs), threatening to dam a vital stream of mortgage credit for underbanked zip codes across the U.S.
That action was subsequently clarified to restrict SPCPs from offering access to credit based on specific protected class designations like ethnicity, family status or religion, while programs tailored to geography or income status remain deployable.
Growth in Latino homebuying demand has been concentrated among nonbank lenders over the six-year period of LatinoProsperity’s analysis, which spanned 2018 to 2024.
Latino borrowers comprised about 26.5% of home purchase loans originated by the 25 largest lenders in California in 2024, according to the report. But only six of those lenders were traditional banks. And banks provided just 10.3% of total home purchase loans, of which just 11.4% went to Latino borrowers.
“More stringent underwriting standards and higher credit score thresholds at traditional banks disproportionately disadvantage Latino borrowers,” the report notes as one consequence of the shift in market share, “many of whom are first-generation homebuyers with limited credit histories despite strong repayment capacity.”
Such disparities support the view of LatinoProsperity that traditional banks must get back into mortgage lending to restore equal access to banking services often best equipped for amplifying homeownership gains. The report also notes how the retreating presence of bank branches limits in-person access to the financial marketplace, as well as bilingual services that may be more easily obtained at brick-and-mortar locations.
The second Trump administration has hollowed out fair lending protection laws and slashed staffing and funding levels for fair lending enforcement. Despite federal priorities shifting, sources tell Scotsman Guide that some states have begun implementing requirements to proactively assess whether the racial distributions of lending outcomes shift amid the elimination of more affirmative programs targeting specific borrowers by race or gender.
What the LatinoProsperity report seeks to emphasize, however, is the link between traditional banks’ exits from mortgage lending and the limits to community wealth creation that have resulted from racial homeownership gaps.
“Latino borrowers may gain entry to homeownership but face fewer opportunities to reduce debt, build equity efficiently, or leverage homeownership as a platform for broader wealth preservation and growth,” the LatinoProsperity report concluded.
