Discrimination, mortgage readiness and affordability continue to be significant hurdles for Asian American and Pacific Islander communities, according to new report released Wednesday.

Discrimination, mortgage readiness and affordability continue to be significant hurdles for Asian American and Pacific Islander (AAPI) communities in their quest to achieve the American dream, according to the Asian Real Estate Association of America’s annual report published on Wednesday.

Tim Hur | Credit: AREAA

“The State of Asia America Report is our most important effort each year as we leverage data from more than 30 sources to tease out the most comprehensive and in-depth look at the drivers and trends relates to AAPI homeownership,” AREAA President Tim Hur said in a statement. “As the largest AAPI trade group in the U.S., we take our responsibility as a leader seriously as we identify, educate and address the critical issues affecting the AAPI community.”

Although the AAPI community has the highest homeownership rate among America’s racial minority groups (61 percent) and vigorous buyer demand (65 percent of AREAA members said demand is ‘greater’ than in 2019), the boom in hate crimes has complicated the process for many Asian homebuyers.

Sixty percent of AAPI homebuyers said they have avoided specific neighborhoods, communities and cities because of concerns about anti-Asian sentiments. An equal share of real estate professionals said they have “discouraged or dissuaded” AAPI clients from moving to certain locales due to a heightened risk of anti-Asian sentiment and violence.

Homesellers also bear the brunt of the boom in anti-Asian hate crimes, with 70 percent saying fears about their “personal safety and security” were a “major factor” in their decision to move. Another 68 percent said “getting away from prejudice and discrimination” was a major (37 percent) or minor (31 percent) factor in their decision to sell.

As nearly 50 percent of survey respondents believe anti-Asian sentiments are getting worse and seek to find refuge in friendlier areas, a lack of mortgage readiness thwarts AAPI homebuyers’ mobility.

AREAA said mortgage readiness, based on Freddie Mac guidelines, includes a credit score greater than or equal to 661, debt to income ratio less than or equal to 25 percent, no foreclosures or bankruptcies in seven years and no severe delinquencies in one year.

Although U.S.-born AAPI homebuyers have their financial challenges, AREAA said the robust flow of Chinese, Asian Indian, Filipino, Vietnamese, Korean and Japanese immigrants to the United States means many potential AAPI homebuyers must build a credit profile from scratch.

“Mortgage ready is a status defined by Freddie Mac that refers to non-mortgage holders ages 45 and younger who exhibit certain credit characteristics that could qualify them for a mortgage,” the report states. “These definitions are research-based assessments and do not relate to Freddie Mac’s Guide or underwriting criteria.

“However, many AAPI immigrants are ‘credit invisible’ since they don’t have any credit histories and are not captured in credit bureau data,” the report says. “The first step in securing mortgage approval involves being credit visible, which refers to consumers who have a credit record with the National Consumer Reporting Association.”

Those who are mortgage ready must contend with astronomical home price growth. Forty-five percent of the country’s AAPI population lives on the West Coast, where median home prices have soared past the $1 million mark in markets such as Los Angeles, San Diego, San Francisco and San Jose.

More than half a million AAPI homebuyers in Los Angeles are mortgage ready, but only 5 percent can afford a median-priced home, AREAA said. In San Francisco, 291,000 AAPI homebuyers are mortgage ready, but only 2 percent can afford to purchase a home.

As a result, many AAPI homebuyers are migrating to more affordable markets throughout the South and Midwest, including Oklahoma City; Nashville; Raleigh,  North Carolina; Wichita, Kansas; St. Louis; Des Moines, Iowa; and Fargo, North Dakota. Although these markets are not as widely known as Chinatowns, Koreatowns and other Asian-centered communities on the coasts, AREAA said they have strong AAPI communities with a plethora of social, educational and vocational opportunities.

“In areas like Iowa, Oklahoma and Ohio, the relatively low cost of living combined with the presence of refugee shelters made these locations ideal for Asian refugees in the 1970s,” the report says of these communities’ origins. “In many cases, through hard work and perseverance, these groups were able to carve an economic niche for themselves within their local communities.

“Oklahoma City’s Asian District first began in the late 1970s following the fall of Saigon. Large numbers of Vietnamese were relocated by religious institutions into areas like Oklahoma City,” it states. “As this community grew and flourished, more family members and AAPIs from other ethnicities moved to this area.”

Besides the other barriers highlighted in the report, Hur said the key to improving AAPI homeownership will also require a cultural shift that enables AAPI communities to be valued as individuals with varying histories, cultures, norms and issues.

“Over the last several years, we recognized one of the challenges was cultural. Obviously, ‘AAPI’ is a catch-all acronym,” he said. “We are not all from the same country nor do we share the same histories, religious backgrounds or beliefs. The only thing we truly have in common is we came from Asia, [and] AREAA is a microcosm of the community.”

Hur said AREAA’s victory in pushing the U.S. Census to stop categorizing AAPI citizens as ‘other,’ was a first major step and now enables the real estate industry to craft specialized solutions to help AAPI people become homeowners.

“That win provides us and policymakers with critical data, including the ability to track our homeownership levels,” he said. “We can now identify and address the barriers to entry.”

Read the full report below:

Email Marian McPherson

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