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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 74 November 2024 J O U R N A L access to down payment assistance, credit-building programs, zoning re- forms, and affordable housing construc- tion and preservation in desirable areas are key initiatives to help this progress continue." More Hispanic homeowners' wealth is typically tied up in their primary res- idence, relative to homeowners of other races, so home value fluctuations have an outsize effect on them. There is a positive movement toward equity at the local level. More than two-thirds of the 100 largest metro areas saw the home value gap decrease for Hispanic home- owners over the past year. For example, significant reductions were observed in several large Florida markets, including Miami, Orlando, and Tampa. Several metros with larger-than-aver- age Hispanic/white home value gaps also saw their gaps narrow. Of the 40 largest metros with gaps larger than the national average, 31 of them reduced their gap by more than the national average. Los Angeles has the largest home value gap, with 32% lower home values for Hispanic residents compared to white residents. The gap in that metro shrunk by 0.75 percentage points in the past year. However, while gradual progress is being made in closing the gap, the jump into homeownership remains a signifi- cant hurdle for Hispanics. According to Zillow's 2024 Consum- er Housing Trends Report, Hispanics represent 18% of prospective buyers, but 13% of successful purchasers. Data from the Homeowners Mortgage Disclosure Act (HMDA) shows that Hispanics face higher fees when purchasing a home, averaging $2,812 compared to the national average of $2,072. Mortgage denial rates are also notably higher for Hispanic borrowers, with 18.8% experiencing denials compared to 10% for non-Hispanic whites, often due to elevated debt-to-income ratios, which account for 38% of denials. Zillow's analysis indicates that the home value gap for Black homeowners has slightly narrowed over the past year as well, to 17.7% from 17.9%. However, the gap remains wider compared to mid-2022 (17.2%) and mid-2007, shortly before the housing bust (16.3%). ARE STUDENT LOANS HINDERING HOMEOWNERSHIP? S tudent loans are frequently listed as the primary obstacle for young buyers' pursuit of homeowner- ship. Even though loan debt is higher than ever, are loans the barrier some claim them to be? A new study from First American reviewed the data from the 2022 Survey of Consumer Finances to determine exactly how much impact student loan debt has on the search for home ownership. Student Loan Debt Payment-to- Income Ratios Have Declined Student loan debt has steadily in- creased over the past 30 years, bringing the issue into the headlines. Average student loan balances have increased from $12,600 in 1992 to $40,600 in 2022 (adjusted for inflation). Yet the percent- age of income that young households put toward student loan repayments each month has decreased in recent years. Between 2016 and 2022, the average payment-to-income ratio for families with heads of household aged 25 to 34 dropped from 7.4% to 5.9%. So, how does this happen? One major reason is that the average inflation-adjusted income for young households with student debt in- creased nearly 70% between 1992 and 2022, from $73,000 to $122,000. Also, the average loan repayment term has almost doubled, from 7.5 years in 1992 to 13.9 years in 2022, lowering monthly payment-to-income ratios and allowing home buyers to borrow more money for a similar monthly payment. This is similar to extending a mortgage term from 15 to 30 years, allowing home buyers to borrow more money for a similar monthly payment. Consequent- ly, student loan repayment terms almost double, accommodating more debt for the same monthly payment. Then there are the declining interest rates on student loans, with the average annual interest rate down two percent- age points in the last three decades—