During this Asian American and Pacific Islander Month, we celebrate the success of Asian/Native Hawaiian and Pacific Islanders (NHPI) in achieving the American dream of homeownership. We also recognize that Asians/NHPIs face homeownership challenges. Because Asians are concentrated in expensive coastal areas (California, New York, New Jersey, Washington, and Texas), they have the highest share of households that are cost-burdened at the national level. Rising interest rates and rising home prices, which will raise property taxes, could have a greater impact on affordability in high-cost markets if wages do not adjust to the same degree. Another challenge is that while Asians/NHPIs have a high homeownership rate as a group, homeownership rates are extremely low among some Asian subgroups. Asian households are also the most likely to have a loan denied due to high debt and unfortunately, due to incomplete information.
There Is a High Homeownership Rate Among Asians
As of 2022 Q1, the Asian/NHPI homeownership rate was at 59.4%, second to the White homeownership rate of 74%.1 The homeownership rate can be disaggregated further across racial groups based on the American Community Survey based on the latest 2020 data, which also shows the Asian alone racial group had the second highest homeownership rate. In 11 states, the Asian homeownership rate was higher than the national average of 65.5% in 2020. The highest homeownership rates were in Wyoming (79%), Hawaii (74%), Florida (73%), Nevada (71%), and Georgia (71%).
Homeownership is determined by economic and historical factors, including redlining and unfair housing practices. However, income and educational attainment are important determinants of homeownership (but these factors are also impacted by where people live). Asians/NHPI have the highest median household income among racial groups, at $93,619, and at $70,982 among NHPI households, in 2020. Among heads of Asian households (owners or renters), 63% had at least a Bachelor’s degree, and 19% had at least 3 or more workers. Among NHPI households, just 19% had at least a bachelor’s degree, but 27% of NHPI homeowner households had at least 3 or more workers, the highest share among racial groups.
However, Asians Also Have the Highest Share of Cost-burdened Households Among Racial Groups Because They Are Concentrated in High-cost Areas
However, while Asians have achieved a high level of homeownership rate, they have the highest share of households that are cost-burdened (spend over 30% of income on housing) because they live in the most expensive states. In 2020, the top five states where Asian households lived were California (30.8%), New York (9.1%), Texas (7.9%), New Jersey (4.7%), and Washington (4%).
The table below shows the share of households that are cost-burdened by income group nationally. A household is cost-burdened if they spend more than 30% of their income on housing. Because Asian households are concentrated in high-priced states, they have a higher cost burden than other racial groups that are less concentrated in high-priced states.
Among the low-income group (income is up to 80% of the area median income), 62% of Asian homeowner households are cost-burdened, compared to 60% among Black homeowner households and 54% among Hispanic homeowner households. Middle-income Asian homeowner households have also the highest fraction of cost-burdened homeowners, at 25% compared to 16% for Blacks and 15% among Hispanics.
Among low-income renter households, 81% of Asian renter households are cost-burdened, slightly ahead of the Hispanic share of 80%, and the 77% share of cost-burdened Black renter households. Among middle-income renter households, 18% of Asian households are cost-burdened, slightly ahead of Hispanics and Blacks at 17%. Rising interest rates and property taxes due to strong price appreciation will worsen the cost burden for Asians who live in high-cost areas.
Controlling for Location (California Only), Blacks Have the Highest Share of Cost-burdened Households
Controlling for location, by looking at, for example, California only, Asians no longer have the highest share of cost-burdened households, but instead, we see that Black households have the highest share of cost-burdened households. For example, among low-income homeowner households, 68% of Black households are cost-burdened compared to 64% of Asian households. However, among low-income renter households, the fraction of cost-burdened Asian households is about the same as Black households, at 84%.
Most Asian Households Move Within the Same State, Not To Other Less Expensive States
If Asians are cost-burdened because they live in these expensive states, why don’t they move to less expensive states? The data shows that a majority of Asian households who move tend to move within the same state. This blog does not analyze why Asians choose to live in these expensive states and why, but history and geographical proximity could explain why Asians are highly concentrated in California. However, rising interest rates and rising home prices that raise property taxes could encourage Asians to migrate to other states.
For example, in 2020, among persons who moved from their place in California, 90% moved into an owner-occupied home in California. Now, among households who moved from their place in California and purchased a home in another state, the most popular destinations were Nevada, Texas, North Carolina, Arizona, and Georgia. Home prices are typically less expensive in these states than in California.
Among Asian movers from New York, 75% also moved and purchased a property in New York, but among those who moved to other states, the most popular destinations were New Jersey, Florida, Texas, North Carolina, California, and Connecticut. So, movers generally tend to stay along the East Coast.
Among Asian movers from Texas, 93% also moved and purchased a property in Texas, but among those who moved to other states, the most popular destinations were California, Washington, Nevada, New Jersey, and New York. Many of these states are high-cost states so the households who moved must have found good jobs that enabled them to afford a home in these states.
Among Asian movers from New Jersey, 81% also moved to New Jersey, but among those who moved to other states, the most popular destinations were Florida, California, New York, Pennsylvania, and Maryland. Movers also tend to stay along the East Coast.
Wide Disparities in Homeownership Rates Exist Across Asian Racial Groups
Disparities in homeownership exist within the Asian/NHPI sub-racial groups. Households with a head of household who self-identified as Chinese comprise the largest group (1.3 million, 26% of Asian/NHPI households), and the homeownership rate was 65.9%. However, there are eleven Asian/NHPI racial subgroups whose homeownership rate is lower than the Hispanic or Black homeownership rate. For context, these subgroups only total about 100,000 owner and renter households.2 These subgroups are at the lower rung of the income ladder compared to other Asian/NHPI groups.
Other Challenges: Mortgage Rejection Due to High Debt-to-Income Ratio and Incomplete Information
Other challenges to Asian/NHPI homeownership can be found by looking at the reasons Asian loan applicants get denied. Despite relatively high levels of household income compared to other racial groups, the major reason Asian applicants get denied a mortgage is due to a high level of debt relative to income, accounting for a third of the reasons loan was denied, the highest share among all racial groups. The high debt may be associated with the family incurring student loan debt for their children because Asian students tend to have the lowest loan debt.3 Asian households are also the most likely to get denied because the loan application simply had incomplete information (20%), and also due to unverifiable information (7%).
Demographic Outlook: Asian Population To Increase to 9% By 2060
In summary, Asian and Native Hawaiian and Pacific Islanders contribute positively to the demand for housing and to a brighter outlook for rising homeownership due to their strong income potential and high level of educational attainment. Due to the concentration of Asians in high cost states, there could be more migration away from these states to less expensive states. According to the US Census Bureau, as of 2020, there were 20 million Asians and 813 thousand Native Hawaiian and Pacific Islanders, or 6% and 0.2%, respectively, of the US population.4 Based on current population trends, the US Census Bureau predicts that the Asian population will increase to 36.8 million, or 9% of the population, while the Native Hawaiian and Pacific Islander populations will increase to 1.1 million or 0.3% of the population by 2060.5
1 US Census Bureau, CPS/HVS survey
2 New Zealand is not shown in the chart, but its homeownership rate is 100%.
3 Education Data Initiative, at https://educationdata.org/student-loan-debt-by-race#:~:text=At%2052%25%2….
4 2020 American Community Survey, 1-year PUMS
5 The Asian population will be the second-fastest growing race-ethnicity, next to the Two Or More Races group (Hispanic or non-Hispanic Group).