This confidential report analyzed demographics, housing, and lending activity in a particular County’s majority-minority census tracts. It used HMDA data and FFIEC demographic data to assess lending opportunities. The analysis revealed a declining population, older housing stock, and a need for home improvement and commercial/investment loans. The report suggested FHA loans as a promising product and highlighted the competitive landscape, with established lenders already holding significant market share. Specific land use patterns within various geographic areas of the county were also detailed.
Introduction
This case study presented an analysis conducted by Premier Insights, Inc. to assess residential housing needs and lending opportunities in a specific market area. The study focused on majority-minority census tracts within a County using data for a 2-year period. The goal was to provide a bank with valuable insights into outreach and target marketing.
Methodology
The analysis included the following components:
- Land Use: Examining the types of properties and land development in the area.
- Geographic Location: Considering where different types of areas were located.
- Demographics: Analyzing population data, income levels, and other relevant demographic information.
- Housing: Assessing the area’s housing characteristics, including the age of homes and the proportion of owner-occupied versus renter-occupied units.
- HMDA Lending Activity: Studying Home Mortgage Disclosure Act data to understand lending patterns and trends.
- Maps: Used to visualize the land use in the area.
The study utilized 2021 FFIEC data for demographics and housing and 2020 HMDA data. Some comparisons were drawn with 2018 HMDA data to identify trends. The 2020 Decennial Census was also considered, but it was noted that the geographic boundaries of the census tracts changed slightly, making direct comparisons challenging.
Key Findings
- Population Trends: The County experienced a population loss of approximately 10% in a 20-year period. The majority-minority areas of the County experienced a greater population loss of 11.7% between the same period.
- Land Use: The land use in this market varied. For example:
- Northeast City was primarily single-family residential and commercial.
- North Central City featured a mixed land use pattern with single-family and multi-family residential, commercial, industrial, medical and recreational areas.
- The County South area was primarily single-family residential with some commercial development along the major corridors.
- Central City was centered around downtown and included single-family and multi-family housing, commercial, industrial, governmental, medical, college, and recreational land uses.
- Other areas had a variety of land uses including residential, commercial, and recreational, with large portions of undeveloped land.
- Income Levels: Of the 50 majority-minority census tracts, 15 were low income, 22 were moderate income, and 13 were middle income. There were no upper-income tracts. 30.7% of the population in these areas lived at or below the poverty line.
- Housing: There were 77,593 housing units, with 16.7% being vacant. Of the occupied units, 53.5% were owner-occupied and 46.7% were renter-occupied. Approximately 80% of all housing units were 1-4 family dwellings. The median year built was 1967, making the housing stock relatively old.
- HMDA Lending Activity: In one year, there were 4,411 HMDA applications in the majority-minority census tracts, with 2,186 being originated. The number of applications was up 20% from two years previous, but this increase was less than half of the overall market area increase of 55%. Approximately 60% of total applications were originated in the overall market area, compared to about half in the majority-minority census tracts.
Lending Product Analysis
- Over-represented products in majority-minority tracts included FHA loans, home improvement loans, business purpose loans, investment loans, and multi-family property loans.
- Under-represented products included conventional loans, home purchase loans, USDA loans, and mobile home loans.
- Multi-family loan proportions in the majority-minority tracts were three times higher than in the overall market area.
Implications and Recommendations
- Limited Loan Demand: The declining population suggested a need to focus on specific products and services rather than just overall loan volume.
- Home Improvement Focus: The aging housing stock created a need for home improvement loans, which were already over-represented.
- Commercial and Investment Property Opportunities: The high proportion of rental units indicated a strong opportunity for commercial and investment property lending, which were already over-represented.
- Multi-Family Financing: The disproportionately high demand for multi-family financing suggested opportunities in this segment.
- Open Lines of Credit: Open lines of credit and loans secured by subordinate liens were over-represented, likely related to the age of the housing and need for improvements.
- FHA Lending: Government-sponsored products, especially FHA loans, were well-suited for the area.
- Competition: The Bank will likely face competition from well-established banks and mortgage lenders.
Strategic Recommendations
- Prioritize Commercial and Investment Lending: Due to the high demand, this segment could be a key opportunity.
- Offer Home Improvement Loans: Capitalize on the aging housing stock and the need for home improvements.
- Promote FHA Loans: Focus on government-sponsored products to meet the needs of the area.
- Tailor Marketing Efforts: Develop marketing plans that highlight appropriate products.
Conclusion
This case study demonstrated Premier Insights, Inc.'s ability to analyze complex data, identify market trends, and provide actionable insights for financial institutions. The analysis of the County’s majority-minority census tracts revealed a market with unique opportunities and challenges. By focusing on commercial and investment properties, home improvement loans, and FHA lending, the Bank can effectively target the needs of the community and achieve strategic objectives. The data also suggests that conventional loans were under-represented.