While everyone awaits the President’s new executive order on immigration after being challenged in court, the concern on the effect of his stance against immigrants on the U.S. housing market and home prices is emerging.
“President Donald Trump’s immigration policies threaten to crack a foundation of the American economy: the residential real estate market,” Prashant Gopal of Bloomberg wrote.
Immigrants and Homebuying
Mr. Gopal cited instances of a son of an immigrant couple from Mexico, a professional with an H1-B visa, or a foreign-born woman with an American husband who more or less backed out of their home buying plans in the face of expulsion, visa vetting, travel ban.
The homeownership rate among foreign born individuals has shown an upward trend between 1995 and 2015, per Bloomberg data. Compared that to data of domestic-born homebuyers whose homebuying rate in 2015 has returned to the 1995 level.
Immigrants’ share of the homebuying market may have gone unnoticed because these undocumented workers and the lenders that cater to them fly below the radar, according to Mr. Gopal.
The Bloomberg report, citing an analysis made by the Migration Policy Institute, noted that a third of the 11 million undocumented immigrants in the U.S. live in a home that is either owned by them or a family member or a friend.
There are small firms who make loans to these individuals at higher interest rates. They also target dreamers who are children of immigrants and arrived very young in the U.S. to have integrated fully into American society.
Some lenders who make mortgages for immigrants including those mentioned above are feeling nervous. Dowell Meyers, a demographer at the University of Southern California, said a new wave of immigrant arrivals is expected to make up more than a third of homeowners for this decade.
Immigrants are also fueling housing demand, replacing baby boomers who are retiring from the labor force, said Jacob Vigdor, economist at the University of Washington. He reckons that the present 40 million immigrants would add $3.7 trillion to the total housing wealth, the report noted.
Professionals with valid visas and high-paying jobs like those working in the Silicon Valley are also pulling out of homeownership over uncertainties on how these immigration policies could affect their jobs.
Home to Immigrants
The effect of the President’s immigration policies on housing will be more felt in some 20 metropolitan areas where there is a huge concentration of unauthorized immigrants in the U.S.
Using 2014 estimates, Pew Research identified the 20 metro areas with the most unauthorized immigrants:
- New York-Newark-Jersey City, NY-NJ-PA
- Los Angeles-Long Beach-Anaheim, CA
- Houston-The Woodlands-Sugar Land, TX
- Dallas-Fort Worth-Arlington, TX
- Miami-Fort Lauderdale-West Palm Beach, FL
- Chicago-Naperville-Elgin, IL-IN-WI
- Washington-Arlington-Alexandria, DC-VA-MD-WV
- Atlanta-Sandy Springs-Roswell, GA
- Riverside-San Bernardino-Ontario, CA
- Phoenix-Mesa-Scottsdale, AZ
- San Francisco-Oakland-Hayward, CA
- Boston-Cambridge-Newton, MA-NH
- San Diego-Carlsbad, CA
- Las Vegas-Henderson-Paradise, NV
- Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
- Seattle-Tacoma-Bellevue, WA
- Denver-Aurora-Lakewood, CO
- San Jose-Sunnyvale-Santa Clara, CA
- Orlando-Kissimmee-Sanford, FL
- Austin-Round Rock, TX
“If Trump gets the immigration plan he wants, the housing market will get hit harder than any other,” Alex Nowrasteh, a policy analyst for the Cato Institute, was quoted as saying by Bloomberg. If “millions of people get deported and more people don’t come in to take their place then you’ll have downward pressure on home prices, especially in urban areas.”
Foreign homebuyers could step in, Bloomberg noted. But that’s for another article.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.