Housing Sales Hurt as Fewer Immigrants Chase Owner Dream

Housing Sales Hurt as Fewer Immigrants Chase Dream: Mortgages
The decline in newcomers has been a drag on the nation’s real estate recovery because they typically account for 10 percent of all home sales and 15 percent of first-time purchases. Photographer: Spencer Platt/Getty Images

After decades of factory shutdowns and population loss, the city of Dayton, Ohio, has found a fix for its housing market hard-hit by foreclosures -- immigration.

The rust-belt city of 140,000 has been encouraging immigrants from Mexico, Nigeria and Turkey to move there since 2011, after its population hit a 90-year low, by offering to help with resettlement and starting businesses. Dayton’s foreign population grew and so did its housing sales, rising last year at almost twice the national rate.

As the housing recovery nationwide sputters, the story of Dayton reveals a reason why: the U.S. market is missing the sales jolt provided by immigration. Last year, the number of immigrants granted U.S. residency -- typically a requirement to get a mortgage -- hit a nine-year low, according to government data. Immigrants, deterred by a weak American labor market since 2008, aren’t likely to get encouragement from Congress, where support for a reform bill has mostly evaporated.

“Immigrants have a drive to become homeowners that surpasses even native-born people, and that gives them a magnified impact on home sales,” said Chris Herbert, research director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts. “No one knows how many immigrants will be arriving in the next few years because it depends on what the economy does and what Washington does.”

Near the end of the housing boom in 2006, about 1.26 million immigrants attained permanent U.S. status, the most since 1991, according to government data. That number declined to 1.05 million in 2007 as the financial crisis began to unfold and tumbled to 991,000 last year.

Housing Recovery

The decline in newcomers has been a drag on the nation’s real estate recovery because they typically account for 10 percent of all home sales and 15 percent of first-time purchases, Herbert said. The drop is also hurting homebuilders by worsening a shortage of construction workers, said Lawrence Yun, the chief economist for the National Association of Realtors.

“More people moving to the U.S. means more housing demand, so any change in immigration patterns is going to have an effect on the housing market,” said Yun. “It’s also a critical part of the homebuilding market, because when you look at any construction site, you see a disproportionate amount of immigrants working there.”

Immigrants typically need a “green card,” which gives them the right to stay and work in the U.S. permanently, to get a mortgage, Herbert said. Lenders’ stiffer credit standards and rising home prices have also restrained home sales.

Mortgage Applications

Applications for mortgages to purchase homes in the week ending June 20 were down 18 percent from a year earlier, according to the Mortgage Bankers Association. There were two million sales of new and existing homes in the first five months of 2014, down 6.3 percent from a year earlier, according to data compiled by Bloomberg.

Sales of existing homes in May climbed 4.9 percent to an annualized 4.89 million, the biggest gain in almost three years, after falling to an almost two-year low in March, according to NAR. For the year, sales probably will decline 3.2 percent from 2013, according to Yun.

Most immigrants arrive in the U.S. without much cash and gravitate to neighborhoods with the cheapest housing, often full of foreclosures in need of repair, said Jacob Vigdor, a professor of public policy and economics at Duke University in Durham, North Carolina.

Immigrant Aspirations

“They don’t have much money, but they have a lot of aspirations about owning homes,” Vigdor said. “They’re going to look for inexpensive properties that can be fixed up. A neighborhood that Americans might look down on, immigrants will see as an opportunity.”

The share of immigrants who own their homes has risen to 51 percent from 49.8 percent in the last 12 years, according to the Pew Research Center in Washington. During the same period, the homeownership rate for people born in America has dropped to 66.1 percent from 68.3 percent.

Under the immigration reform bill passed by the Senate a year ago and awaiting action in the House of Representatives, many of the almost 12 million undocumented immigrants in the U.S. would be given a pathway to become citizens. That provision is one that many Republican lawmakers oppose.

About 3 million of those legalized residents would apply for mortgages and buy homes, according to the National Association of Hispanic Real Estate Professionals in San Diego. There are a total of about 41 million immigrants in the U.S., both legal and unauthorized, according to the Census Bureau.

Immigration Reform

Leaders of immigration reform such as Representative Luis Gutierrez, a Democrat from Illinois, said last week the effort is dead. House Minority Leader Nancy Pelosi said during a visit to the U.S.-Mexico border on Saturday she has little hope of a bill passing, “but we never give up.”

Republican opposition mounted after this month’s defeat in a Virginia primary of House Majority Leader Eric Cantor, who supported many of the bill’s provisions. The winner, David Brat, an economics professor at Randolph-Macon College in Ashland, Virginia, campaigned against the bill. The election was the first time in history a House majority leader lost a primary.

“Immigrants bring old neighborhoods back to life,” said Vigdor, the Duke professor. “In all the political squabbling over immigration, that’s something that seems to have been forgotten.”

Immigration Friendly

Crime rates fall when immigrants move into neighborhoods, said Vigdor, author of a study of immigration in New York issued in April. Every 1 percent increase in the city’s foreign-born population resulted in 966 fewer crimes per year, according to Vigdor. New York’s influx of 2 million immigrants since the 1980s has increased the value of its real estate by $188 billion -- primarily in neighborhoods that had been in decline, according to the report.

Local officials in Dayton, near where General Motors closed a factory the size of 73 football fields in 2008, are not waiting for Washington to act on immigration reform.

As part of the city’s “immigrant friendly” marketing campaign, then-Dayton Mayor Gary Leitzell traveled to Turkey in 2012 to convince a community of Ahiska Turks who were driven out of Uzbekistan by persecution to relocate to his city. More than 2,000 of them have moved to a neighborhood called Old North Dayton. Nan Whaley, who also supports the immigration program, became Dayton’s mayor this year.

Dayton’s Hispanic population jumped 9.3 percent to 18,800 between 2010 and 2012, the latest data available from the Census. The number of Asian residents in the city grew 6.3 percent to 16,857.

Housing Sales

As the immigrant population shot up in Dayton, home sales did too. They rose 16 percent in 2013 from a year earlier. Nationally, sales gained 9.2 percent.

Lisa Arzate, an agent at Coldwell Banker Heritage Realtors in Dayton, said she recently brokered the sale of a $40,000 home needing extensive repairs to three Mexican brothers. They pooled their cash so one of them could make the purchase.

“They said they can count on help from fellow immigrants,” Arzate said. “One of them has a friend who is a roofer, and another has a friend who is a carpenter.”

The trio plans to live there together to save money so the other two brothers can also buy homes in the area.

“We don’t snub our noses at immigrants,” said Arzate. “We have neighborhoods that were hard-hit by the housing crisis that are filled with vacant homes, and we see immigrants as a solution, not a problem.”

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