Immigrant Dreams to Keep Sparking U.S. Housing Recovery

Efforts to revamp U.S. immigration laws may bring at least one unintended benefit for the economy: The nascent housing recovery will probably get an added boost.

The number of foreign-born homeowners will increase by 2.8 million in the decade ending 2020, compared with a 2.4 million gain in the previous 10 years, according to a Mortgage Bankers Association study that didn’t assess the potential impact of any new legislation. Research by a group of Hispanic real-estate agents concludes the increase could be even bigger if undocumented workers were put on a path to citizenship.

Immigrants, who hold more positive views toward owning a home than native-born Americans, are increasingly likely to buy a house the longer they live in the U.S. and the more prosperous they become, the research shows. They will account for more than 50 percent of the rise in home buying in six states this decade, including California and New York, according to the report.

“We’ve probably underappreciated this powerful force that is already resident here and is so upwardly mobile that it pushes up the housing market from the bottom,” said Dowell Myers, author of the MBA study and a public policy professor at the University of Southern California in Los Angeles who studies housing demography. “There’s this incremental momentum that’s built up.”

That upward mobility is evident in the MBA data showing the share of those arriving in the 1980s who became homeowners rose by about 35 percentage points over the next three decades even as the longest recession since the Great Depression took a toll. By 2020, 61 percent of Hispanic immigrants who arrived here almost 40 years earlier, along with more than 70 percent of non-Hispanic foreigners, will be homeowners.

Europe Struggling

While a rebounding housing market is providing fuel for the U.S. expansion, economies in Europe are struggling. The euro-area jobless rate held at a record-high 12 percent in February, data from the European Union’s statistics office in Luxembourg showed today.

Fifty-six percent of Hispanic Americans, who according to Census data make up more than half of foreign-born residents in the U.S., said a “major” reason to buy a house is that it’s a “symbol of success or achievement,” a 2011 survey data from Washington-based Fannie Mae showed. The share for all Americans giving the same response was 32 percent.

Among Hispanics, 67 percent said a major reason for buying a house is that it’s a good retirement investment, compared with 54 percent of all people, the survey showed.

First House

Yadira Ortiz of San Marcos, California, is a case in point. The 24-year-old lab technician arrived from Mexico in 1993. She and her husband bought their first house in December, a $308,000 three-bedroom, two-bath property.

Ortiz, who has two daughters, said she was inspired by her parents and considers her home an investment to “help our children in the long term.”

“I appreciate that my parents decided to come here and give us a better future,” Ortiz said. “They have worked hard and they don’t get paid that much but they have their own home, they can afford their home. I saw how hard they were working and I decided to do the same thing.”

The push to pass an immigration bill this year, which President Barack Obama has made a priority for his second term, is centered on establishing a 13-year path to citizenship for an estimated 11 million undocumented immigrants.

Improving Odds

The heads of the U.S. Chamber of Commerce, the nation’s largest business lobbying group, and the AFL-CIO, the biggest labor federation, reached an accord on March 29 that may improve the odds legislation will pass the Senate.

Passage of an immigration bill may generate about 3 million more homebuyers over the next several years, according to a report last week from the National Association of Hispanic Real Estate Professionals in San Diego.

Giving legal status to current non-citizen U.S. residents may generate more than $100 billion in new mortgage loans, said Gary Acosta, co-founder and chief executive officer of the agents’ group.

The estimate is based on growth in the undocumented resident population since 2004, when the group’s study showed that loans to those who held an Individual Taxpayer Identification Number and no Social Security identification could have added about $44 billion to the mortgage market. The Internal Revenue Service issues ITIN numbers to people who file tax returns but are ineligible to get social security numbers.

Lending Standards

Still, there are hurdles for foreign-born first-time homebuyers. Lending standards are strict five years after the subprime mortgage crisis triggered the recession that lasted from December 2007 to June 2009.

Financial institutions may have “gone too far” in setting requirements to obtain financing amid concerns about new regulations and “may have tightened the mortgage credit box more than would be desirable in a long-run, healthy economy,” Federal Reserve Chairman Ben S. Bernanke said at the conclusion of the central bank’s two-day meeting March 20.

Banks are still favoring refinancing applications now and “don’t have much interest in providing credit for home purchases,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

Another challenge -- low inventories of properties for sale -- is acute in a handful of states that also have high immigrant populations. California, Nevada and Arizona had the lowest inventory supply among the 50 states in February, according to data from Seattle-based Zillow Inc., the operator of a real-estate information website.

In each of those states, people born abroad made up a higher share of the population than the national average of 13 percent in 2011. In California, the proportion was 27 percent, according to Census Bureau data.

‘Easiest’ Homeownership

Even so, for immigrants, “the first dream is to own the place you live in,” said Maria Fiorini Ramirez, founder and chief executive officer of her eponymous economic and financial consulting firm and a native of San Giuseppe Vesuviano, Italy. Even amid the obstacles, “homeownership in the U.S. is probably the easiest in the world,” particularly compared with Italy, where “lots of red tape” can hold up a home purchase for years, Ramirez said.

The potential for increased housing demand would add to a backlog in orders for companies such as Miami-based Lennar Corp., the third-largest U.S. homebuilder by revenue, that are preparing for further acceleration in real estate.

‘Beginning Stages’

“We are still in the beginning stages of a recovery that will be sustained for several more years,” Chief Executive Officer Stuart Miller said on a March 20 earnings call. “As the housing market continues its overall trajectory back to normal, it will provide stimulus to the overall economy through job creation and building long-term consumer wealth, which for generations has been a benefit of homeownership.”

Sales of new U.S. houses in February capped the best back-to-back months in more than four years. Residential construction permits, a proxy for future work, rose 3.9 percent in February to a 939,000 annual pace, the most since June 2008.

The gains are rippling through the economy. Masco Corp., which makes faucets and kitchen and bath cabinets, is among those seeing the rebound.

“Housing dynamics are improving,” Timothy Wadhams, chief executive officer at Taylor, Michigan-based Masco, said in a March 6 investor presentation. “New-home construction obviously is on an uptick and there are a lot of things driving that, from demographics to immigration to household formation, affordability.”