Could Trump’s Immigration Ban Cause Another Housing Crash?

How important are immigrants to the U.S. housing market?  At least according to University of Washington economist Jacob Vigdor they could own roughly 12.5% of the housing stock in the U.S. worth about $3.7 trillion in aggregate. 

Here’s the math…there are roughly 320 million people in the U.S. and 125 million houses, or about 2.5 people per household.  Since there are 40 million immigrants living in the U.S., that implies they could own around 16 million homes.  Using an average home price of $225,000 would imply an aggregate household value of ~$3.7 trillion for immigrant families alone.  Per Bloomberg:

Fueling housing demand, immigrants replace baby boomers retiring from the labor force, according to University of Washington
economist Jacob Vigdor.

By his reckoning, the country’s 40 million immigrants add $3.7 trillion to total housing wealth. In Houston’s home county, the newcomers boosted the value of the typical home by $25,000 during the decade ended in 2010. Between 2015 and 2065, according to a Pew Research projection, future immigrants and their descendants will account for 88 percent of the U.S. population increase, or 103 million people.

The question, of course, is whether or not Trump’s immigration crack down, on both illegal immigrants and H1-B visa holders, will reduce demand from immigrant families to such an extent that it actually drives down home prices? 

In San Francisco, an Indian software engineer on a work permit canceled plans to bid on a $900,000 home. In Washington, a Brazilian nonprofit executive passed on a fixer-upper near her office. And, in Mesa, Arizona, a 24-year-old son of undocumented Mexican immigrants won the trust of a bank — a green light for a mortgage — but now fears deportation.

President Donald Trump’s immigration policies threaten to crack a foundation of the American economy: the residential real estate market. Legal and otherwise, immigrants, long a pillar of growth in homebuying, are no longer feeling the warm welcome and optimism necessary for their biggest purchase.

“I feel like with one stroke of Trump’s signature everything can be taken away, even all my hard work,” said Juan Rodriguez, the 24-year-old whose parents moved from Mexico when he was 7. He now works full time while earning his college degree.

Certainly real estate brokers are full of circumstantial evidence to suggest a doomsday scenario is inevitable but they’re somewhat of conflicted party.

The 32-year-old Silicon Valley software engineer from India gave up on buying because Trump had so rattled him and his wife. He moved to the U.S. seven years ago and decided to become a homeowner after marrying a biomedical engineer from his home country a few months ago.

The newlyweds have H1-B visas, a program that technology and other companies rely on to hire 85,000 people each year.

“We were about to make some offers,” he said. “But we don’t know what news will come out and how that will affect our jobs.”

Their real estate agent, Nomita Shahani, said a colleague in her office just had a customer with an H-1B visa pull out of a purchase contract in Fremont, California, because of similar concerns.

“All morning clients have been calling me,” Shahani said. “We don’t know which way it will go, but if Trump keeps making it hard to hire people from oversees, the housing market will take a hit.”

The immigrant housing market is often underappreciated, in part, because undocumented workers and the companies that cater to them sometimes like to fly below the radar.  That said, according to the Migration Policy Institute, roughly one-third of all illegal immigrants in the U.S. own a home either directly or through friends and family.  

A third of the 11 million unauthorized immigrants in the U.S. live in a home that they or a family member or friend own, according to an analysis by the Migration Policy Institute, a Washington-based think tank.

Some smaller firms will make loans to the undocumented, with higher interest rates. A few larger lenders such as Winston-Salem, North Carolina-based BB&T Corp. market to dreamers, who can qualify for conventional Fannie Mae, Freddie Mac and Federal Housing Administration mortgages.

Of course, as we’ve pointed out before, per data from the Pew Research Center, approximately 60% of all illegal immigrants live in just 20 metropolitan areas across the country with the 2007 subprime havens in Florida, Texas, California, Arizona and Las Vegas having more than their “fair share.”

Meanwhile, the top 10 metropolitan areas alone account for nearly 50% of illegal immigrants and just three states, California, Texas and New York, make up roughly 37% of the total.

“Fake news” crafted by the mainstream media to sensationalize the economic impacts of Trump’s immigration policies or housing crash 2.0?