29 Oct Lower Levels of Immigration Affect Housing Market
While some fault the foreclosure crisis for the swell in vacant homes and continuing drop in home prices, recent Census data reveals that immigrants—or lack thereof—may be a bigger factor contributing to the housing glut than people may realize. According to Fortune Magazine, steady unemployment, the drop in immigration and the growing number of young people moving back in with their parents have all contributed to the “slowest growth in the number of new households since the second World War”—households which would otherwise be filling up vacant homes. Research indicates that new immigrant households have long sustained the “housing and retail markets at the heart of many of our large cities,” but as the number of new immigrants to the U.S. continues to decline due to economic downturn, the already ailing housing market gets a little worse. As Fortune explains:
Foreclosures may leave homes empty, but the owners need to go somewhere. If they end up renting elsewhere, that leaves the housing glut unchanged. The proportion of vacant units stood at 14.5% at the end of the second quarter of 2010, just below the 14.6% record high set in the first quarter of 2009. The vacancy rate hasn’t changed much, even though new home construction has plunged—housing starts have been running at an annual rate of under 1 million since June 2008. Historically, the market needed to build 1.5 million to 1.7 million per year just to meet demand.
In other words, the vacancy rate remains basically the same despite the plunge in new home construction—which implies that there are not enough new households to fill existing vacant homes. An economic consulting firm IHS uses Census data to show that the overall U.S. household formation rate dropped to record lows in 2009 (357,000), down significantly from the 2002-07 average (1.3 million/year). Why the drop? IHS Global suggests several reasons—intensity of the job recession, divorce and birth rates, rise in homelessness—but chief among them, the drop in immigration and the increase of youth “doubling-up.” Foreign-born households dropped by 338,000 in 2009, according to the Census. Clearly, the economic recession and steady unemployment rate (9.6% as of August) are contributing factors to the housing crisis, but as the data suggest, there simply aren’t enough new households to fill the available homes we have. Immigration’s trickle down effect is obviously being felt in the housing market. The sluggish economy and job market explain the lull in immigration—when the economy dips, so do the number of immigrants who come to the U.S. in search of employment…and when the number of immigrants dip, so too does the housing market. Perhaps if we, as a country, not only examine the flow of immigrants but their economic roles as workers, consumers, entrepreneurs and homeowners as well, we might be at a better starting point for debating how to regulate immigration in this country, now and in the future.