More restrictive residency policies can have widespread effects on housing markets.
This
article was not written by me. Instead I am reprinting it from the May
2017 online edition of Realtor Magazine. -- Jim Smith
Immigration
is among the most hotly debated issues in America right now, but
regardless of the political arguments about how to manage the country’s
borders, there’s no denying that an uptick in foreign residents in the
U.S. is a boon for real estate, according to Alex Nowrasteh, immigration
policy analyst with the Cato Institute’s Center for Global Liberty and
Prosperity.
“No
other market is more affected by immigration than real estate,”
Nowrasteh said at a session called “Housing Markets Are International”
at the Realtors Legislative Meetings & Trade Expo. “The effect of
immigration on the labor market is, at most, one-tenth the size that it
is on real estate.” He noted that immigrants gravitate toward
construction jobs at a much higher rate than American-born citizens.
When immigration rates increase, the homebuilding industry may benefit.
Nowrasteh
also said Cato Institute research has shown that on a local level, a 1
percent rise in the immigrant population corresponds to a 1 percent hike
in rental rates. And with 22.6 percent of the U.S. population—or 43.3
million people—being foreign-born, according to Census Bureau data, the
economy is getting a huge influx of cash. In 2012, Nowrasteh noted,
immigrants added $3.1 trillion to U.S. housing wealth, mostly in mid- to
low-income counties.
Policies
that tamp down immigration will tend to have a negative effect on
housing, Nowrasteh said, using a controversial Arizona law as an
example. The Legal Arizona Workers Act, which was enacted in 2007, aims
to crack down on employers who hire undocumented workers and force
illegal immigrants out of the state. Between 2008 and 2010, about
100,000 residents left Arizona, resulting in a 16 percent decline in
foreign-born residents, Nowrasteh said. During that same time period,
rental vacancy rates soared from 9.8 percent to 16.8 percent.
The
exodus wasn't the sole reason for skyrocketing housing vacancies given
that it took place in the midst of the last housing crisis, Nowrasteh
noted. But it definitely compounded the problem, he said. “A shrinking
population decreases housing prices, period. If you want to increase
housing prices, the number one thing you can do is increase the
population.”
Also
during the session, Danielle Hale, managing director of housing
statistics for the National Association of Realtors, revealed NAR’s
latest research on international buying activity in the U.S. in 2016.
These are some of the highlights:
> Foreign buyers purchased $102.6 billion worth of U.S. real estate.
>
While the majority of foreign buyers typically reside outside the U.S.,
2016 was the first year that more were living inside the country.
>
Following the trend of the last few years, China again represented the
largest share of foreign buyers in the U.S., followed by Canada, the
United Kingdom, India, and Mexico. Buyers from Canada and the UK were
most likely to reside primarily outside the U.S.
>
The average price of a property purchased by a foreign buyer was around
$477,000, while the average national home price was $260,000.
Florida, California, Texas, Arizona, and New York were the most popular states for both foreign buyers and sellers.
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