Illegal Immigration And The Housing Market

There weren’t any Ninja loans in 1945; hence homeownership rates were lower than today’s rates. As you can see from the graph below, the homeownership rate in 1900 was just above 45%, whereas today’s home ownership rate is in the neighborhood of 70%.

Home ownership rate chart

New housing starts are on the down slide, which is more than bothersome given that a house is the largest purchase people make. We all know that a healthy economy needs new housing starts because a new foundation being poured spurs everything from Home Depot purchases to gas consumption to landscaping services.

The problem is this: how do you sell water to someone who already has a well? You don’t. If you have water for sale, you need to find a market of people who do not have water. Because the home ownership rate in the U.S. is so high, there isn’t a large enough market of people who need to buy homes who do not already have homes. If 70% of people own a home, that accounts for most of the potential home buying market. A significant number of people either do not want to own a home or may never be qualified to own a home. The baby boom is over too, so we cannot rely on population growth. We are doing better than Europe in that we are at least close to replacing our population. What, then, are we to do?

Answer: allow illegal Mexicans to stream over our borders for decades. I used to scratch my head at why the politicians had looked the other way for so many decades while Mexicans took up illegal residence in our country. Could it be that they knew that we would need these people once homeownership rates hit a certain ceiling?

I do some keyword research for web purposes, and I’m starting to see “bilingual” show up in search terms related to mortgages. That means there is a significant demand for housing from first generation illegal immigrants. Assuming there are 10-20 million illegal immigrants in our country, we are going to have a Mexican-American baby boom of sorts inevitably. Those children will be raised in American culture and will create a significant demand for housing. Sure, illegal immigrants currently live in modest homes, but the second generation will be a whole new crop of truly new first time home buyers. They will want 3,000 square feet in the suburbs too. They will want to move up the socio-economic rung, creating significant housing demand.

If we gave those 10-20 million illegals the boot tomorrow, what would happen to the housing market? There would be millions of empty residences across the country as a result of the illegal alien exodus leaving landlords without tenants. Property taxes would go unpaid, and in turn, school revenues would go down. Foreclosures would go up … and, well, you know the rest. The grocery stores would even sell fewer candy bars. We would also eliminate a huge pool of future housing demand. I am scratching my head wondering if the housing market is a key reason why illegal immigrants were allowed across our border in the first place and why they are being allowed to stay now.

Posted by: Wade Young, Colorado Mortgage Broker