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%.
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
Wade,
Excellent analysis and commentary! Thanks for posting.
Mike in Tucson
Only 1 problem with your analysis: They’re ILLEGAL!
Dean, the solution in my mind is to make them legal. My ancestors made it to America by sneaking onto a boat from England, in the 1700′s. how can you blame anyone for wanting to get here?
Wade and I both live in a city with a very high illegal immigrant population, yet there are no significant problems with employment of crime because of it. I say, build a tall wall with a very wide gate. Let’s get the good guys legalized.
Todd,
The real problem with your analysis is that it is biased to one side and doesn’t look at the true economic and financial issues. Illegal immigrants are putting a huge burden on this country’s resources. They are over-stressing our health care system, our school systems, and our law enforcement and legal systems. Finally, they are a cause of our housing market to remain artificially high at the detriment of legal citizens.
Legal citizens can no longer use emergency rooms because they’re overrun by illegals that do not even pay for the services. Who do you think pays for their services? Our taxes!
Our school systems are overcrowded by the illegals’ children, not to mention the additional burden of having to have bi-lingual teachers. Who do you think pays these extra expenses? Our taxes.
Along with the potential “good” illegals come a lot of “bad” illegals. By them being illegal, we are unable to properly screen them before they enter our country. A large portion of the gang activity in this country is caused by illegals, thus placing a large burden on our law enforcement and legal systems. Who do you think pays for these additional expenses? Our taxes!
Finally, the illegal immigrants that purchase homes cannot afford them on their own so one family buys the home and then five more move in. Property values are hurt because legal citizens don’t want a boarding house next to their single family home with the white picket fence, not to mention the 5 or 6 vans and pickup trucks parked in front of their house ( this is the case in my neighborhood right now).
I have no problem with legal immigration. My daughter-in-law is from another country and is having trouble becoming a legal citizen because of the illegals. With illegals being a cause of increased tax burdens, artificially inflated housing prices, and increased crime, I think it would be best if they would go back to their place of origin and come back legally so our system could handle the issues properly.
Illegal immigrants are causing housing to be too expensive for the average first-time buyer to afford. If the prices were not artificially inflated and the taxes not too high, there would be more legal citizens that could afford to own a home, thus more people without a well that would want to buy the water.
A proud American and Veteran,
Dean
I’ve been to the emergency room 4 times this year, twice a s a patient. It was not overrun by illegals. In fact, they took me right in.
My next door neighbor is a retired Doctor who works part time at a cash clinic. They hired her because she speaks Spanish, all of the clients speak Spanish. Can you guess why?
Sorry, I don’t buy that argument. Nor do I buy the housing argument. Housing prices are not to high because of illegal immigration. It would require a whole series of posts to explain why housing is what it is, immigration barely registers.
The tax burden is also a suspicious argument. When we stop building “bridge to nowhere” type projects, I’ll worry about the tax burden. First time home buyers barely pay any of those taxes anyway.
How much is your home worth? Well, it all depends where you live.
The real estate market is still shaking. New data suggests that home prices have hit a new record low. In every new study that comes out, homeowners from Miami, to Las Vegas, Phoenix and Los Angeles, have seen their home value go lower every time.
Is that disappointing? Of course it is.
Should we sell? Is not a good time.
Should we stick to it? Yes, if you can.
Have we hit bottom? Nobody knows.
Banks are facing their worst foreclosure crisis.
Don’t take me wrong, it’s good if you are in the market to buy a home for yourself or if you are an investor, but if you are not, and you own a home, most likely the value of your property is down at least 15 %.
Why do banks care if you are loosing your home? By having to sell repossessed homes, banks have to literally slash their prices down. It gets very costly for them, after all, they have to pay property taxes, maintenance costs, and whatever utilities that need to be paid, all of this expenses for a house that it’s just sitting there, vacant, and the bank is getting nothing in return.
The latest study by the S&P/Case-Shiller Home Price Index of 20 cities, revealed the news that for 22 consecutive months home prices dropped. Only from April to May, 2009 the decline was of 0.9 %
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Joyce
http://www.webtraffictrigger.com
Joyce–Glad to have you and thanks for taking the time to comment.