Trump’s immigration crackdown could sink prices of US houses
IN SAN FANCISCO, an Indian software engineer on a work permit cancelled plans to bid on a US$900,000 (RM4.1 million) home. In Washington, a Brazilian non-profit 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 home buying, 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 seven. He now works full time while earning his college degree.
President Barack Obama had protected immigrants like Rodriquez, often called “dreamers,” or undocumented Americans who arrived as young children and are often fully integrated into American society.
Last Tuesday, the Trump administration detailed plans for a sweeping crackdown on undocumented immigrants, saying the authorities would deport many more people without court hearings. Under Obama, the government focused on those convicted of violent crimes; Trump would lower the bar to include fraud and, in some cases, a belief the residents threatened public safety.
Even workers with green cards and work visas under the H1-B programme for skilled foreign workers are worried about possible restrictions under Trump. The housing markets most at risk include Miami, Silicon Valley, Los Angeles, San Francisco and New York, which have the biggest concentrations of foreign-born buyers.
While the Trump administration indicated it would exempt dreamers, stepped-up immigration raids and the travel ban on seven majority-Muslim countries – blocked in court – are creating panic in many who believed that their American dream was within sight.
“If Trump gets the immigration plan he wants, the housing market will get hit harder than any other,” said Alex Nowrasteh, a policy analyst for the libertarian Cato Institute. If “millions of people get deported and more people don’t come in to take their place, then you’ll have downward pressure on home prices, especially in urban areas.”
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.
Some smaller firms will make loans to the undocumented, with higher interest rates. A few larger lenders such as WinstonSalem, North Carolina-based BB&T Corp. market to dreamers, who can qualify for conventional Fannie Mae, Freddie Mac and Federal Housing Administration mortgages.
A third of the 11 million unauthorised immigrants in the US 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.
Now, some lenders are starting to get nervous. Las Vegas-based Alterra Home Loans focuses on mortgages for immigrants, including dreamers and the undocumented. At the early stages of government loans, lenders can be on the hook in defaults. “We’re proceeding cautiously,” said Jason Madiedo, the company’s president and chief executive officer.
If financing dries up and borrowers lose faith, it will mark a major reversal in the market. New arrivals are expected to account for more than a third of growth of home owners this decade, according to University of Southern California demographer Dowell Myers.
While the US home ownership rate in 2015 was the same as it was in 1994 – 66 per cent – it has risen 2.4 percentage points for the foreign-born population, to more than half, according to real estate website Trulia.
Fueling housing demand, immigrants replace baby boomers retiring from the labour force, according to University of Washington economist Jacob Vigdor.
By his reckoning, the country’s 40 million immigrants add US$3.7 trillion to total housing wealth.
In Houston’s home county, the newcomers boosted the value of the typical home by US$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 per cent of the US population increase, or 103 million people.
Other foreign buyers could step in. Trump’s friendly stance toward Russian President Vladimir Putin is heartening buyers from that country. They had held back after his 2014 Crimean takeover prompted Obama to impose sanctions, according to Edward Mermelstein, a New York-based real estate lawyer who represents wealthy foreigners.
His Russian clients negotiating home purchases in New York and Miami more than doubled since Trump took office.
I feel like with one stroke of Trump’s signature everything can be taken away, even all my hard work. Juan Rodriguez, 24-year-old immigrant