President Barack Obama extending a form of amnesty to about 5 million undocumented immigrants may not cause home sales to surge, but evidence suggests that immigrants add value to housing markets and aspire to buy homes, and amnesty may make it easier for them to access mortgage credit.
In a speech Thursday night, the president announced administrative changes that would eliminate the threat of deportation for 4 million undocumented immigrants who are parents to U.S. citizens. In six months, they would be eligible to apply for a new legal status that will allow them to get social security numbers, which could make it easier for them to access credit, even mortgages.
The president also expanded the 2012 Deferred Action for Childhood Arrivals Act (DACA), which could help an additional 1 million “dreamers,” the children of undocumented immigrants who entered the U.S. at a very young age.
The National Association of Hispanic Real Estate Professionals estimates that about 3 million undocumented immigrants earn enough to afford a home costing about $173,000. Their access to traditional types of mortgage credit, however, are limited.
“That would be an amazing steroid injection into the housing market,” NAHREP President Jason Madiedo told Scotsman Guide News, referring to the potential of 3 million homebuyers.
Research supports the notion that immigrants of all nationalities aspire to own homes in the U.S., but homeownership rates vary between immigrant groups.
A 2012 National Association of Home Builders (NAHB) study found that after 10 years in the U.S., half of immigrants buy homes. The U.S. Census Bureau has estimated that about 1.2 million undocumented immigrants enter the U.S. each year. By NAHB estimates, they could form up to 3.4 million households over the next 10 years.
“More than 900,000 of these new immigrant households are projected to become homeowners,” NAHB Economist Natalia Siniavskaia wrote in the NAHB report. “These estimates are likely to underestimate the full effect of new immigrants on housing demand, since the model accounts neither for possible second- home purchases nor additional vacant units necessary to accommodate the normal turnover of a larger housing stock.”
The Pew Research Center said this week that 11.2 million undocumented immigrants reside in the U.S., 9 million of whom hail from Mexico or Latin America. New mortgage options
Madiedo, who is CEO of Venta Financial Group Inc., a mortgage bank in Nevada, said that obtaining a mortgage without residency is possible using an individual tax identification number and tax documents. ITIN mortgages tend to carry interest rates up to 9 percent and require downpayments as high as 30 percent.
Madiedo said that Venta recently began offering ITIN mortgages after a six-year gap. The mortgages are portfolio-funded and funding dried up after the housing crash. The loans perform well, Madiedo said, peaking at a 7 percent default rate during the crash.
Undocumented immigrants obtaining social security numbers could help them qualify for conventional or Federal Housing Authority (FHA) loans, Madiedo said.
A new Fannie Mae 97 percent loan-to-value program coming in 2015 may help immigrants borrow, Madiedo said, which could help boost refinance and purchase mortgages.
“Our goal, even as we close ITIN mortgages for undocumented customers %u2026 we could refinance them out of that mortgage, or they could refinance with any lenders, and get a traditional mortgage with a more favorable rate,” he said.
Impact unclear
In 2013, the Americas Society/Council of the Americas studied the effect of immigration on housing. The study found that immigrants of all nationalities added $3.7 trillion in housing wealth to the U.S., stabilized declining rural and urban areas and increased housing affordability where they lived.
The author of that research, Jacob Vigdor, the Daniel J. Evans Professor of Public Affairs at the University of Washington, said that immigration reform would have a noticeable impact on housing, but limited executive orders might not.
Undocumented immigrant groups tend to be poorer and less educated, making it harder for them to afford a home. After amnesty, it may take years for immigrants to build up the capital and credit scores needed to take out a mortgage, for example.
“We’re talking about a subset of the immigrant population that tends to be less educated, their employment tends to be shaky, and they might be a credit risk, and they might have less money for a down payment,” Vigdor told Scotsman Guide News. “For all those reasons, I think that amnesty alone does not have a tremendous potential to impact the housing market.”
Reforming immigration laws to treat immigrants more favorably, such as inviting highly skilled foreign workers to the U.S., may be best for housing, Vigdor said. That does not mean undocumented immigrants do not contribute to housing. When undocumented immigrants choose to rent, and sometimes buy, in deteriorating urban and rural areas, they lower vacancy rates and boost property values.
“In New York City, it’s a story of The Bronx, not Manhattan. It is people moving into San Mateo County [in the San Francisco Bay Area]; they are not driving up costs in Marin County. Those are important aspects of this story. There is something to be said for reducing vacancy, because it’s making better places to live for other people,” Vigdor said.
Political opportunity
Politically, the immigration action has angered Republicans, which may make it harder for the president to work with the incoming Republican Congress to reform immigration further. Friday morning, Speaker of the House John Boehner said that the Republican Congress would try to counter the executive order, but did not say how.
Madiedo said that an executive order is preferable to waiting for Congress to take action on immigration. Even if the order only lasts two years, until the end of Obama’s term, amnesty could help the housing market, and be beneficial for many hard-working people already living in the U.S.
“Someone who risks everything to figure out a way to come to this country for a better opportunity, [that person] is all for any form of opportunity, whether it’s from executive order or through the full Congress,” Madiedo said.
