WE’RE HEARING as politicians begin to debate immigration reform proposals in Washington, a new study suggests immigrants fared better during the foreclosure crisis than native-born homeowners.
The study found that first-generation Asian and Latino immigrant homeowners saw a lower decline in homeownership rates after the Great Recession than their U.S.-born neighbors.
Of course, their homeownership rates were considerably lower than native-born homeowner rates to begin with.
The study was conducted by the University of Southern California’s Lusk Center for Real Estate.
Authors Gary Painter and Zhou Yu noted that metropolitan areas across America experienced a boom in immigration during the decade preceding the Great Recession.
Traditionally, immigrants—often relatively new entrants to the job market and at lower average income levels—have been more vulnerable to economic downturns than native-born residents. In addition, many recent immigrants are not eligible for social welfare programs.
To be sure, the study found that the recession had a negative impact on homeownership rates among both immigrants and native born owners, but the impact on immigrants was not as severe, at least in percentage terms.
Nationally, Asian and Latino immigrant households saw their homeownership rate decline from 49.8% in 2006 to 49.1% in 2009, a decline of 0.7%. Among U.S.-born households, the homeownership rate fell from 67.9% in 2006 to 66.0% in 2009, a decline of 1.9%.
The findings have ramifications for the mortgage industry, because immigrants and their children make up a growing component of the housing market in America.
Painter, director of research at the Lusk Center, told me that the experiences of immigrant homeowners during the housing crisis vary by where they live and how long they’ve been in the U.S.
“One of the key lessons is to really have a keen eye on the fact that immigrants are not just a homogenous population,” he says.
Many have moved to areas that are not traditionally considered immigration “gateways,” and immigrants have an increasing share of the housing demand market “across the heartland of America” as more and more move, either from gateways or directly from their native countries, to smaller metropolitan areas.
That increasing diversity in the immigrant experience may help explain why some weathered the recession better than expected. Most smaller metropolitan areas were not as hard hit during the crisis as many larger cities.
Painter said that immigrants who have lived in the U.S. longer fared better than more recent immigrants during the recession. Many Asian and Latino immigrants arrived in the U.S. during the 1990s and early 2000s.
“It turns out that immigrants actually move up the housing ladder fairly quickly, so they start to look a lot like the native born population within a decade,” he says.
Immigrants in the Southwest U.S. and Florida, where housing values fell hard and subprime lending was prevalent, were more vulnerable than others. But Painter said immigrants may have been less likely to have subprime mortgages than U.S.-born mortgage borrowers. In part, that’s because the most recent immigrants rent rather than own their homes.
As with many native-born homeowners, the housing crisis left many immigrants “locked in” to their homes, as prices fell and they found themselves underwater on their mortgages. That made it difficult for many to move if they lost their jobs and increased the risk of foreclosure. But that “lock in” effect on mobility may be loosening.
“There have been some increases in mobility, but it still hasn’t returned to the level that it was prior to the recession. If you’re moving, you should have a reason to move. And unless the job market is pulling you away, you might just stay put,” Painter says.
So what are the lessons for mortgage lenders from this study?
For one, lenders should note that immigrants are no longer just a big part of the housing market in the traditional “gateway” cities. That creates challenges and opportunities in many communities that are not used to serving the needs of foreign-born residents.
“If you turn back the clock about a decade or half a decade, most people thought immigrants were only in the gateways,” Painter says.