The housing bubble may have caused many Americans to become a bit cynical about the idea of owning a house. This hesitation about homeownership, which was often touted as the symbol of the American Dream, is evident from the reduce number of new households and the decrease in rate of home ownership since the last recession in the USA.
Some experts point out that only the proportion of Americans opting to buy a house instead of renting one will rise to close to 70% levels only in another housing bubble. Yet, there is a sense of regret that the American Dream, in which ownership of one’s own home was the ultimate symbol of success and adulthood, may have been lost forever.
However, there is a segment of the American population that continues to treat home ownership as the pinnacle of success and growth. Data released by the Harvard Joint Center for Housing Studies shows that immigrants in the USA have contributed to 27.5% of all household growth in the country in the past two decades. Data about household growth amongst citizens aged under 45 years shows that almost the entire growth was the result of immigrants purchasing their own home in the United States of America.
In 1994, only 6.8% of all owner-occupied homes belonged to immigrants. In 2014, the figure had risen to 11.2%. While home ownership varies amongst different groups of immigrants, the overall contribution of immigrants towards home ownership continues to show a steady increase.
A study by the Research Housing Institute of America indicates that, in the year 2000, home ownership rate amongst immigrants was around 50%. This figure rose to 52.4% in 2010 and is expected to reach close to 56% by the end of the second decade. Latest Census figures shows that the overall rate of homeownership in the USA was around 64.5% as of the third quarter of 2014.
Amongst the many reasons for growth rate of ownership of homes amongst immigrants, the most significant reason may be immigrants are not as cynical about buying a home as native-born American citizens. Dowell Myers, Professor at the Sol Price School of Public Policy at the University of Southern California, states that immigrants often treat ownership of a home as proof of having settled in life. For them, buying a home is still the ultimate goal of the American Dream.
Another factor that magnifies the contribution of home ownership amongst immigrants is the small population of native-born US citizens in the latest generation, normally described as Generation X. A senior research fellow at the Joint Center for Housing Studies, George Masnick, opines that home ownership trends would have shown significant declines had it not been for the contribution of the immigrant population.
He further states that immigrants will probably continue to account for a big proportion of demand for housing despite being outnumbered by native-born citizens in the millennial generation.
For the housing market, the data seems to indicate that immigrants are more likely to provide the much-needed fillip to the market even as native-born millennials continue to have second thoughts about buying a home. Immigrants and native-born have complemented each other in the past decades as far as home ownership trends are concerned.
In 1990s, the gap in the rate of home ownership between immigrants and native-born narrowed at a very slow rate throughout the decade. From 2000 to 2010, this rate closed at a much faster pace as more immigrants purchased home even as more and more native-born US residents chose to avoid buying homes. The data seems to suggest that the housing bust has had a bigger impact on native-born residents as opposed to immigrants.
One factor that plays a very important role in an immigrant deciding to buy a home is the amount of time the person has resided in the country. The fact that this factor is very important for immigrants may result in a boost for the housing market if the current trend of legalizing longtime residents in the country continues in the future as well.
According to statistics from Pew Research, more than 60% of all undocumented immigrants have been residing in the US for ten years or more. If President Obama’s proposed immigration reform goes through, then the homeownership market may get impacted by the grant of legal rights to a large number of undocumented immigrants. As the reform removes fear of deportation or legal action by immigration authorities, more and more such immigrants may decide to buy their own homes.
The possibility of ownership of a home increases significantly amongst second generation immigrants i.e. children of immigrants. Such residents are better educated and earn more than native-born residents and are more likely to buy their own homes.
The study by Harvard discovered that the biggest contributors to growth in households headed by individuals aged less than 30 years in the past two decades have been second-gen immigrants. Next ranked are first-generation immigrants. This growth is all set to rise in the future. The high inflow of immigrants in the 1990s and early years of 2000s will lead to further contribution of second-gen immigrants towards homeownership in the future.
While children of immigrants consume services today, they are, at least in the USA, contribute more to the economy in general and the housing market in particular.