Immigrant Homeowners Hit Hard During the Housing Collapse, but Experience Varies by Country of Birth

Immigration is an important driver of the increase in U.S. population diversity and growth. Immigrants are key to the rate of workforce growth and will have important effects on housing markets going forward. As immigrants have traditionally been, and will continue to be, a vital source of housing demand, it is important to examine how the recent housing downturn and Great Recession have affected immigrants to gain insight into their potential role in the housing recovery. 

In the latest edition of Housing Insights, Fannie Mae’s Economic & Strategic Research Group analyzed data from the Census Bureau’s American Community Survey to focus on the five most populous U.S. immigrant groups who represent nearly half of the foreign-born U.S. population – Mexican, Chinese (including persons from Hong Kong and Taiwan), (Asian) Indian, Filipino, and Salvadoran. The study explores the trends experienced by these groups, including homeownership rates, median home values, and housing-cost burdens, and compares them to those of the native-born U.S. population.

Examining housing measure trends in a granular manner, such as by country of birth, the study identifies groups that provide more growth opportunity, helps spot early indicators of future housing weakness, and provides insight to better project overall housing demand. Key findings include:

• Homeownership rates declined for native-born and most of the five most populous immigrant groups, but Chinese immigrants bucked the trend.
  • As the number of new homeowners failed to replace those who lost their homes or chose other exits from homeownership, the homeownership rate has decreased. Foreign-born Americans experienced a substantial homeownership rate decline from 54.4 percent in 2007 to 51.5 percent in 2011, while the homeownership rate dropped from 69.2 percent in 2007 to 66.7 percent in 2011 for the native-born population. 
• Median home values fell precipitously for Salvadoran, Mexican, and Filipino immigrants.
  • A decline in home values accompanied the decline in homeownership.  Median home values fell from 2007 to 2011 for all groups except for Chinese immigrants, whose median home value remained stable.  The median home value for the native-born fell 8.2 percent, much less than the 25.6 percent decline experienced by foreign-born homeowners.  The home values of Salvadorans, Mexicans and Filipinos were hit particularly hard by the housing downturn with values declining by a third to a half.
• Cost burdens for immigrant mortgagors declined, but remain at high levels.
  • Another impact of the housing (and economic) crisis on homeowners is the housing-cost burden, which measures the proportion of households experiencing high housing costs relative to income.  In 2011, 51.7 percent of foreign-born mortgagors spent 30 percent or more of their household income on housing costs, compared with 34.8 percent for native-born mortgagors.
  • Salvadoran and Mexican mortgagors – who experienced household income declines – have the highest housing-cost burdens, 62.8 percent and 56.5 percent, respectively, whereas Indian and Filipino mortgagors – who experienced stable incomes – have the lowest at 35.7 percent and 43.9 percent.  
  • Though many American homeowners face affordability challenges, housing-cost burdens decreased from 2008 to 2011 for all demographic groups except Chinese immigrants, for whom the percent of mortgagors with a housing-cost burden remained statistically unchanged.
• Socio-economic characteristics and geographic location influence homeowner conditions and trends.
  • Levels and trends of homeownership rates, median home values and housing-cost burdens differed greatly by country of birth.  Differences in characteristics such as income, citizenship, education, year of entry into the country, and occupation between the native-born and foreign-born populations and among immigrant subgroups may help to explain some of the observed differences in homeowner conditions and trends.  For example, Chinese, Indian and Filipino immigrants – who generally have above average education levels and incomes among the foreign born – have higher homeownership rates, higher median home values and lower housing-cost burdens than do Mexican and Salvadoran immigrants – who are more likely to have lower education and income levels.
  • In addition, location affects housing outcomes.  Immigrant groups that cluster in more-expensive regions or areas that suffered disproportionately in the recession are more likely to be stressed by housing costs or harmed by the housing collapse. Geographic location could explain part of the outsized declines in homeownership rates and home values suffered by Salvadorans and Filipinos, as they disproportionately live in California, which was hit particularly hard by the housing crisis.

Read the latest edition of Housing Insights to find out how differences in characteristics such as income, citizenship, education, year of entry into the country, and occupation between the native-born and foreign-born populations and among immigrant subgroups may help to explain some of the observed differences in homeowner conditions and trends.

Michael Cevarr
Economist, Business Strategy
Economic & Strategic Research Group

The author thanks, Doug Duncan, Orawin Velz, and Pat Simmons for valuable comments in the creation of this commentary. Of course, all errors and omissions remain the responsibility of the author.

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.