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Why immigrants weathered the housing bust better than the U.S.-born population

Despite the recent recession, new studies show that immigrants have managed to narrow the homeownership gap with native-born Americans. REUTERS/Jonathan Ernst
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Immigrants fared far better than the U.S.-born population when it came to holding onto their homes or buying new ones after the housing market tanked, according to recent studies that parsed U.S. Census data.

While overall homeownership rates declined after the housing bust, rates increased among immigrants, challenging the assertion that immigrants were hit disproportionately by the housing crisis.

A Fannie Mae study released this week found that immigrants narrowed the homeownership rate gap between themselves and native-born Americans faster in the 2000s than in the 1990s, “suggesting that the recent housing crisis may have had a lesser impact on homeownership advancement of immigrants.”

A separate study by researchers at Rutgers University and Emory University found that homeownership among immigrants climbed on average from 52.4 percent in the years leading up to the crisis (2000 to 2006) to 54.3 percent during the recession and the years after (2007 to 2012). The reverse was true for native-born Americans. Their homeownership rate fell from 74.3 percent to 72.4 percent, even though their wages did not decline as much during that time.

The studies come at a time of deep interest in the housing decisions of immigrants, who are expected to help shape demand for homes for years to come. (One study projects that they will account for more than a third of the overall increase in the number of homeowners during the decade that ends in 2020.) Even President Obama has weighed in. In a speech at an Arizona high school last year, Obama said that “fixing the broken immigration system” would “actually help our housing market” by stimulating home purchases.

Against that backdrop, researchers have been digging for clues as to why the immigrant population has been less adversely affected by the housing bust, and what that means for the housing market in the future.

The Fannie Mae study, led by analyst Azanaw Mengistu, found that the homeownership rate among the U.S.- born population increased between 1990 and 2000, then fell the following decade. By contrast, the rate among immigrants was flat in the 1990s, but picked up 2.6 percentage points from 2000 to 2010 -- despite the recession.

Mengistu tracked Census data for recent immigrants and native-born Americans aged 25 to 34, the typical age group for first-time home buyers. The goal was to gauge their transition from renters to homeowners. He found that homeownership was higher among the U.S.-born population in the 1990s and 2000s, but the gap narrowed by 12 percentage points from 2000 to 2010, based on the most recent Census figures.

Research has shown that the longer immigrants stay in the country, the more financially stable they become and the more likely they are to buy a home. That trend might explain the recent homeownership gains among immigrants, Mengistu said. The share of immigrant households that had lived in the United States for more than 15 years jumped from 57 percent in 2000 to 63 percent in 2010.

But Mengistu acknowledged that other factors may also be at play. The characteristics of the immigrants in the 1990 Census data may vary from those in the 2000 Census data in terms of country of birth or education levels, for instance. The Fannie study did not account for such differences, Mengistu said.

The Rutgers/Emory study, released in June, offered another possible explanation for the uptick in immigrant homeownership: “birth networks” – the share of the population in a state that comes from an immigrant’s home country.

In the study, Kusum Mundra and Ruth Uwaifo Oyelere examined various predictors of homeownership, such as education, savings and citizenship. They found that none of these factors changed much in the years leading up to the recession or after. The only marked change was among the birthplace networks within states.

Such networks have played a role in helping immigrants secure jobs or determine which types of jobs to take, said Mundra, an assistant professor of economics at Rutgers. It is therefore conceivable that immigrants would leverage these networks on the housing front, and fall back on them for financial help in times of crisis, she said.

The longer people reside in the United States, the stronger the effect of the network, particularly if many people in the network are U.S. citizens, said Uwaifo Oyelere, a visiting economics professor at Emory. “When someone is here for a longer period they know the people who are influential,” she said. “They have more credibility.”