Immigration and the Housing Quagmire

Wolf Richter's picture

Wolf Richter

Pundits who announced the imminent turnaround in housing over the last few years have been disappointed once again by the S&P/Case-Shiller 20-city composite for February which declined 0.8% from January and 3.5% from last year—despite a historically warm winter. The composite has fallen past the low point of the financial crisis to a level last seen in October 2002. Since that time, inflation as measured by headline CPI has eaten up another 27% (CPI calculator), which would take the composite back to the 1990s on an inflation adjusted basis.

Seasonal upticks in home values are likely as are upticks in areas with unique economic conditions—Silicon Valley with an IPO bubble, for example. Yet a long-term recovery is unlikely until a fundamental part of the housing market has healed: vacant inventory.

The housing bubble construction boom, which peaked in January 2006 with 2.3 million housing starts (annual rate), left behind a housing glut. How many vacant homes there were remains uncertain. The Census Bureau counted 18.8 million units in 2009. Others estimated it at 11 million units. Whatever the number, new housing construction, though it adds to GDP, simply knocks back the healing process. For that conundrum, read.... Construction Spending And The Housing Quagmire.

And home sales are just noise. Someone who buys a home and sells the old one, then moves, triggers two transactions. But the move vacated the old home. Hence, a zero-sum event for vacant inventory. Only household formation can mop that up.

But household formation has been slow. Even though it recovered a bit in 2011, only 600,000 households were formed, a far cry from a range of one to two million a year in prior decades. Studies blame demographic changes, including the growth of multi-generational households—in part the result of economic hardship. Then there are the college graduates, the very generation we’re counting on to mop up the vacant inventory. But they may not buy a home for a long time as skyrocketing tuition has saddled them with mountains of student loans. Read.... Next: Bankruptcy for a whole Generation.

And there is another trend that contributed significantly to household formation before and during the housing bubble. But now, it has reversed—according to the Pew Research Center, whose report, released yesterday, doesn’t beat around the bush:

The largest wave of immigration in history from a single country to the United States has come to a standstill. After four decades that brought 12 million current immigrants—more than half of whom came illegally—the net migration flow from Mexico to the U.S. has stopped and may have reversed.

According to the report, Mexican immigrants make up 30% of all immigrants living in the US—and 58% of illegal immigrants. The second largest group, Chinese immigrants (including Hong Kong and Taiwan) amount to only 5% of all immigrants. Of the estimated 11.2 million illegal immigrants living in the US last year, 6.1 million were from Mexico. But that's down from 7 million in 2007. Legal immigrants from Mexico rose slightly from 5.6 million in 2007 to 5.8 million in 2011.

Net effect: 700,000 fewer Mexican immigrants (legal and illegal) in the US. The report points at a number of factors, including the collapse of housing construction where many Mexicans worked. Thus, household formation from Mexican immigrants, after decades of explosive growth—which created demand mostly at the lower end of the housing spectrum—has reversed and is now contributing to vacant inventory.

But, but.... The US remains by far the most desired country, according to Gallup, which once again excelled in reading the minds of people from around the world. While immigration from Mexico is on the wane, 150 million adults worldwide still dream the American Dream and would still like to move to the US. That’s 1 in 30 adults! By contrast, 45 million people would like to move to the second most desired country, the UK, 42 million to Canada, 32 million to France, and 31 million, yes, to Saudi Arabia. Only 6 million people would like to move to Russia.

However nervous these astounding numbers may make us, it’s good to know that the US is still and by far the most desired country in the world. So, with the housing market not allowing for much optimism, I will end on a cheerier note, and with a truly American phenomenon: scrappy outfits going after multinational and foreign giants in the utterly morose beer industry. For the astounding fight of the winners, read.... The Beer War on American Soil.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Dermasolarapaterraphatrima's picture

1 in 3 not paying property taxes in some areas:


"More than 1 in 3 people who bought homes in some of the oldest neighborhoods in 1992 or earlier moved out of those homes after 2002, and close to 1 in 3 of remaining homeowners are delinquent on their property taxes...."

Peter Pan's picture

The author forgot to mention the shortage of housing when it comes to US jails. Maybe the jail system can buy whole residental esates that are unsold and simply erect some fencing. Or perhps it could buy boarded up shopping malls. Or even better, maybe FEMA can prepare for the future by buying towns that are almost deserted.

I am fascinated how the USA is still the preferred destination when Mexicans are staging a retreat. Perhaps even more would have left had the fence been not so well constructed from the US side.

Bloody sad state of affairs for a nation that was once a beacon.

BeetleBailey's picture

"......45 million people would like to move to the second most desired country, the UK, 42 million to Canada, 32 million to France, and 31 million, yes, to Saudi Arabia. Only 6 million people would like to move to Russia."


1. 6 MILLION people would like to move to Russia? WTF? Like to know where those people are now. Fuckedupistan?

Been to Russia. Spent a considerable amount of time blows - period.

2. The 31 million to SA have to be Muslim. Big deal. Let 'em move.

3. 32 MILLION to France? Must be Moroccan. Nice place to visit. Stay long enough, you'll come to despise the French; snotty bastards - the lot of them.

4. Canada is much desired over the UK. Canada rocks. The UK is lousy with Islamic douchebags.


EmileLargo's picture

Would love to hear about your Russian experience. I've never been to Russia although my friends who have been to Moscow absolutely loved it.

AnAnonymous's picture

Ah, Saudi Arabia, the intruder.

World could be so cool without them. See, US citizen propaganda could get it with ease that migrants look for freedom and the rest...

Alas, with SA in the picture, hard to sell the rights, freedom stuff song.

Migrants want to move where the consumption is done.

Saudi Arabia is a consumption sink, centralizing the consumption of many world resources, oh, nothing like the good old US of A, but enough to attract people who see their local resources moved away and consume elsewhere.

Migration path has been commanded by resources consumption for ages, not by US citizen freedom thingy and the rest.

newengland's picture

There was a time when immigrants came to America, fleeing poverty and war, wanting to make a better life for themselves and their new homeland.

Since cynical corporatists rose to power post 1960s, immigrants were encouraged to come to America as cheap labour, driving down American wages, for the profit of the globalist Trilateral Commissionn corporatists and their political pets who are also rootless cosmopolitans with no loyalty and investment in the U.S.A.

The illegal Mexican'ts are leaving. Good. Good for us all.

The legal hardworking Mexicans will stay. The pretty political pets of the Trilateral Commission will tax everyone to death.

No matter. A country is all its people. One for all, all for one. We the people shall prevail, eventually.


End the Fed.


AnAnonymous's picture

Immigration waves have been played one against the other for a long time in the US. Since the beginning actually.

It is part of the good old US of A.

But hey, globalization has to start for decades ago and the US not be a product of globalization because if not, why am I not secured in my share of the loot, what went wrong down the road if nothing has changed since inception?

TheFourthStooge-ing's picture

AnAnonymous squatted and squeezed this out:

It is part of the good old US of A.

But hey, globalization has to start for decades ago and the US not be a product of globalization because if not, why am I not secured in my share of the loot, what went wrong down the road if nothing has changed since inception?

What went wrong down the road? Look to your roadside for the answer.


dolph9's picture

I live in Texas, and, believe me, if there's an exodus of Mexicans I'm not seeing it.

SubjectivObject's picture

Could be they're moving through the state enroute.  See any new faces passing by?

sun tzu's picture

There's certainly no lack of Mexicans in my area either. Drive by any of the schools in my city and you would think you're in Mexico



Here in Houston I am not seeing anything that would make me think they aren't still coming.  1/4 have no car insurance

nscholten's picture

Ah, so you sell car insurance?  Another fucking scam.

adr's picture

If only we would have a mass exodus of bankers, lawyers, and politicians. Maybe we'd have a desirable country again.

Peter Pan's picture

Parasites don't leave until the host is totally sucked dry and dead.

nmewn's picture

O'Barry has stunted illegal immigration, excellent.

CoolBeans's picture

No.....O'Bummer could be the poster child for immigration - He's one that actually became President!!!!

Bollixed's picture

First time in history we have an undocumented immigrant for a President and now everyone wants to leave.

Go figure...

ebworthen's picture

The better the beer the less you drink.

A well crafted beer will have 5%-8% alcohol content (due to high malt content), great flavor, and excellent hops and quantity that in toto is literally "liquid bread".

Large brewers have spent the past thirty years pushing low malt (low calorie) low quality "beer" that is little more than seltzer water and expecting to keep raking in the $$$.


Bicycle Repairman's picture

The People's Central Committee has prescribed low alcohol beer for workers and drivers, and the corporate members of the committee have obliged.  Do you see a problem with that, comrade?

Stuck on Zero's picture

The great enemy of household formation is student loans.  It used to be a kid would leave college with a degree, get a job and buy a house.  Now the kid leaves college with $150K in debt, fails to get a job and moves in with Mom and Dad.  Immigrants in our area rent one house and pack twenty six people in it. 

beechmtnski's picture

great basic economics extension, unintended consequences as Pres out roadshowing expansion of student loans today.  more student loan debt, less home purchases

magpie's picture

Wasn't that always the USA's ace up its sleeve in economic history, being dependent on permanent immigration yet maintaining comparatively high wages.

LowProfile's picture

The desire to move to the US reminds me of how most still regard the Swiss Franc as a safe haven currency...

bugs_'s picture

Whats wrong with Russia?

Bicycle Repairman's picture

Nothing that global warming couldn't fix.

azusgm's picture

Global warming may not fix Chernobyl.

jeff montanye's picture

or the organized crime oligopolists who run the economy.  oh wait.

HarryM's picture

Offer citizenship to anyone and their immediate family , who coughs up $250k cash and buys a house with it.

We need immigrants with money, not more landscapers




Seize Mars's picture

So, more central planning, then?

El Viejo's picture

I hear Chinese govt officials are leaving China in droves and coming to the US with billions of $$$.


i love cholas's picture

kinda lost me in this post.

Obadiah's picture

Well at least he points out that ther ARE pockets of housing that is going pretty well.


Put a nice home up for sale in Lincoln, ne btw 300-550K and you'll have two offers by morning.

The sheep feel interest rates are going to rise so "buy now!!"  Dammit I've lived in the same place for 20 years, two years with no mort payments  I have the 50% down but just don't feel like pulling the trigger, but dont want that money sitting in the banks any longer than "poof its gone"  mommy?

Zero Govt's picture

Immigration is on the wane simply due to ever poorer financial prospects of a Govt/banking/monopolist raped economy

Tourism into the US has also been stagnant for a decade while most other destinations have enjoyed double digit growth in the same timespan. This is a result of the ever more officous intrusive/abusive creeps on your borders and airports

I have a French friend that used to work for Playboy.. post-9/11 she was sent back home at a US airport simply because she was French whose Govt didn't support the wholly illegal and false flag effort to invade Iraq

the US border guards were "just doing their jobs" of defending your borders from the unwanted or sticking their jack-boots into the economy to defend State terrorism, murder and mayhem depending on how you look at it

America is becoming an insular walled garden (with wilting plant life) the end of Rome the rotten US plutocrats will tax ya'll to death and raise barriers not only to people coming in but people trying to escape the tyranny's going to get ugly

prole's picture

A white European, no wonder Uncle Allah kicked her Derrier back to la France. (No whites allowed biatch, this is America) Now if her name had been Mohammed Atta, or if she had a false flag simulated device in her shoe, Well dressed agents would have swept her through security and wherever she wanted to go. Passport? We don't need no stinking Passports.

donsluck's picture

Me too, more like "so what's new?".

Bicycle Repairman's picture

What was news to me was that immigration is at a standstill and thus there is one more nail in housing's coffin.

if the US is so desirable, why then is immigration at a standstill?

I wonder what would happen if there were a flow of talented, educated, young people out of the US?  Just a thought exercise.

DonutBoy's picture

The reason it's at a standstill is we make it insanely hard for educated, contributing, law-abiding people to immigrate.  If you aren't any of those things and get accross the border anyway we'd like to give you free health-care, educate your kids, and have you vote.  Our immigration policy is insane.  We could be forming 5 million new households a year of people with master's degrees and money in the bank who pay taxes.


prole's picture

Unless you are suggesting we import Belgrade, I'd rather keep them out.

Dear 5 million-- Just stay wherever you happen to be. Save yourself the Tazering.

azusgm's picture

Well, there are plenty of US post-secondary educations flowing out of the country.

For a system so obsessed with protecting intellectual property, there are a lot of student visas being awarded for grad school.

BidnessMan's picture

We might start seeing that as young folks escape crushing student loan debt. Lots of 19th century immigrants to the US were escaping crushing debt in the old world.

RockyRacoon's picture

Adding some firmer numbers and faces, however vague, to the general suspicions is helpful.  Putting facts to fancy is a good exercise.  I thank the author for that.

Manthong's picture

"it’s good to know that the US is still and by far the most desired country in the world"