Mortgage lenders should start gearing up to serve the burgeoning ranks of immigrants, says James Johnson, chairman of the Federal National Mortgage Association. He explained why in a speech at the annual convention of the Mortgage Bankers Association of America. Excerpts follow.
The Census Bureau released a new estimate in 1992 that projects net immigaration to this country in the 1990s and 8.8 million above their previous estimate. If their prediction is accurate, the 1990s willmatch the peak level if immigration this country experienced between 1901 and 1910.
As a result of the new predictions of higher immigration, the Census Bureau now predicts U.S. population growth in the 1990s of over 25 million. This is seven million - a full 42% - higher than previous predictions for the decade, and nearly four million above the growth experienced in the 1980s.
It is hard conceptualize numbers as big as 25 million, but think of it this way: it's comparable to having the entire population of Canada, or Romania, or the combined populations of Norway, Ireland, Denmark, Sweden, Finland, and Iceland move to the United States.
Akin to Baby Boom
Not since the baby boom has out population grown so rapidly. And the population is projected to continue growing at a healthy rate at least through the first two decades for the next century.
Obviously, faster population growth - more than one-third of which is attributable to immigration - means more new households. The Census Bureau has not yet released its projections of household formation for the 1990s, but other analysts, including the Joint Center for Housing Studies at Harvard, hae forecast 13 million new households in the 1990s, more then the number created in the 1980s.
Household formation will be influenced not only by immigration, but by a continued rise in single-parent and other nontraditional households.
As well all know, household formation is a key factor in housing demand. Long-term demographic trends like the aging of the baby-boom generation, born between 1946 and 1964; the entry of the "baby bust" generation, born between 1965 and 1979, into their peak years for buying their first home and the decline of the birth rat per woman from 3.6 in the mid-1960s to 1.8 in the 1980s all reduce the demand for first-time homes.
Increased immigration will help offset these trends. The increase in immigration in the 1990s forecasted by the Census Bureau translates into an additional 78,000 households per year. And in fact, nearly 25% of those who emigrated to this country over the past decade are already homeowners, and that number will only increase as they become more acclimated and see their incomes rise.
In fact, the home ownership rate of the foreign-born people who have lived here between 10 and 20 years approaches - and among some groups, surpasses - the national average.
Immigration has a powerful impact on the first-time home buyer market because new immigrants tend to be young, with their years for forming households and raising children ahead of them. According to the 1990 census, 55% of recent immigrants were 15 to 34 years of age and 16% were 35 to 44.
Immigrants typically have more children than their native-born counterparts, and they place a high premium on home ownership. Fannie Mae's housing survey by pollsters Peter D. hart and Robert Teeter found that more African-Americans and Hispanics say home ownership is a primary goal in life than did whites, and they are more willing to make major concessions, like taking a second job.
In many cases, immigrants are willing to maintain extended-family living arrangements, and devote large portions of their collective income to housing costs.
Incomes Catch Up
And while their incomes are low when they first come to this country, a 1992 study published by the Bureau of Labor Statistics' Monthly Labor Review shows that by the time they have been in this country for 15 years, immigrants have incomes equal to those of native-born Americans; their rate of employment is comparable to that of people born in this country.
What does all this mean for the housing finance industry? It means simply this: This people who will be your customers tomorrow are people you do not know today.