This is a post from Jim Haughey's blog that covers the US construction industry.

Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.

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Construction Industry Forecasts

Notes from Jim Haughey - Aug 08, 2008

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Immigrant departures contribute to one million extra vacant homes for sale
Jim Haughey, RCD Chief Economist

The Census report matches the estimate by the National Association of Realtors of a 922,000 unit increase in existing homes for sale over the last two years. The NAR data show that the surplus inventory was cut about 0.5 million from last summer to early this year but then gave up that gain in the last few months with rising unemployment and foreclosures.

How long will it take to eliminate the surplus of vacant homes?  One way is for homebuilders to shut down completely for more than a year.  Do not expect this to happen.  Experience in recovery from previous housing recessions suggests that most of the fix will come from the demand rather the supply side.  That is, it will come from the sum of net international immigration, population growth and new households formed by people moving out of relatives or friends’ homes or unbundling from overcrowded rental housing.

This is a one or two year process but it does not begin until a little after the end of job losses in the economy.  It may be an unusually long process this time because of increasing evidence that lots of illegal immigrants have left the country.  Some illegal workers always leave in tough economic times.  But in the last year the economic self-deporters have been joined by more people formally deported and by people who left voluntarily when they lost hope of gaining legal status.

A good summary of the declining illegal immigrant population can be found at the Center for Immigration Studies (http://www.cis.org).  The Center estimates that the population of illegal immigrants has declined by more than one million in the last year instead of increasing by half a million as it had for many years.

Obviously this is a hard statistic to estimate. But if the Center has the direction and magnitude right, home prices will be depressed by the surplus housing stock for several more years.  This will restrain new home construction.  But Reed Construction Data still expects a rise in housing starts soon because the vacant houses are concentrated in the southeast, the southwest and the depressed Great Lakes industrial region. Many of these homes are too small and in too poor condition to compete with newly built homes. A significant share of homes abandoned by departing immigrants will be torn down.

The evidence for the net departure of illegal immigrants includes the end of growth in cash remittances to Latin America, declining school enrollments in some cities in Arizona and Florida and reports by farmers of trouble finding help with this years’ harvest.

 


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Member Comments

Posted by Jim Haughey
08/15/2008
O.H. Hamilton is correct that there is no direct hard data on illegal immigrants both when they come and when they go. But the proxy evidence is overwhelming. Fewer illegal immigrants caught crossing the border, more voluntary deportations, more legally forced deportations, declining school enrollments in some immigrant heavy border communities and reduced remittances from the US to Latin America. It is nearly certain that the inflow of illegal immigrants has slowed from the pre 2007 trend. Most of this immigration is from Mexico and the Mexican economy is now being boosted by high oil prices, providing less stimulus to emmigrate.
Posted by O.H. Hamilton
08/10/2008
There is no evidence that the drop in illegal immigrants is having any effect on the housing market. The CIS study Mr. Haughey refers to deals with "young, less-educated foreign-born Hispanics", a group that is least likely to be homeowners. Moreover, Mr. Haughey himself contends that a "significant share of homes abandoned by departing immigrants will be torn down" and logically would decrease the surplus housing stock. If Mr. Haughey has stats on the percentage of homeownership among departing illegals, let him present them.
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Read Other Recent Jim Haughey Posts

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07/19 - Housing starts rebound.6% in June after two weak months
07/18 - Congress prepares to postpone resolving the deficit crisis assuring an extended period of subpar eco
07/12 - House Transportation Committee proposes to keep federal highway funding at fuel tax receipt level
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07/08 - Contractors cut 9,000 jobs in June
07/05 - The cost and frustration of selling a home contributes to the delayed housing recovery
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