As the son of an immigrant family that now owns multiple homes, Luis Molina—a real estate agent with eXp Realty in Long Island—understands the significant influence immigration plays on the housing market.
His team recently helped a buyer who immigrated to the U.S. two decades ago—a business owner who wished for homeownership since coming to America. In fact, he says about 85% of the buyers he’s encountered are immigrants who are chasing that same dream.
It’s just one of many stories in a state that is home to a historic landing point for immigrants, earning New York City’s “melting pot” label. And with U.S. immigration levels surging to 6 million between 2022 and 2023, according to the Joint Center for Housing Studies (JCHS) of Harvard University, housing markets here and in other areas where immigrants settle will undoubtedly see a boost, says Molina.
“Immigration leads to population growth, which increases the demand for housing,” he tells RISMedia. “It’s going to have a positive effect for many homeowners as supply is still at an all-time low.”
Molina attributes several factors to this expected boom. Immigrants bring with them diverse housing needs, he says, leading to the development of various housing types from single-family to multifamily. Also, from his experience, immigrants often renovate or update existing homes, which can increase property values and the overall quality of the housing stock.
Increased economic growth from immigrants participating in the workforce also influences the market, he says, as does job creation related to construction, real estate and other industries as the demand for new housing and home improvement increases.
Using historical data to measure impact
The full effect of this immigration surge on the market will take time to fully realize, per the JCHS, and the industry must consider historical data with headship rates—the share of adults who are heading their own household—to get a clearer picture.
Here’s the historical breakdown, according to American Community Survey data:
- Those who arrived between 2017 and 2022 and were working age had a 34% headship rate.
- The headship rate of immigrants who arrived between 2013 and 2017 was 41% in 2022.
- Those who arrived 20 or more years ago had a 50% headship rate (higher than native-born adults).
The takeaway is that headship rates increase among immigrants, but also rise with time spent within the country. They typically increase with age as well, with higher rates among recently arrived immigrants in the 25 – 34 age bracket (36%) compared to 18 – 24 (19%) from 2017 – 2022.
Household formation rates, however, also depend on the age, country of origin and immigration status of this new cohort. Border Patrol data shows more families are coming into the country with children through Mexico, says JCHS, and that could lead to faster household formation if they are young adults or slower if the children are too young to form households.
Immigrants from Mexico, Venezuela, Guatemala, Honduras and Cuba in 2023—the most common origin countries at that time—had a lower headship rate than from other countries. JCHS reports the current immigration surge may be driven by people from these Central and South American countries.
Using this information, JCHS predicts the 6 million new immigrants could result in over 1 million new households over the next five years.
Growth doesn’t happen without its pain points
This subset of the population comes with its own unique set of challenges. Many newly arrived immigrants, for example, are asylum seekers, per JCHS. This means likely delayed or reduced household formations as they gain work authorizations—a process that takes at least 180 days after the asylum claim is filed.
“This is important because the headship rate of recently arrived immigrants in 2022 was 41% among employed working-age adults and 27% among unemployed working-age adults—and asylum seekers may be in an even more economically difficult situation due to the lack of networks or assets to help them maintain financial footing,” says Riordan Frost, JCHS senior research analyst.
It’s not just asylum seekers that face financial difficulties, either. Molina’s recent buyer required additional guidance throughout the lending process as the client had previously tried purchasing a home and was denied by several institutions.
The minimum down payment of 15% – 25% that many immigrants face is often a roadblock as well, he says. And while renting was often a more affordable route, Molina says that many rents these days are the equivalent to paying a monthly mortgage anyway.
The story isn’t over
Molina predicts that the immigration surge will not only lead to greater housing demand and stable prices, but that increased household growth will help stabilize the community through economic contributions that put pressure on local infrastructure, such as schools, transportation and healthcare services, potentially leading to more investment in these areas.
JCHS says more information about the recent surge is needed to truly assess the extent and timing of how it will impact household formation and housing demand.
“In the meantime, historical data suggests that the millions of new immigrants are likely already having a large impact on household growth and supporting the recent high levels of growth reported in our State of the Nation’s Housing report,” says Frost.
