NEW YORK – The surge of new immigrants into the United States has fueled demand for new housing and will be key to sustaining future growth in the real estate market, executives and analysts said this week.
Immigration accounts for more than 40 percent of U.S. population growth, according to U.S. Census Bureau (search) figures. Those stats, combined with low interest rates and a backlog of orders for new homes, had many guests at the Reuters Real Estate Summit confident the current housing boom will continue.
"Immigration is such a huge part of what has supported the housing market over the past several years," said Victory Capital Management (search) Managing Director Michael Koskuba, who follows the home building sector.
"Minority groups and immigrants are doing better and therefore they're buying homes, living the 'American dream,' and we'll see that continue," Koskuba added.
The strongest housing markets are ones where the most jobs are being created. Immigrant buyers gravitate to new jobs, many buy a starter home and some eventually move to more expensive homes and to the luxury home market — with strong growth in cities like Atlanta and Las Vegas.
Bruce Karatz, chief executive of KB Home (KBH), estimates that 30 percent of the home builder's customers are immigrants, though precise numbers are hard to come by.
"Immigrants congregate in markets where KB builds homes. Immigrants have a higher propensity to become home owners than do native(-born) Americans," Karatz said at the summit, held at Reuters U.S. headquarters in New York.
Karatz said population growth will drive home demand for the next decade. He cited a Harvard University study projecting a need for 2 million housing units per year, above the current rate of production. "If the study is correct, it's very good news for home builders for the next 10 years," he said.
"Without population growth and jobs growth, demand is static," Karatz added.
KB Home in March began offering all of its Web site content in Spanish, saying it was a necessary step to serve customers in a growing demographic.
Hispanics are the fastest-growing population segment in the United States and the nation's largest minority group at 12 percent of the population, according to the U.S. Census Bureau. Forty-eight percent of all Hispanics in the United States own a homes, an 11 percent jump in the Hispanic ownership rate in the last six years.
While an important part of the customer base, immigrants also provide home building companies with a needed labor pool, an area where shortages are common.
The labor shortfall has boosted reliance on illegal workers, spurring a political debate on how to shape and enforce immigration policy in the United States.
Toll Brothers (TOL) Chief Executive Robert Toll said current policy is being enforced "with a wink and a nod."
"You'd upset the economy terribly if you started to impose immigration policy," Toll said, adding that enforcing rules against illegal labor is not a problem on Toll work sites.
"Would I like to have a looser labor policy to permit more labor? I have to think what's best for the whole country," he told the summit. Toll personally has not made up his mind on the issue, he said.
Immigrants are having the biggest impact in the Western and Southern states, said Richard Dugas, chief executive of home builder Pulte Homes (PHM).
Immigrants are the biggest factor in entry-level homes, according to Dugas, but are starting to be active in the market for more expensive homes as well.
"Long term, immigration is important to housing," Dugas said.