Immigrants are one of the fastest growing categories of first-time homebuyers in the United States. And many real estate analysts attribute the strong housing market nationwide, in part, to their house-hunting. The northeastern state of Massachusetts is home to about 850,000 immigrants and their numbers continue to grow as the native-born population shrinks, according to the U.S. Census. This demographic shift is already affecting local real estate.
At a spacious colonial house in Boston, realtor Chrissy On helps her Vietnamese-born clients work with the home inspector. The buyer, Huy Pham explains that he, his wife and two young children lived in one room of his brother's house for several years. "During the time I lived with him, I saved a lot of money, so that's why I have the money to put down for payment." He saved enough for a 20% down payment on this $371,000 home. Now his family and his in-laws will share the 4-bedroom house.
Mr. Pham is part of a growing state and national cadre of foreign-born first time homebuyers, who "have definitely bolstered demand for housing, both home owning and for renting," according to Rachel Drew, a researcher at the Joint Center for Housing Studies at Harvard University.
"In the last few years," she says, explaining the demographics behind the trend, "native-born populations … entering their 30's -- [which tend to be] home-buying years -- have been on the decline following the baby boom, but immigrants have really supplanted that difference and made a big difference in keeping home buying and home demand strong." Across the country, the percentage of immigrant homebuyers more than doubled from 2003 to 2004, reaching nearly 20% in some areas.
But with housing prices so high and immigrants tending to be in the lower income brackets how are they doing it? National studies show immigrants save more and shoulder larger mortgages to be able to buy a home than native-born first-time homebuyers. Boston Realtor Chrissy On says she sees this with most of her Asian clients. "One of the things about Asian Americans [is] we tend to live with family and that allows us to save a lot of money. And we also are very conservative with our money so that we can think big in the future and make a better home for ourselves."
Latino immigrants often combine more than one income to buy a multi-family home, according to East Boston realtor Luiz Gonzalez. "Their families are large and when I say large [it's] not that it's just one couple has 10 kids," he says. "I mean large in the sense that the brother has the other brother with the wife [living with him] and they have uncles, aunts and everything. Once one person buys a property, they become like partners." He says that's why the high priced housing market doesn't scare them away.
Immigrants are also educating themselves about home buying. In the Boston area, there are dozens of classes -- in languages from Cantonese to Spanish -- about navigating the process.
Foreign-born homebuyers are having such a big impact now because of the surge in immigration during the 1990s. As Rachel Drew of Harvard's Housing Center explains, these newcomers have been in the country long enough to learn English, understand mortgage options, save money and be a part of a community, all of which makes them ready to buy. "Our research has shown that at the median, on average, immigrants will buy a home after being the country about 10 or 11 years," she says. "So the immigrants that arrived in the early and mid-90s are the ones who are really impacting housing markets and are home buying today."
And banks are becoming a lot savvier about catering to immigrant loan applicants. Bruce Ocko, a Senior Vice President of Citizens Bank, says it was an easy marketing decision. "We realize that immigrants have accounted for such a huge growth in the labor market here, particularly in Massachusetts, that it is a segment that we do need to go after." He says helping immigrants with home loans requires flexibility. Because it can be difficult for immigrants to provide evidence of a good credit history, his bank will consider other signs of financial responsibility, like whether they pay their bills on time. Some banks allow immigrants to make a large down payment in cash, without accounting for where the money came from.
Banks are tapping into just the tip of the demand iceberg, according to Realtor Luiz Gonzalez. "As long as there's the right information out there for them, they'll still buy," he says. "It's not going to stop. According to statistics nationwide, only 17% of the Latin community has bought [a house], so that means it's huge."
And as long as there are potential buyers, banks and realtors will continue to look for ways to get them into their first house.