Michelle Yuanying Guan, ASA, PhD Associate Professor of Mathematics Indiana University Northwest

1. Immigration Effects on Metropolitan Housing Markets in the United States:A post crisis perspective (2009 -2016) Michelle Yuanying Guan, ASA, PhD Associate Professor of MathematicsIndiana University Northwest Micah Pollak, PhDAssistant Professor of EconomicsIndiana University Northwest

2. Introduction & Motivation • Why the “metropolitan housing market”? • Between 2009 and 2016, average home prices in U.S. metro areas rose by 12.5% adjusting for inflation. • Why “immigration”? • Population growth & housing markets. • Since 2009, foreign-born population has grown at twice the rate of native born population (metro area). • Largest foreign-born population in U.S. ever. • Very high % of population foreign-born as well

3. Foreign-Born Population and Percentage of Total Population for the United States: 1850 to 2016 Source: U.S. Census Bureau, Decennial Census 1850–2010 and the American Community Survey 2016

4. Introduction & Motivation • Why “2009 to 2016”? • Housing market crisis • Availability of data • U.S. Decennial Census: • 2000, 2010, 2020 • American Community Survey (ACS) • Annual survey, inaugurated in 2005 • Started to get acceptable sample size data in 2009

5. Introduction & Motivation Our question: How does the high rate of immigration affect housing prices in U.S. metropolitan areas?

6. Related Literature – Mixed results • Saiz (2007) • US metro areas from 1985 to 1998 • 1%↑ in immigration has about a 1%↑ in home prices. • Sa (2005) • UK metro areas from 2003 to 2010 • 1%↑ in immigration has about a 1.7%↓ in home prices. • Accetturo et. al. (2014) • Large Italian cities, 2000 to 2010 • Immigration effect depends on districts

7. Socioeconomic & Demographic Data • A lot from the Census ACS • Origin, income, education, age, etc. • Some housing data: mortgage status, owner vs. renter occupied, number of housing units. • Challenges: Census defines 388 metro areas • Some changes to definitions • We have at least one observation for 272 • We have start/end observations for 235

8. Socioeconomic & Demographic Data • Definition of “immigrant”? • “Foreign-born” regardless of citizen or not. • Use growth as percent of total population

10. Change in Foreign-Born Population as Percent of Population (2009–2016)

11. Socioeconomic & Demographic Data • Foreign-born more likely to rent, less likely to buy Owner-Occupied and Renter-Occupied Housing Units in U.S. Metropolitan Areas in 2016 by Occupant Origin Source: U.S. Census Bureau, American Community Survey 2016.

13. Housing Market Data • Prices from Freddie Mac House Price Index (FMHPI) • Index, can’t compare levels across metros. • Rent prices from HUD’s 50th Percentile Rent Estimates • Interest rates from Freddie Mac 30-year fixed national average

14. Housing Market Data

16. Distribution of Average Annual Housing Price Growth Rates (2009–2016)

17. Distribution of Average Annual Rent Growth Rates (2009–2016)

18. Average Annual Growth Rate in House Prices (2009–2016)

19. Average Annual Growth Rate in Two-Bedroom Median Rent (2009–2016)

20. Four metro “groups” • Highhousing price growth, low immigration • Example:Los Angeles metro area(+28.9% home prices, +0.5% foreign-born growth) • High housing price growth, high immigration • Example:Dallas-Fort Worth metro area(+33.4% home prices, +2.8% foreign-born growth) • Low housing price growth, low immigration • Example:Chicago metro area(-3.6% home prices, +0.6% foreign-born growth) • Low housing price growth, high immigration • Example: New York metro area(-5.2% home prices, +2.4% foreign-born growth)

21. Real Housing Price vs. Foreign-Born Population Growth in U.S. Metropolitan Areas between 2009 and 2016 Source: U.S. Census Bureau, American Community Survey, 2009–2016.

22. Four metro “groups” examples

23. Looking for a relationship Growth in home prices Growth in Foreign-born Population

24. Model & Empirical Approach • Panel data: • Time dimension: T=7 (2009 to 2016) • Individual dimension: N=272 MSAs • Unbalances panel of 2,057 observations • Outlier treatment • Empirical approach: fixed effects regression • Allows estimation of individual-specific intercepts • Estimation of common variables over time or metro • Will identify the metropolitan area common effect of immigration on housing prices.

25. Model • How population growth affects housing prices: • How native vs. foreign-born population growth affects housing prices: (1) (2A)

26. Other controls include: • Unemployment rate • Education (bachelors degree or higher) • Median age • Mortgaged rate (% subject to a mortgage) • Interest rate • Separate controls by native/foreign-born (2B)

27. Results (housing prices) • Real home prices dependent variable other controls omitted

28. Results (housing prices) • Controls:

29. Results (rent) • Real rent (two-bedroom) dependent variable other controls omitted

30. Results (rent) • Controls:

31. Education Quartiles Regressions • Subsample by foreign-born graduate education quartiles (separate at 25%, 50%, 75%) • Similar results (signs) for housing prices: • Strongest/most significant for highest education levels • Similar results (signs) for rent: • Strongest/most significant for middle education levels

32. Conclusions • Data for 272 U.S. metro areas from 2009 to 2016 • Evidence of a common effect for U.S. metro areas between immigration and housing price/rent: • 1% ↑ is associated with about 2.5% ↓ in home prices • 1% ↑ is associated with about 1.4% ↑ in median rent • Results partially explained by lower homeownership rates in foreign-born population

33. Limitations and Future Research • This is the common effect across metros. • Total effect is likely dominated by metro-specific effects • Limited time horizon (only 8 years) • May be substantial lags/leads • Additional metro-specific factors • Skills level • Cultural • Social and economic backgrounds • Future research to study specific metro areas or groupings of metro areas

34. THANK YOU! Questions?