Experts: Slowdown in Undocumented Immigration Drives Up Housing Costs

SEATTLE, Feb.17, 2016 /PRNewswire/ -- More than half of the experts surveyed in the latest Zillow® Home Price Expectations (ZHPE) Survey said the continued decline of undocumented immigration in the U.S. will drive up construction labor costs.

The number of immigrants in the U.S. who entered the country illegally has remained flat for more than five years, according to data from Pew Hispanic Center. The undocumented Mexican immigrant population in the United States, in particular, is now 20 percent smaller than it was in 2007.

The quarterly ZHPE survey, sponsored by Zillow and conducted by Pulsenomics LLCⁱ, asked more than 100 housing experts about their expectations for the housing market. Of those, 85 answered a question about how immigration might affect the housing market.

Immigration is an ongoing national debate, and one that's sure to be part of the 2016 presidential race. For that reason, Zillow looked at how this issue would impact housing. Respondents said they think fewer immigrants entering the country illegally will translate to higher housing costs and more luxury home construction.

• More than two-thirds of those surveyed said an immigration slowdown would drive up construction labor costs.
• About 43 percent said a decline in the undocumented immigrant population would result in more construction jobs for U.S.-born workers and other foreign-born workers.
• Forty percent said that higher labor costs would, in turn, cause builders to focus on high-end construction, which has a higher profit margin.
• More than 30 percent of respondents tied immigration trends to the lack of inventory, and predicted that the number of new homes built will remain lower than historic norms.

"While housing policy hasn't been a big talking point thus far in this election cycle, immigration policy certainly has, and immigration plays a big role in housing," said Zillow Chief Economist Dr. Svenja Gudell. "The supply of homes for sale isn't keeping up with demand – especially among entry-level homes that first-time buyers want. New-home construction has been sluggish, and homes that are getting built are aimed at a higher-end clientele. If builders hire relatively more expensive U.S.-born workers, they may continue to focus on the more profitable higher end of the market."

Single-family home construction has declined over the past decade. More than half of the experts in the November ZHPE survey said the decline in single-family construction can be attributed to high labor costs and a lack of skilled workers.

Prices of newly constructed homes are at historic highs -- the median price of new homes sold in December 2015 was almost 7 percent above the pre-recession peak of $267,000 in March 2007.

Overall home price expectations are up from a quarter ago, with survey respondents expecting 3.7 percent home value appreciation in 2016. Respondents expected 3.4 percent appreciation last quarter.

"The outlook for 2016 home price appreciation is 3.7 percent, less than the 4 percent value increase realized in 2015," said Pulsenomics founder Terry Loebs, noting that longer-term expectations for home values continue to drift lower. "The five-year average annual rate of home value appreciation expected by the panelists is stuck at 3.3 percent, its lowest level since 2012. These subdued expectations are remarkable in light of the improvement in headline unemployment numbers, recent evidence of real income growth, stubbornly low home inventory levels, and very low mortgage rates that seem unlikely to spike anytime soon."

About Zillow
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

About Pulsenomics:
Pulsenomics LLC (www.pulsenomics.com) is an independent research and consulting firm that specializes in data analytics, new product and index development for institutional clients in the financial and real estate arenas. Pulsenomics also designs and manages expert surveys and consumer polls to identify trends and expectations that are relevant to effective business management and monitoring economic health. Pulsenomics LLC is the author of The Home Price Expectations Survey™, The U.S. Housing Confidence Survey, and The U.S. Housing Confidence Index. Pulsenomics^®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.

                                                      
ⁱ This edition of the Zillow® Home Price Expectations Survey surveyed 104 experts between January 27 and February 9, 2016. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc.
ⁱⁱ The percent of 85 respondents who indicated each outcome; the percentages do not sum to 100% because panelists were asked to select as many as three outcome choices.

SOURCE Zillow