The Unassuming Economist

The view of a professor who has predicted the last eight elections accurately.

Today, Richard Koss (IMF) made a presentation on the developments in global real estate at the 58th NABE Annual Meeting in Atlanta. To see his presentation click here.

Other speakers at the conference included: Robert Shiller (Yale University),  Jed Kolko (Indeed), Issi Romem (BuildZoom), Marisa DiNatale (Moody’s Analytics), Jessica Lautz (National Association of Realtors), and Selma Hepp, (Pacific Union).

by: Hites Ahir

What is the impact of immigration on the housing market? What is the impact at the county level? What do recent trends tell us? Does immigration results in increased residential segregation in urban neighborhoods? These are some of the questions that were discussed at a recent conference organized by the Cato Institute on Immigration Economics on September 2. 

The conference had a panel session on Immigration and Real Estate. The panelists were Gary D. Painter (University of Southern California Sol Price Center for Social Innovation), Jacob Vigdor (University of Washington), and Susan M. Wachter (University of Pennsylvania). Mark Calabria (Cato Institute) moderated the session. What follows are some highlights from this session.

The $3.7 trillion effect on housing wealth

Vigdor talked about the impact of immigration on the housing market at the county-level in the United States. To estimate the impact, Vigdor uses population and housing data for US counties from 1970 to 2010. Among other findings, he finds that if 1,000 immigrants move into a community, the forecast is that median home values will rise by $116 US dollars. He points out that most immigrants reside in a county of 800,000 housing units. So the total impact per immigrant on the housing market is about $90,000 US dollars. And if we multiply $90,000 by 40 million immigrants in the US, we get $3.7 trillion US dollars—this is the impact of immigration on US housing wealth.

Are immigrants less or more mobile?

Painter showed that immigrants now are no more mobile than native born populations. The “gap between natives and immigrants has fallen tremendously”, Painter said. For example, using data from the current population survey, he showed that overall mobility has decreased for immigrants. Similarly, long distance mobility (interstate and inter-county) shows that overall mobility in the US has been declining, but it is declining even faster for the immigrant population. He says that the most interesting finding is that the housing demand of immigrants is no different than natives.

How does immigration impact neighborhoods?

In a paper co-authored with Albert Saiz (Massachusetts Institute of Technology), Wachter tests whether immigration results in increased residential segregation in urban neighborhoods due to native attitudes toward mixed neighborhoods. “In general, we find that immigration does lead to more segregated neighborhoods”, Wachter said. The paper also finds that there is a relative price decline and native flight. “In areas with higher initial density of white residents or more expensive initial housing prices, immigration has a stronger impact on outflow of native population”, Wachter said.

Video of the session:

“House prices have been rising in the Seoul metropolitan area, while prices in other regions have weakened after increasingly rapidly over the past few years. Overall, house prices do not seem overvalued according to the usual affordability metric”, says IMF’s report on Korea.

There is a widespread perception that trust and social capital have declined in United States as well as other advanced economies, while income inequality has tended to increase. While previous research has noted that measured trust declines as individuals become less similar to one another, this paper examines whether the downward trend in social capital is responding to the increasing gaps in income. The analysis uses data from the American National Election Survey (ANES) for the United States, and the European Social Survey (ESS) for Europe. Our analysis for the United States exploits variation across states and over time (1980-2010), while our analysis of the ESS utilizes variation across European countries and over time (2002-2012). The results provide robust evidence that overall inequality lowers an individual’s sense of trust in others in the United States as well as in other advanced economies. These effects mainly stem from residual inequality, which may be more closely associated with the notion of fairness, as well as inequality in the bottom of the distribution. Since trust has been linked to economic growth and development in the existing literature, these findings suggest an important, indirect way through which inequality affects macro-economic performance.

For details, see the new IMF Working Paper.