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Mortgages: Immigration Reform Could Be a Boon to Real Estate

June 6, 2013 by Leave a Comment

So says the National Association of Hispanic Real Estate Professionals in San Diego. If Congress approves legislation providing a pathway to citizenship for undocumented immigrants, the organization expects the country’s pool of home buyers to swell by three million, generating some $500 billion in new mortgages.

The estimates are based on the assumption that some six million unauthorized immigrants would probably pursue legalization if given the opportunity. That’s a little more than half of the total number of unauthorized immigrants in the United States, which the Pew Research Hispanic Center estimates to be 11.1 million. Almost 60 percent of those are Mexicans.

The association calculated that about three million of those who would pursue legalization would also buy homes, based on previous rates of homeownership among foreign-born households, said Gary Acosta, the chief executive of the real estate association.

The $500 billion in real estate transactions would also generate $25 billion in mortgage origination and refinance income, and $28 billion in commission income to real estate professionals, the association says.

“It’s not what we expect to happen in a year or two, but over 5 to 10 years,” Mr. Acosta said. “These are people who can’t get mortgages right now, and they’re primarily living in the shadows.”

The association did not try to break down the economic benefits by region, but Mr. Acosta said the effects would be concentrated in states with large Hispanic populations. More than 60 percent of the country’s Hispanic residents are concentrated in a handful of states, among them New York, though Mr. Acosta notes that Hispanic populations are growing rapidly in “nontraditional” states like North Carolina, Oklahoma and Utah.

Hispanic households are already a strong force in the nation’s housing market. A previous report from the association found that from 2000 to 2012, the net growth in new-owner Hispanic households was 58 percent, versus 5 percent for the rest of the American population.

Mr. Acosta attributed the growth to several factors. The Hispanic population is a “younger demographic that’s just moving into prime-home buyer years.” Their household makeup tends toward two-parent families, making them more likely to buy. And in surveys, Hispanics report a “fundamental desire to participate in homeownership,” Mr. Acosta said.

New York’s five boroughs would most likely see a rise in housing demand should Congress pass an amnesty measure. Right now, the homeownership rate among the 30 percent of the population that is Hispanic is just 15 percent, half the citywide rate, according to Josiah Madar, a research fellow at the Furman Center for Real Estate and Urban Policy at New York University.

Mr. Madar hasn’t studied what share of the city’s Hispanic population is undocumented, but the low rate of homeownership suggests that legal status plays a role. “There might be a lot of prospective homebuyers in that population,” he said.

The share of home purchase mortgages issued to Hispanic borrowers in New York peaked in 2006, just over 16 percent, according to data provided by Mr. Madar. It then declined sharply, and as of 2011 stood at just under 10 percent.

The fate of the immigration reform measure in Congress is uncertain. Mr. Acosta says his organization believes that a legal path to immigration should be a “required component” of any reform measure.

Article source: http://www.nytimes.com/2013/06/09/realestate/immigration-reform-could-be-a-boon-to-real-estate.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Britain to Stick With Austerity Budget

March 20, 2013 by Leave a Comment

In his annual budget presentation to Parliament, George Osborne, the chancellor of the Exchequer, stuck to the austerity plan he designed three years ago but offered some additional support for the ailing economy, including concessions for home buyers. Some economists said that relying in part on the housing market to spur growth reeked of desperation and showed how little room to maneuver the government has as it pushed ahead with austerity.

Mr. Osborne blamed troubles in the euro zone for a deteriorating economic outlook at home. He cited figures from the Office for Budget Responsibility showing that the British economy would grow 0.6 percent this year, half of the 1.2 percent forecast earlier. Growth will be 1.8 percent next year, down from a previous estimate of 2 percent, the office said.

“It is taking longer than anyone hoped, but we must hold to the right track,” Mr. Osborne told Parliament. “I will be straight with the country: another bout of economic storms in the euro zone would hit Britain’s economic fortunes hard again.”

In the latest sign that the government is struggling to repair the economy, Mr. Osborne conceded that public-sector net debt as a percentage of gross domestic product would start falling only in the fiscal year ending in 2018. That is a year later than Mr. Osborne predicted in December, when he pushed the goal back to 2017 from 2016.

The Office of Budget Responsibility said public-sector net debt would peak at 85.6 percent in the 2017 fiscal year, compared with the 79.9 percent it forecast in December.

Austerity measures at home, the economic crisis on the Continent and higher prices for energy caused the British economy to contract in the last three months of 2012. Without growth, Mr. Osborne cannot balance the budget, but a sluggish economy and rising consumer prices have been squeezing households, and companies are struggling with weak consumer demand.

Dominic White, an economist at Absolute Strategy Research and a former adviser to the British Treasury, said Mr. Osborne was unlikely to step back from his austerity plan two years ahead of a planned general election.

“George Osborne has imposed this debt target on himself, and to abandon it now would be political suicide,” Mr. White said. “Fiscal tightening has acted as a drag on growth and probably more than what the government thought when it set out.”

The Conservative Party of Mr. Osborne and Prime Minister David Cameron has been losing some public support. A survey by Ipsos MORI this month showed that 60 percent of the public was now dissatisfied with Mr. Osborne as chancellor.

With little cash to spend to help spur growth, Mr. Osborne is now relying on the Bank of England and the housing market to help create the economic upturn he needs to meet his debt targets.

In the new budget, he diverted some of the proceeds of a concerted public spending squeeze to extend the scope of a program that lends home buyers a portion of the money needed to put down a deposit on newly built houses.

The government will also set up a separate three-year program, operating along similar lines, to assist anyone wanting to buy a home worth up to £600,000, or $906,000. The program will be backed by up to £12 billion in government guarantees.

The housing market has traditionally been an engine of economic growth in Britain, but because of the country’s history of real estate booms and busts, even supporters of the plan acknowledged that it carried risks.

“It’s a bold move, perhaps a desperate one, but one that will be undeniably welcome by the beleaguered construction industry,” said Richard Threlfall, head of infrastructure, building and construction for the advisory firm KPMG. “The government has finally recognized that housing might offer the fastest-acting pain relief for our economic woes.”

The Royal Institution of Chartered Surveyors, the trade group for the real estate and construction industries, warned in a statement that even though the move “will help prevent prolonged market stagnation” it is also risky. The “government needs to be careful this doesn’t create another housing bubble,” it said.

If the plan stokes inflation, a new remit for the Bank of England, also announced Wednesday, would allow the central bank more flexibility in keeping its benchmark interest rates at their record low of 0.5 percent. Under its new remit, the Bank of England is supposed to focus more on helping economic growth than bringing inflation down to its 2 percent target.

Other efforts to generate growth include a reduction in corporate tax to 20 percent from 21 percent in 2015, a reduction in payroll taxes to help small and midsize businesses, and higher tax-free allowances for earners. A planned increase in the tax on fuel was scrapped and a duty on beer was reduced.

Mr. Osborne also announced tax concessions designed to spur the exploitation of shale gas reserves in Britain.

But his plan was criticized by the Labour Party, in the opposition, which argued that the relatively small shifts in tax and spending policy would not be enough to help the economy return to growth.

Ed Miliband, the Labour leader, said Wednesday in Parliament that Mr. Osborne was “the wrong man in the wrong place at the worst possible time for this country.”

“All he offers is more of the same,” Mr. Miliband said. “Britain deserves better than this.”

The Labour Party has argued that the government should increase spending to help the economy, even if it means borrowing more in the short term. But Mr. Osborne and Mr. Cameron have argued that this would unnerve investors in British debt.

Article source: http://www.nytimes.com/2013/03/21/business/global/britain-to-stick-with-austerity-budget.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

S.&P. Downgrades Debt Rating of U.S. For the First Time

August 6, 2011 by Leave a Comment

The company, one of three major agencies that offer advice to investors in debt securities, said it was cutting its rating of long-term federal debt to AA+, one notch below the top grade of AAA. It described the decision as a judgment about the nation’s leaders, writing that “the gulf between the political parties” had reduced its confidence in the government’s ability to manage its finances.

“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge,” the company said in a statement.

The Obama administration reacted with indignation, noting that the company had made a significant mathematical mistake in a document that it provided to the Treasury Department on Friday afternoon, overstating the federal debt by about $2 trillion.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokeswoman said.

The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have decided not to downgrade the government at this time.

The announcement came after markets closed for the weekend, but there was no evidence of any immediate disruption. A spokesman for the Federal Reserve said the decision would not affect the ability of banks to borrow money by pledging government debt as collateral, a statement that could set the tone for the reaction of the broader market.

S. P. had prepared investors for the downgrade announcement with a series of warnings earlier this year that it would act if Congress did not agree to increase the government’s borrowing limit and adopt a long-term plan for reducing its debts by at least $4 trillion over the next decade.

Earlier this week, President Obama signed into law a Congressional compromise that raised the debt ceiling but reduced the debt by at least $2.1 trillion.

On Friday, the company notified the Treasury that it planned to issue a downgrade after the markets closed, and sent the department a copy of the announcement, which is a standard procedure.

A Treasury staff member noticed the $2 trillion mistake within the hour, according to a department official. The Treasury called the company and explained the problem. About an hour later, the company conceded the problem but did not indicate how it planned to proceed, the official said. Hours later, S. P. issued a revised release with new numbers but the same conclusion.

In a statement early Saturday morning, Standard Poor’s said the difference could be attributed to a “change in assumptions” in its methodology but that it had “no impact on the rating decision.”

In a release on Friday announcing the downgrade, it warned that the government still needed to make progress in paying its debts to avoid further downgrades.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” it said.

The credit rating agencies have been trying to restore their credibility after missteps leading to the financial crisis. A Congressional panel called them “essential cogs in the wheel of financial destruction” after their wildly optimistic models led them to give top-flight reviews to complex mortgage securities that later collapsed. A downgrade of federal debt is the kind of controversial decision that critics have sometimes said the agencies are unwilling to make.

Eric Dash contributed reporting from New York.

Article source: http://feeds.nytimes.com/click.phdo?i=38f85b4dc2a3d77f78fe41cb83e5e4d7

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