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| The Basics | 14 cities where home prices could rise fast
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A rush of immigrants has helped fuel the housing boom, but recent trends suggest it may slow in traditional entry cities -- while home prices in 14 new gateways surge.
By Liz Pulliam Weston
The future of home prices in your area may depend -- a lot -- on whether your neighbor was born in the United States or not.
In recent decades, immigration has had a strong affect on housing demand and prices, according to economists and other researchers who've studied the issue. A sharp rise in newcomers during the 1990s helped pump up home values in many cities, and the influx shows no signs of abating.
But immigration trends are changing in some surprising ways, and that could mean:- A slowdown in home price appreciation in some major cities like Los Angeles, New York and Miami that have been enjoying recent growth; and
- Rising home values in other metropolitan areas -- Las Vegas, Atlanta, Phoenix and Dallas, among others -- that have become new centers of immigration.
Immigration's affect on homebuying
Foreign-born populations have been rising since the United States loosened immigration standards in the 1960s. The stream of newcomers in the 1970s and 1980s became a flood in the 1990s, with immigrants accounting for nearly one-third of the nation's total population growth. 
In 1990, non-native residents numbered 19.8 million and made up 7.9% of the U.S. population, Census Bureau figures show. By 2003, their ranks had soared to 33.5 million -- nearly a 70% increase -- and they made up almost 12% of the population.
Immigrants typically take 10 to 15 years after their arrival to buy their first homes in the United States, said economist Gary Painter, director of research at the University of Southern California's Lusk Center for Real Estate. It can take that long to build up their incomes, assets, comfort with the language and familiarity with the U.S. home-buying system.
At the same time, young immigrants are much more likely to be homeowners than their native-born peers, Painter has found.
That's not as contradictory as it sounds. Say a family comes to the United States with small children. The kids may be in high school before their parents can afford to buy their first homes. But the children themselves, inculcated in the importance of homeownership by their parents, may buy their own houses shortly after graduating from college -- becoming landowners while their native-born friends are still renting or moving back in with mom and dad.
"All that immigration in the 1980s and 1990s is coming to fruition now," said David Lereah, chief economist for the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "Those who arrived in the 1990s are buying homes . . . and a lot of the children (from the earlier waves of immigration) are becoming first-time homebuyers."
Multiple incomes per mortgage
Another way foreign-born homebuyers tend to differ from their U.S.-born counterparts: Immigrants are more likely to have multiple streams of income supporting one mortgage, Painter said. What that means is that more people in the household are working, or that two or more families are pitching in to buy one home.
And that tends to lead to higher demand for larger houses with more bedrooms in areas where immigration inflows are strong, Painter said.
None of this is news to economists -- or developers -- in the cities that have traditionally attracted the most immigrants. These so-called "established gateway cities" also have the largest populations of settled immigrants, and include: - New York (where, in 2000, 24.4% of the population was foreign-born)
- Chicago (16%)
- Miami (40.2%)
- Los Angeles (30.9%)
- San Francisco (27%)
- San Diego (21.5%)
Of that group, only Chicago has failed to exceed the national rate of home-price appreciation in the past five years. Home prices have doubled in Los Angeles, San Diego and Miami, according to the Office of Federal Housing Enterprise Oversight, and are up 77% in New York and 65% in San Francisco. Prices in the Windy City are up 45%, compared to 50% growth nationwide.
New gateways emerging
But immigration patterns are starting to change, as newcomers move on from gateway cities or bypass them entirely for new immigration magnets, Painter said.
"(Immigrants) are a much more dynamic group than our native-born households," Painter said. "It's not as easy to predict where they'll come, how long they'll stay or where they'll move."
Still, Painter found differences between the 1990 and 2000 Census records that indicate 14 cities are what he calls "emerging gateway cities" that are becoming the first or final destination of growing numbers of immigrants. These are: - Atlanta
- Boston
- Dallas
- Denver
- Houston
- Las Vegas
- Orlando
- Philadelphia
- Phoenix
- Sacramento
- Seattle
- Tampa
- Washington, D.C./Baltimore
- West Palm Beach, Fla.
Residents in those cities could see home values start to gain more rapidly as their immigrant populations rise, Painter said. (The new gateways also could be particularly vulnerable if the United States should, for whatever reason, clamp down on the number of people entering the country.)
Uneven price appreciation
The six original gateway cities are still receiving huge numbers of immigrants, Painter said, but the growth rate is tapering off. Nowhere is the trend more evident than in California, which in 1990 received nearly 38% of the country's new arrivals; by 2000, the proportion was down to 24.8%.
"I don't think (home prices) will crash, as long as the job market continues to be strong" in those cities, Painter said. "But there could be less price appreciation."
The high home prices in those original gateway cities are one of the factors inducing immigrants to look elsewhere. Immigrant populations may be more sensitive to prices than their native-born counterparts, Painter has found -- perhaps because newly immigrated households tend to earn less on average.
He predicts native-born people will continue to flood into cities like Los Angeles, for example, but new immigrants increasingly may opt for Las Vegas or Sacramento, where home prices are less dizzyingly high but job growth is still robust.
The Realtor association's Lereah believes continuing immigration, combined with first-home purchases by the baby boomer's offspring and second-home purchases by the boomers themselves, mean home prices overall will continue to rise. But some cities will benefit far more than others, he warned.
"The real estate experience we've been having . . . does discriminate," Lereah said. "It's creating some haves and have-nots."
The young, in particular, will be going where the jobs are, which would mean continued home-price appreciation in the South and West and far less growth in the so-called Rust Belt.
"It's not going to be Detroit," Lereah said. "The industrial states will continue to be outsourcing jobs."
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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