President Joe Biden’s expansive migration policy is notably impacting the U.S. housing market and financial stability.
As reported by the Wall Street Journal and key figures in the Federal Reserve, the influx of over ten million immigrants since 2021—comprising legal, illegal, and quasi-legal statuses—has driven up housing costs and mortgage rates despite a substantial increase in housing supply.
The Federal Reserve Bank of Chicago’s president, Austan Goolsbee told the Wall Street Journal that the housing market has “not behaved the way we thought it would.”
The housing market was expected to drop in prices. Despite the availability of new apartments and homes, the market has resisted the drop.
Goolsbee expressed concerns about the challenge this presents in controlling inflation, which the Federal Reserve aims to maintain around a 2 percent target. “If [housing prices] don’t behave as we expect, we’re going to have a hard time,” Goolsbee stated, indicating potential difficulties in achieving economic stabilization.
Echoing Goolsbee, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, pointed out the immediate effects of increased immigration on the housing demand.
“While the long-run effect of increased immigration on inflation [and interest rates] is unclear … [immigrants’] arrival in the U.S. has likely also increased demand for housing,” Kashkari stated.
This rise in demand has been substantial enough to prompt the Federal Reserve to increase interest rates from a mere quarter of a percent in early 2022 to 5.5 percent by May 2023, with corresponding mortgage rates soaring from 2.7 percent to 7 percent during Biden’s administration.
The sharp rise in interest and mortgage rates is particularly burdensome for younger Americans, many of whom are increasingly finding homeownership out of reach.
A report by MoneyUnder30 illustrates the severity of this issue, noting that a 1% increase in mortgage rates on a $200,000 home could lead to nearly $100 more in monthly payments and about $30,000 additional interest cost over a 30-year loan period.
Industry experts and economists suggest that this influx of migrants is not only reshaping the housing market but also redirecting investment from sectors that could boost productivity, such as machinery, automation, and training, towards real estate.
This shift potentially limits overall economic growth and individual wage increases.
Moreover, the larger socio-economic impact of Biden’s migration policy has been profound, with significant implications for wage levels and employment opportunities for native-born Americans.
The International Monetary Fund’s managing director, Kristalina Georgieva, and other economic analysts have pointed out that the abundant labor supply resulting from high immigration rates is pressing down American wages.
As this scenario unfolds, it becomes evident that the federal government’s current migration strategy affects the housing market and the broader economic scene.