This last Tuesday the Wall Street Journal published an op-ed by my friend Gary Shilling and Richard LeFrak. They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards). This is a very important proposal and one that deserves national attention and action. Gary was kind enough to send me two lengthier white papers offering more facts. In this week’s letter we are going to look at this proposal in more detail than the small space that an op-ed can offer. And while this letter will be somewhat controversial in some circles, I ask that you read it through, giving me the time to make the case. I will also add a few thoughts as to why this could not only help solve the housing crisis, but help put the nation back into growth mode.

Long-time readers know that I have been growing more and more bearish of late. I have been writing for a long time that we are in for a long period of slow Muddle Through growth as the twin crises of the
housing bubble and credit bubbles require time to heal. Today we look at a serious proposal for cutting the time to healing for at least one of those bubbles (housing), and at least keep the other (credit) from getting worse. This is the most serious idea I have seen that could actually make a realpositive contribution to the economy and help put us back on a growth path.

I will post Gary’s papers and a link to the actual op-ed piece for those who want to do further research, but let me make one point at the beginning that he did not emphasize: the US is already allowing roughly 1 million immigrants a year into the country (which for a variety of reasons I and most serious economists of all stripes believe is a very good thing). We are suggesting that we simply change the nature of what constitutes the conditions for acceptance, so as to jump start the housing industry and the economy. We are not suggesting additional immigrants, although nothing would be wrong with that. I will also post a link for you to send this e-letter to your congressmen and senators.

Let me put up front a few benefits of a program that would allow legal status to immigrants buying a home. Housing values would stabilize and in many cases rise. The massive losses because of bad loans that are being subsidized by US taxpayers would be stemmed, saving many hundreds of billions, if not a trillion or more dollars. The excess inventory of homes would quickly disappear and the millions of jobs that were lost as home construction fell into a deep depression would come back. If housing values rise, many families would be able to refinance their homes at lower rates and have more income left over after paying their mortgages. $12 billion in commissions would end up in real estate agents’ pockets, helping a very battered and bruised group. Hundreds of billions will flow into local businesses, as these new immigrants will need to furnish their homes. This could mean as much as a half trillion dollars in sorely needed stimulus in the next few years, without one penny of taxpayer money and actually adding taxes back to governments from local to national. And we are not bringing in 1 million foreigners, we are attracting 1 million mostly middle-class new Americans, which, if we are smart in how we do this, will result in more jobs for all Americans. So let’s jump right in and look at the details.

Housing Could Drop Another 20% in Pricing

Let’s review the situation as it will be if we do nothing. Shilling shows that we built 6.7 million more homes in this country between 1996-2005 than the normal trend would have projected, partially because we underbuilt the decade before that. New housing starts average about 1.5 million in normal times but have
fallen to 500,000 recently, and could fall further as unemployment rises and demand declines. Even so, Shilling estimates that we still have about 2.4 million excess homes.

This compares rather well with estimates by independent analyst John Burns, which I cited in the e-letter early last year. What they both agree on is that it will take at least until 2012 to work through this excess inventory, and that assumes that foreclosures do not increase as housing prices drop.

Excess supply of anything means lower and continuously falling prices, and that has certainly been the case in housing. Here is what Shilling writes:

“We believe that if nothing is done to eliminate surplus housing, prices will fall another 20% between now and the end of 2010 for a total peak-to-trough decline of 37% (Chart 1 below). The resulting further negative effects on the economy will be devastating. At that point, almost 25 million homeowners, or almost half the 51 million total with mortgages, will be underwater… That’s also a third of the 75 million total
homeowners, with the remaining 24 million owning their houses free and clear. It would take a little over $1 trillion to reduce their mortgages to the value of their houses, compared to $449 billion for the almost 14 million currently underwater.”

This is not inconsistent with similar projections by other acknowledged experts and independent analysts like John Burns and Professor Robert Shiller of Yale. If nothing happens to stimulate buying, there is a great deal more pain ahead for American homeowners.

For the great majority of Americans, their homes represent the largest portion of their assets. This is particularly true of Americans of more modest means, who have been hit the hardest. Watching their single biggest assert drop another 20% will be devastating and for many will mean they will not be able to retire
as they had planned. More Americans own homes (68%) than own stocks (50%). This helps explain a recent poll which shows more Americans are worried about house prices than about the decline in stock prices.

Falling home prices means that consumers have to save more for retirement, which results in lower consumer spending, which translates into lost jobs and more homeowners coming under stress — a vicious spiral that is increasing unemployment. Realistic estimates of unemployment rising to over 10% within the year abound.

Two years ago I and a few others foresaw the current housing crisis (and an accompanying credit crisis), predicting a protracted recession and a slow, multi-year Muddle Through recovery. Sadly, I was right about the housing crisis. Without some intervention, there is little to suggest that the prediction of a long, protracted recovery will not come true.

Lowering rates, as is being discussed in various circles, will help homeowners who can make their payments, but it does nothing to really bite into excessive inventory. Until we reduce the inventory, housing prices in many neighborhoods all across America are going to continue to come under pressure. And as Barry
Habib points out, while the Fed may be lowering rates for securitized packages of loans, those low rates are not available to the average home buyer. The cost of packaging and securitization adds considerable cost.

Shilling discusses the “traditional” options for reducing home inventories, but in the end there is no real solution other than time, or massive amounts (read trillions) in taxpayer money being given to homeowners, which will be very unpopular, as homeowners who were responsible and are paying their mortgages would get no benefits. Waiting another two and a half years for the excessive inventory to sell will keep this country in a very slow or no-growth economy, and devastate the wealth of millions of homeowners.

But there is a solution. There are millions of foreigners throughout the world who would like to come to live in the US. In 2006, there were 1.1 million immigrants allowed into the US, some 63% of whom were allowed in simply because they already had relatives here. Only 13% of visas were granted to people because of their skills. While allowing relatives of current residents to come to the US may be a humane and reasonable policy, it does nothing to assure they bring more than that relationship to help them make their way in the US.

Buy A Home, Get a Green Card

What if we changed the rules for a few years? Starting as soon as possible, we should allow anyone to come into the country who would buy a home. They would be given a temporary visa which would become permanent if they had no problems after, say, five years. While Gary proposes that they be allowed to borrow against the value of their homes, I lean toward suggesting that initially we take those who buy their homes outright (with a few exceptions). That means they have enough capital to purchase a home to begin with, which probably means they are educated and have skills. In fact, if they have enough cash to buy a home, that means they would have more actual savings than most US citizens. We would be attracting future citizens with the capital to invest in job-creating businesses and/or who have useful skills to assist in
the recovery of the US economy.

Of course, there should be some rules that go along with this proposal. Background checks and references should be required. The home could not be rented for a period of time (at least two years), to help reduce the supply of available housing, and could not be resold for at least two years unless another home was purchased. There should be a minimal price, which could be somewhat different for various regions, but
$100,000 would seem to be a good minimum for most areas, with higher minimums in certain areas.
The immigrant should demonstrate the ability to support himself and his family for a period of time (at least one year, preferably two), including the purchase of health insurance. Cash or letters of credit or other guaranteed commitments would be required. Only immediate family members (spouse and children) would be allowed to come with the immigrant. Cousins and siblings must buy their own homes. The permanent
visa should be contingent on not having gone on welfare or public assistance at any time in the past five years. We are trying to solve a housing problem, not looking to create others. I would make an exception in having 100% financing for immigrants with advanced degrees or special skills, especially those who did their schooling in the United States. If the US is to remain competitive in an increasingly technological world, we need more scientists and engineers. But getting permission to stay is becoming increasingly difficult. We are seeing a brain drain of those who would like to stay and create new jobs and technologies (and buy houses) here in the US.

Shilling and Le Frak write:
“The authors of this report believe
that a number of people have given up waiting for those visas or don’t want to
put up with the hassle and are leaving the country. This “brain drain” is
unfortunate since many of these foreigners are highly productive. In 2006,
foreign nationals residing in the U.S. were named as inventors or co-inventors
on 25.6% of the 42,019 international patent applications filed from this
country, up from 7.6% in 1998. Studies of the authorship of academic papers
show the same trend.
“U.S. educational institutions are
considered the best in the world by many and are magnets for foreign students,
especially at the graduate level. Many of them are inclined to settle and work
in this country after completing their studies, if they can obtain permanent
resident status.
“The Council of Graduate Schools
survey revealed that in the fall of 2007, 241,095 non-U.S. citizens were
enrolled in graduate programs. Technological progress and the productivity it
generates depends on people educated in biological sciences, engineering and
physical sciences, but only 16% of U.S. citizen graduate enrollment was in
these three disciplines. In contrast, 55% of total non-U.S. citizen enrollment
was in those fields. Conversely, 53% of graduate enrollment by Americans was in
education, business and health sciences while those three fields accounted for
only 24% of foreign graduate students.”
(There is a great deal more background
detail in the second white paper. See link below.)
Much can be
learned from similar programs already in place in immigrant-hungry countries
such as Canada, Australia, and New Zealand. The United Kingdom has recently
added new programs. Many countries realize that in the coming years there is
going to be increasing competition for the best and brightest of the world.
Again, there are more details in the white papers, but let’s turn to the
effects that would result from such a program.

A Real
Stimulus Package
First, upon Congressional
approval, it would almost immediately stop the seemingly inexorable slide in
house prices, as initial demand would be significant. Let’s assume one million
new immigrants would buy homes. At an average price of almost $200,000, that
would be $200 billion injected into the economy. And each of those homes has to
be furnished, food has to be bought, clothing will be needed, local taxes will be
paid. Airplane tickets to research potential areas, hotels needed during the
interim period, and other related expenditures would add up. Over two years,
this could easily be another $100 billion.
Couple 1
million new buyers with current US demand, and the excess inventory would be
worked through within a year, and possibly faster. This puts a floor under the
housing market, and home values could once again to begin to rise in line with
a growing economy.
Such a program
would have a salutary effect on the value of the dollar, as not only the
initial purchases of homes and materials would need to be converted to dollars,
but it is likely that immigrants would bring even more capital into the
country.
By stemming the
fall of home values, it would decrease the likelihood of foreclosures and help
homeowners get refinancing at lower rates. Refinancing now is difficult because
most lenders want a substantial slice of equity to go along with any new
mortgage. If your home value has dropped 20% and is likely to fall another 20%,
it is hard to have enough equity to qualify for a new mortgage. Stopping the
fall in prices is critically important; and maybe if prices rise in some areas,
homeowners will be able to refinance at better rates, giving them more cash
each month to save or spend.
As I have
written in previous letters, the psyche of the American consumer is permanently
scarred. We are on our way back to a savings rates that will look more like
1987 than 2007, when it was almost zero. Just a few decades ago, we saved
7-10%. Consumer spending was only 64% of US GDP in 1987. It was 71% in 2007. It
is on its way back to that lower level.
Lower consumer
spending will be a drag on growth for years. But bringing in 1 million already
middle-class new immigrant families will help make up for a lot of that reduced
spending. If you can spend $200,000 on a home, you are likely skilled at
something and well-educated. You will find a job, or create one, as many
immigrants do, and then you will add to our total consumer spending.
If you are a
real estate agent, you should love this proposal, as it would result in an
additional $12 billion in commissions.
If you are a
home builder, what a great way to reduce inventory and get back to the
conditions where there is a demand for your product. This would help put back
to work those who have lost their jobs in the home construction collapse. Home
Depot and Lowe’s and local stores? It would help them to increase sales, which
leads to more jobs.
We are on the
cusp of the Baby Boomers beginning a huge wave of retirement, both in the US
and elsewhere in the developed world. There is going to be a need for skilled
workers to replace those Boomers, as well to provide services to the retirees.
Further, the promised Social Security and Medicare expenditures are going to
start increasing at a significant rate. We are going to need immigrants to help
pay for those benefits. Given the controversy over immigration, we will look
back with some irony in ten years when we find we are in a serious competition
with other nations to attract skilled immigrants. We should start now. I think
the concept is, let’s not waste a good crisis.
Let’s look at
some of the potential critics of this proposal. I was on Yahoo Tech Ticker yesterday talking about
this, and got a few irate emails and phone calls.
“Why,” I was
asked, “do I hate American workers? Isn’t there enough unemployment? Why do we
need more immigrants taking American jobs?” And there was considerable angst
about illegal immigrants.
First, I am
suggesting we transform the already existing legal immigrant flow, which is
going to happen anyway, into a form which helps us solve a major crisis. I am
not talking about adding another 1 million immigrants on top of the current
legal inflow. Just change the nature of that inflow until the excess housing
inventory is settled, and then we can go back to the current program, if that
is what is wanted (more on that below).
Second, I am
not suggesting we bring in or condone illegal immigrants. That is another issue
altogether, for another debate at another time.
If we do
nothing, unemployment is going to rise to at least 10%. That is certainly not
good for the American worker. Home values are going to continue to fall. That
is certainly not good for the American worker. The economy is likely to be
stagnant for an extended period of time, which means job growth in a Muddle
Through recovery will be slow and stagnant. That is not good for the American
worker.
Hundreds of
billions more of taxpayer dollars will have to go to banks to keep them solvent
as falling home prices and increasing unemployment increase foreclosures. That
is not good for the American worker and taxpayer.
And further, I
am not talking about bringing 1 million foreigners to this country. I am
talking about bringing 1 million future Americans, who want to work hard and
live the American dream.
Let me say a
few words to those who are opposed to immigration — and I have heard from
you. With few exceptions, US citizens reading this have an immigrant in their
genealogies. Some of mine go back to the 1600s. Some of mine were not exactly
considered welcome. “No Irish and Dogs allowed” read the signs. But immigrants
and their children have been the driver for growth in this country for
generations. It is hard-working immigrants who leave their homes for the dream
of being Americans that have been the backbone of the building of the nation –
the hewers and shapers, if you will.
It is precisely
that melting pot of human diversity that is the strength of the American idea.
Each new wave of immigrants has been viewed with trepidation or scorn, yet
within one generation they have become American. And in turn, their children’s
children forget that their forebears had to deal with discrimination.
America –
the US — is not so much a country as it is an idea, the idea that anyone,
regardless of race or religion or gender, can come here and with hard work and
determination make their own way. Some end up owning the local deli, and some
end up founding Google. Some 25% of Silicon Valley start-ups, I am told, are by
immigrants, creating jobs at the bleeding edge of technology. They see the US
as a land of opportunity. That is why so many want to come and that is why we
can attract a new generation of affluent, self-reliant immigrants who can help
us solve a problem that we created.
I
can see no downside to changing our immigration policy for a few years. We
solve the housing crisis, stabilize home values, brings hundreds of billions in
stimulus to the US, and with no taxpayer outlay. For a short time, we
substitute one class of immigrant for another, to solve a serious crisis. It is
not a matter of immigrants or no immigrants, just which immigrants
So
which do you want? 10% unemployment and a decade of lower home values and
increasing foreclosures, with a slow, Muddle Through, jobless recovery, or a
stable housing market and home construction back to trend?
If
you agree with me, I suggest you contact your Congressman. You can go to
http://www.visi.com/juan/congress/
(selected at random from many such sites) and type in your address and get the
name of your congressperson and senators. Just tell them you like this idea,
and cut and paste the link where you read this into the letter. And tell them
to get into gear! I would like to point out that this proposal is not Republican or Democrat, it is just common sense.
I hope we can get broad bipartisan support.
The link to the Wall Street Journal editorial is:
http://online.wsj.com/article/SB123725421857750565.html
The links to the white papers are:
http://www.frontlinethoughts.com/pdf/Housing_Whitepaper_1.pdf
http://www.frontlinethoughts.com/pdf/Housing_Whitepaper_2.pdf

Las Vegas, La Jolla and the OC
I
expect I will get a few new readers from this letter. Normally, at the end of
my regular weekly letter, I make a few personal comments. I write this free
weekly letter to my 1 million closest friends, and you can add yourself to the
list at
www.frontlinethoughts.com.
You can find out more about me at
www.johnmauldin.com.

Parts
of this letter have been written in New York and Dallas, and as I write this I
am on a flight to Las Vegas to speak at a conference on natural resources. I am
sure the recent Fed actions will be at the center of conversation. There is not
enough space now to comment on that; but I did do a few segments on Yahoo Tech Ticker (one of which evidently made
the Yahoo home page), which you can listen to at the following links.
Links to the Yahoo segments:
D.C. to America: You Can’t Handle the Truth
http://bit.ly/10rUiF

Plan to Solve Crisis: Let Immigrants Buy Houses
http://bit.ly/W0XLq

Fed Strategy: Spread Economic Pain Over Multiple Years
http://bit.ly/wgGjA
I will be in La Jolla for my annual
Strategic Investment Conference in two weeks, as well as hosting the Richard
Russell Tribute Dinner. The dinner is shaping up to be a big event, with hundreds
of attendees and many of the brightest lights in the investment writing world present
to honor Richard for 50 years of brilliant commentary.
I
really enjoyed my trip to NYC. I had a great steak dinner with Art Cashin,
everybody’s favorite commentator on CNBC. Breakfast with Tom Romero and then a
meeting with Jim Cramer, who I found to be very personable and genuinely
likeable. Meetings in the afternoon with business partner Steve Blumenthal,
then breakfast the next day with Barry Ritholtz, Yahoo at the NASDAQ, and then
a speech at noon, back on the last flight and up writing — and then this
plane, which I hope ends up in Las Vegas.
In addition to being with old
friends Doug Casey and David Galland (and their posse), I intend to see the
inside of the gym and spa. I need it. Tiffani has been gone for two weeks,
working on our book, and will get back on Monday; and the new chapter I was
supposed to have for her has disappeared in a reboot from this laptop. I am
quite distressed, but evidently the book gods decided it needed a major rewrite.

Have a great week, and find a few
friends and share some laughs and your adult beverage of choice.
Ok, the computer crashed again, and
this letter is going out on Saturday rather Friday night. But I did get to see the
Jersey Boys (The Story and Music of Frankie Valli and The Four Seasons) here in Vegas last night. One of the best shows I have seen in
years. See it when it comes near you.
And if you are in Las Vegas, eat at
Wolfgang Puck’s new place, called Cut. One of the best pieces of steak I have inhaled
in years. And now it really is time to hit the send button and go attend the
conference.
Your wondering if we can actually get some action analyst,


John Mauldin

John@frontlinethoughts.com

Copyright 2009 John Mauldin. All Rights Reserved
If you would like to reproduce any of John Mauldin’s E-Letters you must include the source of your quote and an email address (John@frontlinethoughts.com) Please write to Wave@frontlinethoughts.com and inform us of any reproductions. Please include where and when the copy will be reproduced.

John Mauldin is the President of Millennium Wave Advisors, LLC (MWA) which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS) an NASD registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB). Millennium Wave Investments is a dba of MWA LLC and MWS LLC. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions.

Category: BP Cafe, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

35 Responses to “Solving the Housing Crisis”

  1. ook_boo says:

    I speak as a former foreign home-owner on an H1B visa who sold out at the peak and left the USA. In fact, the timing was such that my green card was approved a few weeks after I left (I never picked it up).

    First, there is already a visa category for people who start a business. Why any foreigner like myself who has the skills and financial ability to start such a business would choose instead to purchase an overpriced home is beyond me.

    Second, since this is a transparent and desperate attempt to ignore reality and maintain what is left of the housing bubble, it will not work long-term. It will just spread out the pain longer.

  2. dontcallitacomeback says:

    So, apparently the problem is that we’ve run out of suckers and must allow more members into the club, thus enlarging the ponzification. Great thinking!

  3. generalenthu says:

    I am on H1B working with a bank. One of the implicit assumptions when someone on a H1B joins an employer is that they will process a Green Card. With that unwritten commitment, we recently bought a foreclosed house by putting 3% down (Thanks to the FHA). After a 45% drop and at 5%, this was working out to be as much as renting a smaller home.

    Now with all the ass backwards rules imposed on TARP taking banks, my employer is unwilling to file for my Green Card. With this, my wife and I have no option but to walk away from our home come next year if the situation doesn’t change. End of the day, I don’t lose much on the call option that my down payment is. I reckon I can live rent free for 4-5 months before getting foreclosed on, helping me come out ahead.

    Now if I get to stay in the country, I would be thinking long term and hold on to the home. So what good is this doing to the American Taxpayer / home owner? Another foreclosure? A drop in 50K of taxes my wife and I pay each year? And all the spending that comes with it?

    There are a number of people who are out in the US already, making more than enough to afford a home and want to own one. The uncertainty imposed by the residency process is the biggest road block keeping these folks away from the market. Even saying that H1B holders buying a home get a green card would create substantial demand.

    You are absolutely right on the money. US needs more people here. Not less. Drive out the foreigners and your unemployment will rise. The legislators got the relationship backwards as they do most of the time. Who can rescue Americans from the Congress?

  4. John Reeder says:

    One of my questions is why we always talk about a “housing crisis”. The housing market is made up of both Buyers and Sellers. Rising prices are good for Sellers, good for our national feeling of being wealthy, but they are bad for Buyers. There is a generational bias to this attitude. Like all of the bailout programs, many of the proposals to fix the “housing crisis” are biased towards older generations, and are not fair to younger Americans who want to buy their own home. Similarly, the bailouts are basically a judgment call that in order to hold up equity prices on Wall St (and save 401k plans for imminent retirees), we are going to saddle future generations with debt.

    We’re getting closer to housing bottom anyway, so why try to fix anything now? (My take is here: http://realpropertyalpha.com/2009/03/18/cycle-visualization/ ) Let it play out like a market should.

  5. deanscamaro says:

    Let me see if I have this straight:
    - Encourage illegal immigrants to sign up for a mortgage (this gets the brokers back in it to make their buck on the signing) at teaser rates and gets them past the immigration wait
    - Overlook all the things that might make them bad risks like we have in the past (no proof of income, low credit score, etc. etc.)
    - Make them citizens with little or no requirements other than having signed up for a mortgage
    - That works on getting rid of the inventories, gives the first round of foreclosures a place to dump their houses and puts off the subprime problem for awhile until they can’t keep up with the increased payments with the reset

    Yeah, sounds like the same people who caused the problem in the first place are right back in proposing a solution.

  6. pmorrisonfl says:

    Let’s say this was implemented and 2 million people moved here, took out loans and bought houses.

    Where are they working? At Home Depot, selling paint and carpet to each other?

    I don’t see how this does anything except kick the can down the road for a couple more years.

    I suppose it works as a stimulus package (the ‘Statue of Liberty play’!), but it doesn’t do anything to bring house prices back in line with incomes. Now that would be stimulus.

  7. Trainwreck says:

    This wont solve the employment crisis which will plague us for years. This is a free marketeer’s love of the market before America solution. What Shilling is proposing is reverse colonialism. We can’t take care of our problems so we need people to come to our shores and buy our way out of this problem. Perhaps things are so bad that we can not solve our own problems, tough it out, and become stronger in the end. Unfortunately this will not provide prosperity for America and is an admittance our nation has failed.

    An American fire sale.

  8. xoxma says:

    1. Lefrak is a major landlord in NYC – so they’re shamelessly plugging their own position.

    2. This is one of the more bone-headed solutions – and I am really surprised that it’s being further plugged by this website (I used to rate editorial discretion here higher than at WSJ).

    In plaintext Messrs Shilling and Lefrak acknowledge that the whole of U.S. housing “market” is simply a Ponzi scheme that needs a few more suckers.

    3. Just imagine the wave of immigrants coming in to buy $100 houses in Detroit and then skipping town to rent in Lefrak’s favorite Queens, NYC – where they can actually get semi-decent jobs.

  9. xoxma,

    re: 2. “editorial discretion” is, indeed, the correct term.

    By John Mauldin – March 21st, 2009, 6:34PM

    I never bought into the old dodge of: “Opinions expressed here…”

  10. whskyjack says:

    The faulty assumption here is that only wealthy individuals would come. Go to a real estate web site and look for houses in the 64126, 64127 zip code. Look at the number of houses under $30,000 and we are not even economically depressed like Michigan. Many people around the world will pool their money so one of their own can come here to make it big. They do this even with the knowledge they will never have papers. Think what the prospect of a green card would do. Don’t worry about financing. The neighborhood is filled with people doing “owner finance”

  11. usphoenix says:

    FUBAR. What’s completely and totally wrong with this picture? How very sad so many don’t know the answer.

  12. This would be great for businesses out there who already have a ton of workers competing for limited jobs. Now you will have even more workers fighting for the same jobs in a literal beggar thy neighbor battleground. So the people that come to America will compete for lower paying jobs which will make even more Americans unemployed and thus create more of a housing crisis when the last greater fool has landed on American shores.

    I agree with others that say there is a market for these houses. It just isn’t where the government, bankers and sellers want them priced at. That is too bad. They should have listened when people told them that 20% growth rates year over year were unsustainable

  13. jenslapinski says:

    There is one basic assumption underpinning this idea:

    That there are a lot of people living outside of the US who would love to live in the US and who have enough money to buy a home, but who currently can’t get a green card.

    Really? Hmm…. not so sure about this one.

  14. mikeque says:

    Novel idea, but the author makes a wrong assumption that so many foreigners would participate. In the US there is a misperception that the entire world outside is a bunch of wild dogs who dream of immigrating to the US and the only thing keeping them out is an immense fence and arbitrary laws. This is not the case, especially with those who have $100,000 cash ready to invest.

  15. Moopheus says:

    House prices are falling because they are basically unaffordable under relatively normal (i.e., pre-bubble) lending standards. They are unsupported by rent and income levels in many markets, and many households don’t have enough cash savings for a reasonable downpayment (and we can see what happens when you allow little or no downpayment purchases!). Are the immigrants coming on H1-B visas going to come over with sacks of cash and get high-income jobs? Which industry is going to supply these jobs, and why aren’t they providing them to the unemployed now?

    Basically, the main reason to keep house prices propped up is to benefit folks who are “underwater,” meaning they paid too much to begin with. As pointed out above, the only way to keep a Ponzi scheme (and housing was a Ponzi scheme) going is to find the next round of suckers. And that is what they will be: the next round of suckers.

    Look, there are plenty of people out here who want to buy houses, and will do so when it makes sense to do so.

  16. oldncreaky says:

    As a the type of resident alien that this article would purport to attract — educated, enough assets to by a house for cash — I’d like to make two important points. First, the idea that there are millions of people in my situation with a burning desire to get specifically to the US is a daunting assumption. Even relaxing the assumption to allow for either educated or with assets still leaves a great hurdle, and ignores that the US must compete for these types of immigrants. Second, as generalenthu eludes to, the US has numerous policies that drive away the type of immigrants this article says should be attracted. Apart from the gauntlet laid down by INS, the US also drives away immigrants with tax policy. The US taxes citizens on worldwide income, and it is also one of the few countries in the world with an exit tax, passed with the HEART act last year to fund wars, that is imposed on all non-citizens leaving the US. The threshold is $600K in worldwide assets per person. Why would someone bring money — like say, enough to buy a house — to the US if bringing it simply makes the individual subject to onerous exit taxes?

  17. Unsympathetic says:

    ” Drive out the foreigners and your unemployment will rise. ”

    Generalenthu, please stop fear-mongering. Drive out the foreigners.. and unemployment will drop.

    H1 visas are used as a tool of big business to depress the salaries for American workers in the same industry. In engineering, companies in the US enjoy hiring H1 workers because they can offer a much lower nominal wage to that employee.. and then include that salary in the computation so as to lower American workers’ salaries in the same field.

    There are plenty of American workers for every industry and job.. especially now.

    Eliminate the H1 entirely and you have a lower unemployment rate as all the foreigners who are simply stealing American jobs must leave. Remember, FOREIGNERS DO NOT CARE ABOUT THE US. They want to take money and jobs from Americans and leave. It’s the height of oblivion to presume that simply because someone acquires a job in the US that they are interested in working hard to make the US great.

  18. mikeque says:

    @Unsympathetic
    Yes the foreigners are just on the other side of the border, ready, to steal our jobs, marry our daughters, and defecate in our toilets. BTW, where were your grandparents or great-grandparents born?

  19. Mike in Nola says:

    I agree with most of the rest of the crowd: why does the housing crisis need to be “solved?” If the S&P drops to 400 would John so readily accept that the stock crisis needs to be “solved” by inventive ways of pumping prices?

    The housing market was a ponzi scheme that ran out of new players. Getting more won’t solve the problem.

  20. Mannwich says:

    How about a permanent house-swap program with foreigners? I’d love to swap my place for a permanent place in France. Anyone? Anyone in France? I thought not.

  21. Trainwreck says:

    Exactly how does this create jobs in America? I see only the desire to prop up a housing bubble that should have collapsed long time ago. Attempting to re-inflate this bubble with foreign investment is foolish as it will only buy us a little time. It will not solve the problems we are facing.

    Start with creating jobs for Americans, and they will be able to buy. How can we compete with China? Well start with calling a spade a spade and demand that they stop manipulating their currency, demand that they start treating thier workers humanly, and demand that they provide their workers with the same hard fought rights we have garnered for our own employees here in America. We should put our foot down and demand fair trade, and admit that free trade is an illusion.

  22. tenaciousd says:

    I want to thank Mr. Mauldin for putting me back in touch with my rage this morning. I got no beef with foreigners. It’s not their fault we’re stupid and will give away the store.

    Why not just give the house to an American like me who sat out the bubble and saved money, but who still won’t buy due to uncertaintly? Since prices were so inflationary, I put more in my 401k instead of saving for a downpayment. (At 38, I have more saved than the average American at 60. Not as much as I’d like, but it’s a good start.) And, we decided to have my wife quit work till our son was in elementary school. (For most people, I guess children only show up as liabilities on the balance sheet.) So, the timing was not ideal. However, I could spend the money I save on rent on furniture and all sorts of good stuff. Come on, how ’bout it?

  23. painlord2k says:

    The only thing that will cure the crisis is higher rates.
    Higher rates will imply that people will defer consumption and prefer saving and lender will be forced to be sane when lending money.
    The saving will buy houses and other, when the prices will go down enough.
    The problem is that rising the rates will force a large group of people to fail, go bankrupt and restart again.

    It could be counter intuitive, but higher rate imply that the houses can be bough before and not after.
    Doubling the rates imply that people will be able to pay only half of the price for the same house, and there will be no incentive in long mortages (the monthly payment will be very small going from 10-20 or 30 years mortages). But, mainly, the people saving before buying a house will be able to repay the loan long before. If you do a bit of math, going from rates of 5% to rates of 10% (with the same sum paid every month), imply that deferring the spending for one years and using the saving for the down payment will let people to pay in full the loan two year before.

    With low rates, saving is worth nothing (a few months in ten years), so it is stupid to save for a down payment.

    A rate of 2 % on loans would be possible/sustainable only when people will live 300 years and will work for 250, because deferring consumption for 10 years will be acceptable.

  24. dunnage says:

    For a Trillion dollars you could basically buy all the subprime loans in existence. Ten Trillion and you have the entire portfolio of residential property. Hell, the government could be holding the whole damn sector — not a bad investment, and a hell of a lot cheaper than so far. And So Far is gonna need a lot more.

    Immigrants could get jobs building the US/Mexico and US/Canada walls.

    I don’t care where Obama’s head is, but these Money Center dudes are willing to nuke the public in order to hang on to their offices. Much is possible when all are taken into consideration; too late now I’d say.

    Immigrants, hell yes — but wages must go up.

  25. thoma72s says:

    Dear John Maulidin,
    I am one of those “Legal immigrants” you are talking about. I have substantial capital with me, however, due to my uncertain immigration status (have been waiting for the green card due to excessive backlog) I cannot risk buying a house. In my capacity I will easily be able to afford >300 k house and I would say there are hundreds of thousands in similar position like me. We have money and have legal highly payed jobs, high qualifications but just the uncertain immigration status is preventing us investing into homes. Please keep up your effort to raise awareness and hopefully the Gov realizes the potential by just giving us a Green Card. I am not asking for giving a GC on immediate arrival to the nation, NO. I request a GC for people who are qualified and working legally in the US, who have tremendous potential to break the chain of the falling home prices. Thanks a lot.

  26. SPAP says:

    Hi All,
    People always forget about a category-Legal Immigrants.
    Let me tell my story…………………..

    Me and my spouse came here 9 years ago.Both of us have Masters degree in engineering from a reputed uni in USA. Also we are working in fortune 100 companies in USA. We have two kids both are US citizens. The problem here is we apply for immigration 7 years ago still it is pending because of backlog in immigration policy. We have enough money to buy a decent house in the town where we live. But without greencard we dont have confidence to spend in this country. Here getting green card we are not pulling someones job. We are paying taxes for 8 years. If we get green card,who is loosing here. There are 500,000 people are waiting in this immigration queue,We have job,money ,education,enough experience everything ,but no greencard…..not ready to buy house………..);

  27. thoma72s says:

    One of my friend is a college professor (not tenured) with two kids and an unsecure job. He is in a desperate situation (medical issues, heart + back problems) and is really looking to sell his house (350 K). I can easily easily buy it and releave him of his heart ache, however, given my uncertain immigration status, how can I commit? This is just a crazy situation.

  28. chubby says:

    Personally I do think “buy a house, get a green card” is a great fantastic idea to link both economy and immigration systems together. This new and fresh idea will attract aliens (especially people who have US advanced academic degrees and anyone who have stayed in US for about 8-10 years) who are both wealthy and knowledgeable to immigrate here.

    You can imagine that besides buying a house to get a green card, if every aliens are charged with $10,000 as the non-refundable immigration entry fee, you will see there is a lot of tremendous cash flow into the economy and this may reduce the national debt.

    Once they immigrate, they will put extra cash into the banks, buying cars, spending money on household products such as buying computers, televisions etc and you can see more cash flow into banks, uplifting car industry and raising profits in the retail businesses.

    In addition, the relatives/friends of these green card holders will be indirectly to be invited to visit US and this will indirectly increase the prosperity of the country. Such visitors will increase the demand in hotels, vacation apartment rentals, shopping in malls, restaurants and these will indirectly create more jobs in sales and uplifting the housing markets. Also, the fees charged from the tourist visa will raise the government income.

    Maybe you will argue that such immigrants will definitely take American jobs away and they will hurt the economy. But on the other hand, you need to think about if these green card holders can’t find a job, they must spend their own money to survive in addition with the abovementioned immigration fees flow into the economy. They can’t hurt the economy in any means if the government set rules for these type of green card holders can’t get any social security benefits once they immigrate. Such green card holders will not sit still at home if they are unemployed, they will set up the company and this will indirectly create jobs.

    Besides, the new idea of “buy a house, get a green card” is smart to solve both housing crisis and the long waiting lines of employment-based immigration system. Also, I do believe this new idea can replace the
    non-nuclear (means the far-related family members such as cousins, nephews and niece) family immigration system but not the nuclear (means spouse and children) family immigration system. It is because this new idea ensures the high quality aliens (rich or knowledgeable quality) to enter the nation but the traditional family-based immigration only emphasizes the family-ties. Most of the non-nuclear family-based immigration members are non-wealthy and not academically adequate.

    However, all these aliens must be free of both criminal and illegal stay records and preferably to have good credit score if they have stayed in US for 8-10 years.

    This new idea can be tried for several years to see the results in the market.

  29. chubby says:

    One more thing I forget to say, this new idea “buy a house, get a green card” can also solve the problems of highly dependent on employers’ sponsorship to get the H-1B visas. This will avoid working visa frauds and employees cannot be tied up by employers once the employees want to leave the companies. Employees can control their own career future without worrying their legal stay which is tied to the employers’ willingness to sponsor their working visa or green card. Furthermore, the employers will not have any inconvenience to have the both time- and money-consuming working visa filing process for their employees. Therefore, “buy a house, get a green card” is a super-excellent idea which is advantageous for both employees and employers. It is also advantageous for solving the housing crisis, financial banking crisis and uplifting the US economy.

  30. jchan says:

    As a person working on H1B, I would raise both my hands to support this idea. I came to US 10 years ago, earned my Masters degree, started working on H1B. But due to serious retrogression for Chinese citizens. Our income can easily afford a $600k house with 20% downpay, and my credit score is over 800. But we still rent because of the uncertainty in life without green card. If I were to get my green card tomorrow, I would go out and buy a house the day after.

    btw, in the 7 years my wife and I worked, we paid roughly $400k in Fed, state, local, and SS tax. That is the $400k used to help the poor, build roads and bridges, etc. We work in the US for a better future and career, and I am sure our hard work also have a positive push to the US. It is just beyond me why the US government and its immigration policy make our lives so hard? Law abiding and hard working is not being rewarded any more?

    Because of the hopeless state of immigration application and increasingly better opportunities in China, we are actively looking for jobs back home. Guess it’s time to kiss goodbye our American dream and start our long due Chinese dream.

  31. Steph82 says:

    If only this were true. I’m a 26 year old single female from canada. I have a certificate in Early Childhood Development and 2.5 years of experiance after I completed this program and about 12 years of childcare experiance before I started the program. I’ve been wanting to move to the US pretty much my whole life. No I wouldn’t be working at McDonalds or any other minimum wage job. I would be bringing my experiance and skills that I have learned from working with children. I would gladly buy a house if it would mean I got to live in the US. I know that no matter what state I decided to move to I would be able to find a job because parents need qualified people to care for their children.

  32. Steph82 says:

    P.S I’ve been reading some of the posts…do people in the US really not like people in Canada as much as it sounds? I’ve always thought that the US was a beautiful country and the people are so proud it’s amazing. I’ve wanted to be a part of it for such a long time…but unfortunatly my parents were born here in Canada. I love Canada I always have so don’t think I’m knocking my country. I’m just saying what’s wrong with mixing it up a bit?

  33. a_j says:

    I am on H1B for years and have not been able to buy a house(even though i have the money) cos I can be kicked out of the country if I lose my job. And seriously anyone in this economy can be kicked out , however skilled you are. So I don’t want to take the risk. What is the use of taking a risk and owning an asset when you are not allowed to stake a claim on it. I would rather buy assets in countries where I will be allowed to live, even if I lose my job. Common ppl , Realize the advantages of ppl like me to the economy and do the right thing !

  34. a_j says:

    Also if the US does not do the right thing as the author points out, then surely we will go back to our country and start up our own companies and will give Americans jobs if you are ready to relocate there. Our countries welcome bright people!