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Foreclosure; Illegal Immigrants More Determinative Than NAMs, Proximity to Canada
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A commenter at Mangan’s named Chris looked at the correlation between the per capita illegal immigrant population and the foreclosure rate by state and found a correlation of .68. Using his population figures (accessible here) and the foreclosure or preforeclosure rates from a data-rich paper out of the University of Virginia yields a slightly stronger correlation of .72 (p=0). In the same post, Dennis quips:

It sure looks like proximity to Canada really cuts that foreclosure rate. Maybe people know that they’ll be really cold if they get kicked out, so they avoid it.

But it actually doesn’t reveal much. Using the latitude of each (of the 48 contiguous) state’s most populous city and comparing it to the foreclosure rate produces a weak and statistically insignficant relationship. With the exception of Florida (and to a lesser extent, Georgia), the South, so often maligned for filling out the bottom of socially desirable rankings, has suffered relatively little from the mortgage mess. Louisiana has the fourth lowest foreclosure rate in the country. Tennessee, Virginia, Maryland, Kentucky, Mississippi, Alabama and both Carolinas are all among the 25 lowest foreclosure rate states.

When Alabama and Mississippi do well, it’s a pretty sure bet that intelligence isn’t a strong determinate of what is being measured. That is the case here. The correlation between estimated average IQ and the foreclosure rate by state is .32 (p=.02). Thus intelligence ‘explains’ 10% of a state’s foreclosure woes. Pretty minor, especially in comparison to a state’s per capita illegal immigrant population, which, by contrast, accounts for 52% of the foreclosure rate.

Another Mangan commenter, Mark, suggests race is probably more germane to foreclosure rates than the size of the illegal immigrant population is:

I would be interested to see a chart of foreclosure rate correlated with percentage of population that is black or hispanic. I think it would show that foreclosures, just like levels of crime, poverty, poor school performance, and other social ills all seem to mysteriously correlate with the proportion of the population that is black/latino. Correlation with illegal status is probably just a proxy for correlation with racial status.

Not so in this case. The correlation between the NAM population and the foreclosure rate is .35 (p=.01). The size of the black and Hispanic population only accounts for 12% of a state’s mortgage mess.

Like the identity theft problem (but much more consequential), the mortgage meltdown and ensuing economic recession are inextricably linked to our lack of immigration enforcement. Without the millions of illegal immigrants–one-fifth of whom worked in construction–lowering labor costs while simultaneously putting upward pressure on housing prices by increasing demand, the real estate bubble could never have grown so large. To meet the uptick in demand for houses, more homes had to be constructed, which created a need for more construction workers. The need was met by the immigrants who were in large part pushing the increase in demand for more housing starts in the first place. The problem of low paid people buying expensive houses was circumvented by removing safeguards (like the down payment) in place to prevent such financial recklessness from occuring in the first place.

Permitting masses of unskilled, uneducated immigrants to settle in the US was a bad idea during putatively good times. It’s an even worse idea now. As Randall Parker pithily puts it:

Somehow we have to confront the fact that the law of supply and demand works in the labor market just as it does in other markets. A swelling low skilled labor force increases the ranks of those living in poverty while also increasing fiscal burdens of governments to pay growing social services costs. Worse yet, the influx of millions of low skilled workers, their poor performance in American school systems, and their competition for jobs and housing is lowering the quality of life for natives.

The connection Richard Nadler tried to draw between immigration and the wealth of states turned out to be based on illusory economic growth. Lending to people who will never be able to cover their loans does not increase total wealth, even if the financial instruments that are spawned by the activity trick the market into temporarily believing that to be the case.

The complete data set is available for download here.

(Republished from The Audacious Epigone by permission of author or representative)
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  1. Anonymous • Disclaimer says:

    i,m trying to figure out factors to describe the under lying mechanism of this and was wondering if you could think of anymore factors or had any answers. 1. what percentage of illegals were receiving bank loans or goverment housing. 2. what effect did the size of the illegal population in a community have on the velocity of white flight from that community? (for example in the northeast i've heard that when a schools student body reaches one third black pretty soon it's almost all black). 3. how did this effect property values, taxes and tax base. 4. how great was the deflation or stagnation of working class wages in thease states and how many bankruptcies did this lead to? 5. how many people fleeing a community found themselves with a house they couldn't sell ( and maybe two mortages, renting the old house to illegals). 6. how much did taxes and health care costs go up due to illegals. 7. how many businesses were bankrupted or relocated becuase of this? 8. what percentage of defaulted loans were to hispanics vs. traditional americans?

  2. Anon,

    That's an ambitious set of questions you're looking to answer! Perhaps an organization like the CIS could produce a report estimating figures for some of them, but it's way beyond what I have access to.

  3. Anonymous • Disclaimer says:

    i'm not asking you for a doctoral thesis or anything like that. what i'm curious about is what do you imagine just happened and questions, variables you'd feel you need to know to come up with a model of what just happened. quick and dirty like. a lot of things had to go wrong for this to happen and i expect to here about the ways the fed, treasurey messed up but not how pc blew up in a thousand bank branches and communities in the sandstates, your itelligent and don't kowtow before pc bullshit so i'd like to hear your thoughts.

  4. Anon,

    Are you familiar with Steve Sailer? Before I try to offer anything, let me provide you a couple of easily digestable, relatively quick reads that are yet quite thorough and certainly don't genuflect on the PC altar:
    Minority mortgage meltdown
    Respectable right flinching from mortgage meltdown
    CRA and…
    Charting the CRA crackup

    I am not just hurling links lazily at you. Steve does journalistic detective work. I take data, quantify it, and relate it to other data–but I can't even come close to him in explaining things at a micro level or detailed macro level. If you're not familiar with him, read those links–you can get through them all in less than half an hour, and I think you'll have more than enough to chew on.

  5. thank you.

  6. Interesting about the lack of much correlation between race and foreclosures. The housing bubble relaxed standards for everyone, regardless of race, and so lower-class whites who shouldn't have bought houses did. In my area there have been many stories in the paper about people in danger of foreclosure and they are all white. That being said, the first person I knew who was foreclosed on was a Salvadoran immigrant who works as a janitor and who bought a $650,000 house in 2005.

  7. Anon,

    One thing to note is that newer homes (and thus exurbs) were more likely to be foreclosed on, since the mortgages taken out on them were most likely to have originated during the bubble. Thus young, illegal immigrants were probably the most 'at risk' demographic group in the entire country.


    I suspect residency (read legal, or lack thereof) status is a better predictor of falling into foreclosure than race is. That is what the state level data strongly suggest, anyway.

    I find the thought of a foreign janitor buying a house that is nearly four times the (nominal) value of my own almost too staggering to wrap my mind around. I wonder what thoughts were going through the loan agent's head as the mortgage was being signed. Whew.

  8. You have to keep in mind the circular logic of the Housing Bubble.

    Financial institutions would argue that it was smart to give out ever huger mortgages in California, Nevada, Arizona, and Florida because the growing population meant that housing prices would keep going up.

    But the population growth consisted in large part of illegal immigrations attracted by jobs building houses.

    How would that work out in the long run? A few people on Wall Street got rich short selling mortgage backed securities, but in general it wasn't something you were supposed to talk about.

  9. If immigrants were the main reason for the foreclosures epidemic, then Lehman brothers and other multi-million dollar financial firms would not have gone belly-up, and the Fed would not be spending tax-payer's money to keep these corporations afloat. Because if wall street collapses, so does our nation's financial system.

    But returning to the issue of blaming the immigrants for the greed displayed by the "rich white man" is not only racist but a vain attempt to cover up the history of what happened rather than trying to study it so that it can never happen again.

    In short, government's have more incentive than not to continue issuing green card visato people who take those jobs -jobs that many Americans deem themselves too educated and intelligent to take.

  10. Green card,

    Investment banks like Lehman Brothers were trying to get on the gravy train Fannie and Freddie were creating for lenders like Countrywide, with a Clinton government waving around CRA consequences (and lack of merger opportunities) if "historically underserved" aspiring lendees continued to be underserved. With AIG, Freddie, and Fannie behind the junk, it's not too surprising that it kept being peddled.

    Re: race, black and Hispanic default rates are higher on all types of loans (bank/broker, verified/unverified). If NAMs were being underserved, we'd expect to see lower delinquency rates relative to whites.

    Following factory raids of illegal immigrants, local aspiring job applicants for replacement positions number several times more than the actual number of spots to be filled. Wages rise a couple of bucks, but the labor is subsidized whether it's performed by unskilled migrants or unskilled natives–better to have a native working with subsidy than a foreigner working with subsidy and an unemployed native on super subsidy.

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