If two things are correlated, which is the cause, which the effect? Free market capitalists need to start looking at the facts.
The housing boom was fed by 3 factors:
- Capital gains on the sale of a house are not taxable if a more expensive house is built
- Low interest rates
- Supply and Demand
Immigrants provided the demand boom in the housing boom. This was a mix of legal and illegal. Often a legal husband and illegal wife, or illegal brother-in-law, or “cousin” which usually means someone trusted, would buy a house together on the combined income. Then the anti-immigrant controversy emerged out of nowhere (for decades Pat Buchanan was a voice in the wilderness ridiculed by all other conservatives.)
The anti-immigrant hysteria created uncertainty in among the potential immigrant home buyers. They have an extremely low rate of foreclosure and are proud of that. They did not want to buy a house if some of the people helping pay the mortgage would be deported or additional “cousins” from Mexico could not be brought in to help pay the mortgage.
Thus, the anti-immigrant hysteria is the major reason that the demand was taken out of the supply and demand equation.
The demand of immigrants for cheaper houses drove up the prices of thos houses. The sellers of those houses made a killing off the capital gains and invested in upper middle class houses that would have normally been considered beyond their means. Of course, this increased demand drove up the prices of upper middle class houses. The sellers of those houses used their capital gains to buy luxury houses at high prices due to the increased demand. It was classic price determined by supply and demand.
When the demand slumped, prices plunged.
Of course, there were other factors. But clearly, immigration hysteria is a major, and probably the major, factor in the housing crisis. This was pointed out by many capitalist economists and activists early in the immigration debate.
Anti-immigrant voices repeatedly said that they agreed with the analysis and that they would accept a lower standard of living and be willing to pay the price for restricting immigration.
(the word “illegal” is seldom used in the analysis above because a) it is irrelevant and b) most of the hysteria only rarely used the word “illegal”. For example, Hannity originally ridiculed Pat Buchanan’s position on immigration. Then gradually Hannity adopted it. Hannity would create hysteria about the issue 3 hours a day. He would use the word “illegal” to qualify his hysteria once or twice in 3 hours. But one had to listen the full 3 hours to catch it. For most of the 3 hours the word “illegal” was omitted.
Beware what you wish for.