When Donald Trump announced on the campaign trail that, if elected, he would build a wall along the border of Mexico, many Americans didn’t believe it would ever happen. Well, now that’s he’s commander in chief, he insists he’s going to make good on that promise and has already made moves to get the process started.
And while others can debate-loudly-who’s going to pay for the thing, and the long-term repercussions on political and trade relations with our neighbor to the south, we at realtor.com® are focusing on other concerns:
What impact will the wall have on the world of U.S. real estate?
The barrier, which is expected to cost anywhere from $12 billion to $40 billion depending on who’s doing the estimates, is expected to have a profound effect on the housing markets in the American towns and cities along the nearly 2,000-mile border.
The proposed edifice has sparked tensions on both sides of the border, leading to celebrations and protests, as well as threats of lawsuits. Mexican President Enrique Peña Nieto even canceled his visit with President Trump over the issue.
But when it comes to real estate, there will be unexpected winners and losers, largely depending on where people live along the border, how close it is to their homes, and just how dependent their local communities are on Mexico. The particulars of the wall-such as whether it’s an eyesore and how easy it will be to cross-will also play a part in determining property values in some positive, and negative, ways.
There’s already 670 miles of fence, stretching across a third of the border in the most populated cities, that was put up as part of President George W. Bush‘s Secure Fence Act of 2006. Its makeup varies along its length, from wire mesh and chain link to concrete barriers and steel beams. It’s unclear what would happen to the existing divider if a new one is erected.
For now, those living on the U.S.–Mexico border are anxiously waiting for the wall to rise, some eagerly, others with dread. One thing is for sure: Many lives could change dramatically.
Life along the Mexican border
Retired cattle rancher Bob Maupin staunchly believes that a bigger and stronger barrier will help border communities like his-and home prices within them. Most days, the 77-year-old gets dressed with about 50 pounds of body armor, including a bulletproof vest. He loads up his AR-10 sporting rifle, which can fire 700 rounds in a minute. And then he patrols the mile-and-a-quarter portion of his 250-acre property in Boulevard, CA, which borders Mexico.
The town, if it can be called one with just 315 residents as of the 2010 U.S. Census, sits about an hour between San Diego and Calexico, CA.
Every month, he rounds up two or three Mexicans, usually young men he suspects (with no evidence) are involved in the drug trade, and hands them over to Border Patrol agents. (That’s down from the 30 to 100 people he and his local pals would catch each night in the 1990s.)
The trespassers get in through holes cut in the Mexican side of the fence, cross the road between the nations, and make their way through his own fence onto his property.
Maupin says he added 10 more feet of chain-link fence topped with razor wire onto the existing 4-foot-high barbed wire fence the government had originally put up to separate the countries.
“If Donald Trump put up a wall, they could not cut through it and drive through,” says Maupin, whose father bought their land back in 1948. “They’d either have to fly over it, or they’d have to tunnel under it.”
If residents feel safer, property values will rise
In the world of real estate, perception is everything. So if prospective buyers feel that the wall will make their communities safer, property values should indeed rise, says national real estate appraiser Orell Anderson of Strategic Property Analytics in Laguna Beach, CA.
“There are ranchers right now who have horror stories about their property being used for smuggling drugs and people. Some of them are very much afraid with armed gangs coming through,” says Jim Burling, director of litigation at the Sacramento, CA–based Pacific Legal Foundation, which specializes in eminent domain and property rights.
A strong barrier could reduce such smuggling, as well as the use of safe houses to store contraband in cities along the Rio Grande like McAllen, TX, which is about a 30-minute drive from its Mexican sister city of Reynosa. And that would help clean up some of the less desirable parts of the city, says longtime McAllen real estate broker Joyce Smithers of Keller Williams Realty.
A wall “would improve the area,” contends Smithers, who expects property values to get a boost as a result.
Check out the view-of the giant fence
In Brownsville, TX, the border fence runs practically through the backyard of 80-year-old Sigifredo Tijerina Casa. This section of fence was finished about a half-dozen years ago.
Casa, who speaks little English, has lived in his small home in one of the state’s poorest cities for about 20 years. He was none too pleased when workers showed up a few years ago to begin work on the barrier along the Rio Grande.
“We used to be able to walk out all the way to the river, and now we are limited to where we can go. I’m not happy about it,” he says through a translator. “Now there are Border Patrol agents constantly patrolling along the fence.”
He worries the partition has already diminished the value of his 1,380-square-foot home, and that his children won’t get what it was worth before the divider went up. And he believes a bigger wall will be even worse.
Making it harder to cross the border could affect the struggling economy of Brownsville, says Mayor Tony Martinez, a Democrat. His city of less than 200,000 residents is intertwined closely with Matamoros, Mexico.
“We get along with all these folks. They’re our neighbors, they’re our friends, they’re our family,” says Martinez, who was born in the U.S. but whose father is from Mexico. “The reality of it is we’re really one community, and our river happens to run through it.”
Does a wall make economic sense?
The potential financial impact of the wall is a topic of hot debate among those who live along the border.
Although some in McAllen, a city of 140,000 about an hour west of Brownsville, see the proposed wall as an advantage, the town could also take a hit financially. If homeowners could no longer make their monthly mortgage payments, a rash of foreclosures and short sales could ensue.
McAllen’s sister city is Reynosa in Mexico, which is more than four times its size. Many local businesses in McAllen, another poor border town, rely heavily on their Mexican customers. Those shoppers were already dwindling due to the weakening peso.
If a giant wall goes up, “there’s less likelihood somebody [from Mexico is] going to cross the border, go to Macy’s, pick up something, and head back,” says McAllen Realtor Rene Galvan at RGV Realty.
Fewer shoppers from Mexico could lead to fewer jobs on the U.S. side of the border. And that’s fewer people with the money to make monthly mortgage payments or buy homes.
“Just talking about the wall is pulling the welcome mat off the front door,” Galvan says. “It’s bad for real estate.”
However, an uptick in Border Patrol agents and additional federal money pouring into the city could offset some of those losses if more Americans move to the area, he says. Plus, the construction workers building the wall could provide a temporary economic boost when they shop locally.
“We may have an increase in federal employees along the border, and they’ll need places to live,” he says.
Moving back to the U.S.A.
Many Americans live in Mexico-where homes are often much cheaper-and commute to work in U.S. cities. A massive concrete wall would put a big crimp in those plans, and change real estate prospects for homeowners, even in upscale areas.
Case in point: San Diego, which is about a half-hour from Tijuana, Mexico. The median price of a San Diego home is $650,000, according to realtor.com. Meanwhile, fancy beachfront properties marketed to American buyers start at just $200,000 in Tijuana, according to La Asociación Mexicana de Profesionales Inmobiliarios, a Mexican real estate group.
If a wall makes their commute more onerous, many Americans, as well as Mexicans, are expected to move back home. This could potentially drive prices even higher.
“That could be good for the market,” says Galvan. The other possibility: It could price more people out.
Walls around the world have hurt property values
We may be entering uncharted territory with the U.S.–Mexico wall, but there is some precedent here. And most of it is not great.
Despite the positives, walls are rarely-if ever-good for real estate, says Jon Calame, co-author of “Divided Cities: Belfast, Beirut, Jerusalem, Mostar, and Nicosia.” The book looked at walls dividing cities, not nations.
“As you get closer to the wall, property values fall,” says Calame, also an architectural consultant. “Nobody wants to be near them. … The perception is if you need a wall with barbed wire, there’s something dangerous on the other side.”
The neighborhoods surrounding these divides tend to be low-income, as those who can afford to live far from the barriers generally do.
“The closer you get to living near one of these walls … depression goes up, alcoholism goes up, unemployment goes up, suicide rates go up,” he says. “It’s a toxic situation.”
How America pays for the wall could hurt border towns
Ah yes, the $12 billion-or was it $38 billion?-question: Who’s going to pay for the wall? Well, the way that works out could also deal the real estate markets along the border towns a blow.
The proposed 20% U.S. tax on Mexican imports could drive many border companies out of business, says University of Texas at El Paso professor Tom Fullerton, who specializes in the border economy. Mexican factories could close, along with nearby U.S. transportation and warehouses companies.
“As a consequence of the closures, unemployment rates would increase very rapidly, incomes would decline, and the demand for housing would decrease,” Fullerton says.
The end result could be a series of little Detroits along the border.
“Some of the areas of the border region will be devastated,” he says. “But for most areas, it’ll be an economic downturn, but not a crisis.”
When the wall leaves Americans on the wrong side
Building the barrier, which could top 35 feet, on the treaty-defined boundary of the two countries won’t be possible in many areas. More than half of the border lies along the shifting Colorado River and the Rio Grande. There are deserts. There are mountains.
Much of the land on the U.S. side is Native American tribal land, privately or state-owned.
These geographic obstacles have already led to some U.S. homes ending up south of the border fence despite still being in America. Other landowners have a fence dividing their property, leaving some farmers and ranchers cut off from natural water sources for their crops or cattle.
More U.S. citizens are expected to lose, through eminent domain, at least portions of their property for the construction and placement of the barrier. Others will likely wind up on the Mexican side of the wall.
And it could happen quite quickly, as the government can usually seize private land within just a few months, says eminent domain attorney Burling.
Property owners can challenge the loss in court, but “the landowner is not going to have a lot of opportunity to stop it,” he says. And they shouldn’t hold their breath for a big payday. The government typically lowballs owners anywhere from a few percent to about 200% below the value of their land, Burling says. The owners can then spend years in court fighting for more money.
In addition, the construction of a nearly 2,000-mile wall is a colossal undertaking-one that will require scores of workers and building materials. Homebuilders are already facing a construction labor shortage and siphoning off skilled workers to build the barrier could make it worse. It could also lead to higher prices on building materials.
The result? Fewer homes are expected to go up while the wall is being built. And the ones that do are likely to cost more.
“There’s going to be pluses and minuses,” McAllen Realtor Galvan says. “We have to see how things play out.”
Translations done by Vanessa Velez
The post What Trump’s Wall Along the Mexican Border Means for the U.S. Housing Market appeared first on Real Estate News & Advice | realtor.com®.