14 ms·
Foreign purchases of American homes plunge as Chinese buyers flee the market
- deleted 7y ago[deleted]
- sk5t 7y agoIt's impossible to read almost any mass-media article about real estate without leaving wearied by loaded phrases and unfounded conclusions. In what other sphere is a decrease in purchasing "fleeing the market"? Where are the fire sales, or even, where are the begrudging foreign property sellers? Still somewhat fresh in memory are NAR economist Lawrence Yun's bizarre rationalizations in the runup to the 2008-09 GFC.
- eloff 7y agoI agree those things are typical in articles like this, but a 40% drop in foreign sales can quite reasonably be described as fleeing the market. It's not a trivial decrease.
- JMTQp8lwXL 7y agoIt needs context. Are 100% of American home buyers foreign? Wow, that's quite dramatic. Are 20% of buyers foreign? Okay, so that's an aggregate decline of 8 percent-- while impactful, not nearly as exciting of a number, which matters in a journalistic sense these days.
- sachdevap 7y agoNote that an 8% decline does not capture the demand implications. If the market is pretty sensitive to demand, 8% is a pretty big number.
- bilbo0s 7y agoI don't know man? What was it? Like 36% decrease in foreign buying overall? China specifically was like a 60% decrease? I'm not an expert or anything, so what I think means exactly jack. Having mentioned that, those decreases seem to me to be far in excess of anything that could be reasonably explained by economic factors alone. Something must be going on. "Fleeing" seems like a legitimate label for it.
- roenxi 7y agoIt says in the opening paragraph "tighter currency controls by the Chinese government". As with most financial articles there is no discussion of the relative magnitude of the effects at play. Financial journalists are perfectly happy to ignore the elephants in the room and report a laundry list of tiny effects that might have had an impact and then devote 1 line to whatever causes 80% of the change observed. Fleeing implies they have a choice and are choosing to leave because of poor prospects in US housing. That might be true. But the choice might be involuntary or be due to sharply rising prospects in China or elsewhere. If China those capital controls are significant, maybe a better title is "Chinese purchasers dragged away from US housing kicking, screaming and cursing their own government". That is a possible interpretation based on what is included in the article.
- fabianhjr 7y ago> As with most financial articles there is no discussion of the relative magnitude of the effects at play. Principal Component Analysis is really difficult to do on a live economy because no one is omniscient and policies/events enter and go in a less than ideal simultaneity.
- bilbo0s 7y agoBut 36%? I mean, the Canadians don't have currency controls. Neither do the Mexicans. All three of the Big Three foreign real estate buyers have pulled back in a material fashion this year. Like I said, I just think something must be going on here. I don't think this can be waved off as "Well, it's just China."
- xbmcuser 7y agoThe main problem Chinese face currently is getting money out of China that is the reason Chinese property purchases are down it is the same in Asian cities and countries where Chinese were doing a lot of purchases last few years.
- RomanBob 7y ago>price goes up People can't afford housing because Chinese are buying up all the houses. >price goes down People lose life savings because Chinese are not buying up all the houses.
- inlined 7y agoAnd yet somehow I managed to time my purchase right in the inflection point.
- i_feel_great 7y ago>prices remain the same Zero growth, return on investments bad, need economic stimulation quick
- rxhernandez 7y agoI don't agree with either statement at all but the second statement seems predicated on the first. That is, some people bought in a bubble the Chinese created and they lost their savings when the bubble popped and the Chinese stopped buying. This does not at all resemble the dichotomy of, damned if you do or damned if you dont, like you seem to be implying. Again I do not agree with either statement even remotely. I haven't done any serious research on the current housing market and dont harbor any feelings or ideas on it.
- JMTQp8lwXL 7y agoIn a dual-sided market, price movement negatively impacts one group, and positively impacts the other. The negative headline generates more clicks.
- cltsang 7y agoThese sentimental words definitely serve better as triggers of trading algorithms. Maybe related?
- mmazing 7y agoSomething interesting about those numbers - the average sale price of the real estate is 425k to 450k. Also interesting is the average price for each property dropped from last year to this year (from 450 to 425). Dunno what any of that really implies but thought it was interesting.
- ptmvp 7y agoOne thing I noted was that the median price paid by foreign buyers was not as high as I expected when compared to the median price for all buyers (280.6k compared to 259.6k). This indicates to me that these foreign buyers are not necessarily institutional investors or companies, but foreign citizens, so the segment of the market they're in is probably not the multi-million property segment, but the more "standard" residential properties market a normal US resident would be in. The article does somewhat confirm this: >"Foreign buyers include those living in the U.S. and overseas, but the majority (60%) were recent immigrants and foreigners who live in the U.S. for work, school or other reasons." If you also take into account that there is an effect of the purchases made by these buyers on the "median price for all buyers" cited above (and so the real difference in median prices between foreign/domestic buyers is higher than what is suggested by those figures), I think the effect is somewhat diminished (as this pushes them into a more "upscale" market). Even with the above, I still think it's relatively safe to assume this will have a downwards impact on US residential prices, at least in these states (but I'd need precise figures as to what share of homebuyers are foreign). *edited the last paragraphs to correct something I had gotten mixed-up on
- C1sc0cat 7y agoThey are buying flats of plan mostly I would expect not 4 bed detached.
- r00fus 7y agoIs anyone surprised with this given outcome this administration's trade war? On one hand maybe this combined with the tax changes will result in housing price stabilization. However given how much of the economy is tied to FIRE, it could have significant external impacts.
- tehlike 7y agoWhy is trade war related to house purchases?
- Hates_ 7y agoFrom the article, the CEO and director of Juwai.com explains it as a result of "a combination of anti-Chinese political rhetoric, a clampdown on visa processing, and of course tariffs".
- whamlastxmas 7y agoDoes he have something to back up that claim, or is it just his opinion?
- tehlike 7y agoMy simplistic view is foreign buyers want to buy because of stability in the us market, and as a way to park their money away from their government. The simplest reason i can think of is due to tariffs rmb lost value compared to us, making us housing tad bit more expensive. But housing market has dropped a bit to make up for it. I am not fully convinced.
- noobermin 7y agoThe article mentions that general political tensions with China has a chilling effect on wealthy parents wanting to send their children to the US.
- Causality1 7y agoI'm a little surprised people without green cards are allowed to purchase homes in the US at all.
- pmiller2 7y agoWhy? Nothing says “permanent resident” like, well, a permanent residence.
- darkpuma 7y ago> Why? Reasonable (but in this particular case unfounded) cynicality?
- inlined 7y ago1. Visas aren’t permanent. My best friend renewed his H1B, ran through that renewal, and had to spend a year out of the country to reapply (all while in line for a green card) 2. Given the finite nature of real estate, especially in metro areas, (vacant) investment property harms the residents Counterpoint: at least in AZ there is a tax for foreign buyers.
- Gibbon1 7y agoI think it doesn't help in the current 'lootacracy' where zero interest central banks loans are being used to jack up the price of existing real property. Vs historically where foreign money finances development and upgrading of real property.
- diogenescynic 7y agoOP said “without”.
- seanmcdirmid 7y agoAmerica has mostly a free market, so why would you expect otherwise? America doesn’t have a hukou system, nor restrictions on internal residency, so why would they distinguish between residents when buying property?
- deleted 7y ago[deleted]
- xxxpupugo 7y agoSo good right? Easier to buy a house now, less competition. House owners should be happy enough to have the real estate goes straight up those many years. There is an end to it, they need to accept that. In short, happy after all.
- kshacker 7y agoBe happy but be aware of the cascading impacts. Foreign buyers affected the price in valley and elsewhere in big markets, and while you may get cheaper house don't end up causing another subprime. All it needs is one domino to move. I would prefer lower prices but am not sure it will be happy for all.
- H8crilA 7y agoNot to mention that money (as in USD or any other fiat) is mostly backed up with houses on banks' balance sheets. Perhaps it'll push down the ridiculous prices on US equities too. Whoever has much of their investing time left should cheer for a good stock market crash - to buy stocks cheaply.
- pixl97 7y agoOf course it cant be 'happy for all', the rent seeking wealth extraction industry will not be happy about lowering prices at all.
- whalesalad 7y agoVery good, especially for those of us in Southern California where foreigners have been purchasing a ton of property with cash. It’s tough to compete.
- JMTQp8lwXL 7y agoZoning laws have more of an impact than foreign purchases. California has been under-building for decades. It would take a monumental political change to play catch-up.
- diogenescynic 7y agoHallelujah! Prices are out of reach for most people. This is great news.
- cjhanks 7y agoChinese leverage is high and their economy is trending down. They have to contract into slightly more conservative positions. And afaik, they were the world wide cause of inflationary real-estate. I would suspect that US markets are less to blame than foreign economies showing signs of contracting. In any case, it's good for American's. It's insane to me that our ability to buy homes is so adversely affected by foreign investment.
- JMTQp8lwXL 7y agoAs our economic productivity centralizes around cities, zoning laws protect existing property owner interests, which in turn, restrict supply. Foreign investment certainly plays a role, but I think it misses the forest for the trees. Also the fact that people can leverage a home purchase 5-to-1. If mortgages weren't a financial instrument, few could afford today's prices. I won't go into detail here, since the chances of mortgages going away is near-zero, but the possibility of zoning changes is somewhat reasonably possible.
- mymythisisthis 7y agoDemographics is the real key issue. A bulge of kids had reached home buying age all at once (the children of the Baby Boomers). We're now on the other side of that curve. Prices are starting to stabilize in all large cities that have seen a bubble. The demographic bubble/bulge was made worse by foreign investors, zoning, speculation, etc., but fundamentally all the kids of the Baby Boomers entered the market at about the same time. Housing Shortage After WWII (aprox. 1945-1955) 30 years latter another housing bubble (aprox. 1980s) 30 years after that another housing bubble (aprox. 2010s) Incidentally Trump is a good reflection of America. His father made a fortune in the post war housing bubble, Trump is the face of the 80s housing bubble, and now he's back again for this housing bubble.
- agent008t 7y agoI would argue that foreign investment plays almost no role. Homes generate cashflows (rents). Rents are a function of local economy (paychecks). What one is willing to pay for a home is a function of rents, risks, interest rates and expected changes in rents, risks and interest rates. If home prices are not detached from these fundamentals (and is there evidence that they are?), some investor is going to buy them, foreign or local.
- Sabinus 7y agoNow if this trend would spread to other western countries like Australia we could have some nice healthy housing price deflation.
- wcoenen 7y agoAt this point the housing bubble in Australia likely can't be ended without triggering a recession.
- C1sc0cat 7y agoAsk japan about how that worked out for them - how may lost decades is it now ?
- pixl97 7y agoJapan's set of issues is so significantly different it's not really worthwhile bringing them up.
- dmurdoch 7y agoYeah I'm hoping this gets mirrored in Canada so Vancouver becomes livable for normies again.
- asdff 7y agoDo rents/housing costs truly ever dip or do they just stagnate while wages catch up?
- deleted 7y ago[deleted]
- always4getpass 7y agoReal estate and primary residences should not be a market and an investment opportunity imo. A company buying thousands of homes and then milking workers through rent for decades seems unethical. While I do not have a solution, I think this is an issue we should work on
- dgzl 7y agoIf there's no market, how can you buy or sell a home? Why should I not invest in my property?
- rwmj 7y agoI suppose it might work like council housing (used to) work in the UK. The council builds large numbers of homes and houses people in them for lower than market rentals. Of course people are still free to build and buy homes privately if they want. The problem with this in the UK was that the stock of council housing became immensely valuable and as soon as we had a right wing government they started to sell it off. Selling it off created home owners (who are more likely to vote for that government) and raised "free" money which could be given out in tax cuts, so it was a natural target. In the UK an alternate system - housing associations (HA) - survived a little bit better. Here the houses are either built with public money and handed to a housing association (a private trust) or built by the HA. The HA then rents them out on similar terms to council houses. Because they aren't publicly owned the government couldn't sell them off. Except that because some HAs built using government loans or assistance the government was able to extend the right of tenants to buy to those homes too.
- apexalpha 7y agoIn the Netherlands we have the good tendency to take these away from politicians: any extra budget MUST be used to lower our national debt, not to lower taxes or 'buy votes' for the current people in charge. This takes away the incentive to sell off public goods for their own short term profit.
- supernova87a 7y ago
- hexo 7y agoLOL! US would be always ranting instead of being happy that security risk is leaving country/ceased to buy their place for living. Can believe my eyes how stupid one country can be. First you impose sanctions and then you can't believe when these sanctions hit you back. bwahahahah
- shaunrussell 7y agoForeign + corporate ownership of single family homes is a ridiculous concept and significantly contributing to our inflated home prices. You should have to be a citizen to own property. Imagine having to get a visa to go to a home you own?
- nickserv 7y agoCitizenship is an absurd requirement IMO, there are greencard holders that live and work for decades in the US without going through the onerous and expensive process of obtaining citizenship.
- rat9988 7y agoHe probably meant resident.
- deleted 7y ago[deleted]
- tcbawo 7y agoShould you be a resident to invest in a fund that purchases US real estate? The US has always been open to foreign investment.
- charlesdm 7y agoSo if I have the means and want to live in both the US and Spain I'm not allowed? Now that seems like a ridiculous concept. Citizenship is an outdated concept, and not one I really agree with.
- brightball 7y agoYou’re right about being able to own homes. Citizenship, though, is a critical concept for how countries function. It has a bearing on taxes, benefits, voting, etc. Without citizenship every one of those are up for massive abuse.
- 7y ago
- credit_guy 7y agoReal estate sales to foreign buyers is a form of export. Maybe the best export: * the good (the house) does not leave the country * the money continues to flow after the actual sale: real estate taxes and maintenance * taxes go to the local government, but the non-resident buyer does not really consume government services, so that benefits the rest of the local population * maintenance go to the local economy * when the rich foreigner visits, they spend like a tourist, not like a local, i.e. they contribute to the local economy disproportionately compared to their actual presence Why do rich Chinese buy in Manhattan? Why not in Lagos, such as this wonderful house [1] that goes for $1MM ? Because of the rule of law. Real estate sales to foreign investors is actually export of the rule of law. The rule of law is simply a more valuable asset in Manhattan than in Lagos, or in Beijing for that matter. Impeding real estate sales to foreigners simply means obstructing the monetization of maybe the most valuable asset that the Western world has. (or maybe the second most valuable) [1] https://www.nigeriapropertycentre.com/for-sale/houses/block-of-flats/lagos/lekki/lekki-phase-1/347150-4-units-3-bedroom-flats-bq-exquisitely-finished-lekki-phase-1 https://www.nigeriapropertycentre.com/for-sale/houses/block-...
- te_chris 7y ago"Impeding real estate sales to foreigners simply means obstructing the monetization of maybe the most valuable asset that the Western world has. (or maybe the second most valuable)" Literally the whole point of doing it.
- chrisjc 7y ago> taxes go to the local government, but the non-resident buyer does not really consume government services, so that benefits the rest of the local population The non-resident might not spend any money on goods or services in the municipality resulting in less tax revenue for the city/state. Especially bad if they don't even rent it out to anyone.