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Chinese leverage is high and their economy is trending down. They have to contract into slightly more conservative positions. And afaik, they were the world w

Chinese 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 ago
As 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 ago
  Demographics 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 ago
I 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.
- cjhanks 7y ago
  The U.S. economy is one of the most stable in the world, and certainly the most stable of any major world power. In fact, many economies are directly tied to the value of the dollar directly or indirectly. A lot of foreign investors are simply trying to put their money in US assets. Most conservatively in treasuries, least conservatively in the stock market. Housing falls somewhere in between. To these investors, the fundamentals of the housing market don't apply as rigidly.
mensetmanusman 7y ago
Less investment than laundering: https://www.theatlantic.com/magazine/archive/2019/03/how-kleptocracy-came-to-america/580471/ https://www.theatlantic.com/magazine/archive/2019/03/how-kle...
handedness 7y ago
You're one of the few commenters in this thread who actually gets what's going on. This is not in any way about the cost of housing in the US. The US real estate market has virtually no impact on capital flight from other nations. The article completely misses the point, for understandable reasons: this is a domestic Chinese fiscal and political issue, as perceived by CNBC's Real Estate Correspondent. What we're seeing is the effect of the latest step in tightening capital controls by Beijing, designed to reduce capital flight, something which they've been actively trying to limit, and publicly so, for at least the last three years. The paid lip service to the single biggest factor. People engaging in capital flight don't care all that much about market prices. Paying more than the value of something is acceptable if the alternative is losing everything. Buying a home and leaving it empty is not a problem. Using it to get in-state tuition so your kid can get a western education is better, but not necessary. Money laundering fronts will give up profit margin that would be unthinkable in a legitimate business, all in order to turn some portion of ill-gotten gains into something that can be more safely used. The reason Chinese nationals are buying fewer American homes has nothing to do with America, and everything to do with China. The current American political climate has nothing to do with it, either, unless one's considering America's stability and the international status of the US Dollar (both of which are the surest respective bets on the planet), the two things that make it such an attractive destination for capital flight. It's also an economy in which one can put that capital to good use without much difficulty (relatively speaking). Beijing swings back and forth between opening up their capital markets, and maintaining domestic stability. That's all this is.

JMTQp8lwXL 7y ago

As 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 ago
Demographics 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 ago

I 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.

cjhanks 7y ago
The U.S. economy is one of the most stable in the world, and certainly the most stable of any major world power. In fact, many economies are directly tied to the value of the dollar directly or indirectly. A lot of foreign investors are simply trying to put their money in US assets. Most conservatively in treasuries, least conservatively in the stock market. Housing falls somewhere in between. To these investors, the fundamentals of the housing market don't apply as rigidly.

mensetmanusman 7y ago

Less investment than laundering: https://www.theatlantic.com/magazine/archive/2019/03/how-kleptocracy-came-to-america/580471/ https://www.theatlantic.com/magazine/archive/2019/03/how-kle...

handedness 7y ago

You're one of the few commenters in this thread who actually gets what's going on. This is not in any way about the cost of housing in the US. The US real estate market has virtually no impact on capital flight from other nations. The article completely misses the point, for understandable reasons: this is a domestic Chinese fiscal and political issue, as perceived by CNBC's Real Estate Correspondent. What we're seeing is the effect of the latest step in tightening capital controls by Beijing, designed to reduce capital flight, something which they've been actively trying to limit, and publicly so, for at least the last three years. The paid lip service to the single biggest factor. People engaging in capital flight don't care all that much about market prices. Paying more than the value of something is acceptable if the alternative is losing everything. Buying a home and leaving it empty is not a problem. Using it to get in-state tuition so your kid can get a western education is better, but not necessary. Money laundering fronts will give up profit margin that would be unthinkable in a legitimate business, all in order to turn some portion of ill-gotten gains into something that can be more safely used. The reason Chinese nationals are buying fewer American homes has nothing to do with America, and everything to do with China. The current American political climate has nothing to do with it, either, unless one's considering America's stability and the international status of the US Dollar (both of which are the surest respective bets on the planet), the two things that make it such an attractive destination for capital flight. It's also an economy in which one can put that capital to good use without much difficulty (relatively speaking). Beijing swings back and forth between opening up their capital markets, and maintaining domestic stability. That's all this is.