The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S.
The provision is part of a larger package of immigration measures, co-authored by Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah), designed to spur more foreign investment in the U.S.
Foreigners have accounted for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit markets. Chinese and Canadian buyers, among others, are taking advantage not only of big declines in U.S. home prices and reduced competition from Americans but also of favorable foreign exchange rates.
To fuel this demand, the proposed measure would offer visas to any foreigner making a cash investment of at least $500,000 on residential real-estate—a single-family house, condo or townhouse. Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out.
The measure would complement existing visa programs that allow foreigners to enter the U.S. if they invest in new businesses that create jobs. Backers believe the initiative would help soak up an excess supply of inventory when many would-be American home buyers are holding back because they’re concerned about their jobs or because they would have to take a big loss to sell their current house.
“This is a way to create more demand without costing the federal government a nickel,” Sen. Schumer said in an interview.
International buyers accounted for around $82 billion in U.S. residential real-estate sales for the year ending in March, up from $66 billion during the previous year period, according to data from the National Association of Realtors. Foreign buyers accounted for at least 5.5% of all home sales in Miami and 4.3% of Phoenix home sales during the month of July, according to MDA DataQuick.
Foreigners immigrating to the U.S. with the new visa wouldn’t be able to work here unless they obtained a regular work visa through the normal process. They’d be allowed to bring a spouse and any children under the age of 18 but they wouldn’t be able to stay in the country legally on the new visa once they sold their properties.
The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas. There would be no cap on the home-buyer visa program.
Over the past year, Canadians accounted for one quarter of foreign home buyers, and buyers from China, Mexico, Great Britain, and India accounted for another quarter, according to the National Association of Realtors. For buyers from some countries, restrictive immigration rules are “a deterrent to purchase here, for sure,” says Sally Daley, a real-estate agent in Vero Beach, Fla. She estimates that around one-third of her sales this year have gone to foreigners, an all-time high.
“Without them, we would be stagnant,” says Ms. Daley. “They’re hiring contractors, buying furniture, and they’re also helping the market correct by getting inventory whittled down.”
In March, Ms. Daley sold a four-bedroom vacation home in a gated community to Harry Morrison, a Canadian from Lakefield, Ontario. “House prices were going down, and you could still make a lot of money on the exchange rate,” said Mr. Morrison, who first bought a home in Vero Beach four years ago.
While a special visa would allow Canadian buyers like Mr. Morrison to spend more time in the U.S., he said he’s not sure “what other benefit a visa would give me.”
The idea has some high-profile supporters, including Warren Buffett, who this summer floated the idea of encouraging more “rich immigrants” to buy homes. “If you wanted to change your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you’d solve things very quickly,” Mr. Buffett said in an August interview with PBS’s Charlie Rose.
The measure could also help turn around buyer psychology, said mortgage-bond pioneer Lewis Ranieri. He said the program represented “triage” for a housing market that needs more fixes, even modest ones.
But other industry executives greeted the proposal with skepticism. Foreign buyers “don’t need an incentive” to buy homes, said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands. “We have a lot of Americans who are willing to buy. We just have to fix the economy.”
The measure may have a more targeted effect in exclusive markets like San Marino, Calif., that have become popular with foreigners. Easier immigration rules could be “tremendous” because of the difficulty many Chinese buyers have in obtaining visas, says Maggie Navarro, a local real-estate agent.
Ms. Navarro recently sold a home for $1.67 million, around 8% above the asking price, to a Chinese national who works in the mining industry. She says nearly every listing she’s put on the market in San Marino “has had at least one full price cash offer from a buyer from mainland China.”
Located on an infill lot in the Point Loma neighborhood of San Diego, the client desired a home that would make the most of its site, be low-maintenance and incorporate a variety of energy and resource-conserving features.
The house has been conceived according to passive solar and natural ventilation design principles. Horizontal sunshades shield glass from summer heat gain, while the interior is naturally ventilated via the central atrium and clerestory windows. The house’s simple form is compact (48’ L x 40’ W x 23’ H), minimizing the exterior surface area, maximizing thermal performance, and reducing electrical and plumbing runs. The living, dining, kitchen and master bedroom are located on the upper level and oriented to capture views of the Pacific Ocean, Mission Bay and La Jolla.
Due to the client’s concern with durability and maintenance, the house is constructed entirely of steel and integrally colored concrete masonry. The exposed steel seismic-resisting frame is filled in with a super-durable pre-finished panel façade system consisting of real wood veneer over a bakelite core. The walls are entirely non-bearing and are constructed of light-gage steel framing. The roof and floors are framed with light-gage steel, pre-punch for easy routing of services. Steel typically contains at least 25% recycled content.
In addition to a high “R- value” rating for the walls and roof, the building has a “cool roof” consisting of a membrane system with an aluminized coating.
This is not a political endorsement – I hope all the politicians jump on board! FromHW:
Republican Presidential candidate Mitt Romney says the government should let the foreclosure process run its course, so the housing market can reach its bottom.
Romney made those statements in an interview recorded by the Las Vegas Review Journal this week.
The state of Nevada — Las Vegas in particular — has been hit hard by the foreclosure crisis. When asked how he’d fix housing, Romney told the Las Vegas paper, he would let the foreclosure process go forward to clean up the process.
“Let it run its course and hit the bottom,” he said. “Allow investors to buy homes, put renters in them, fix them up and turn them around.”
Romney took shots at the Obama administration, saying the president “has slow walked the foreclosure processes that have long existed and, as a result, we still have a foreclosure overhang.”
Romney also pushed back at the credit given to first-time homebuyers in the wake of the housing meltdown, calling it “insufficient and inadequate to turn around the housing market.” “It was like cash-for-clunkers,” he said. “Throwing money at something which is not market-oriented.”
Romney did say the idea of helping certain homeowners refinance their mortgages is worth further consideration. But he added, “I am not signing on until I find out who is going to pay and who is going to get bailed out.”
Fellow presidential candidate Ron Paul also announced a fiscal plan that included a housing reference this week. The congressman said he would end funding for the Department of Housing and Urban Development as part of an aggressive plan to tackle the nation’s deficit.
This year we have seen the bigger bombers selling in Leucadia for $1.2 million and up. If you are looking for a newer house with an ocean view, and are at one with the greenhouses, here’s an alternative (with map) :
REO sales will peak when the banks decide to peak them. FromHW:
The sale of properties repossessed through foreclosure may not peak until 2013, keeping home prices from a meaningful recovery for some time, analysts estimated Monday.
Nearly half of the more than 552,000 REO properties liquidated in the first half of 2011 were held by private banks. In the years ahead, the government — including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac — will begin taking a majority of the activity.
In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.
“We do not expect to see anywhere near the downward pressure on home prices that we had back in 2008, since the expected percent changes in liquidation volumes are so much smaller,” BofAML analysts said. “But home prices are starting from a negative point, so the implication is that home prices will continue to decline as the foreclosures transition through the pipeline.”
Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.
Total REO liquidations wouldn’t drop below 1 million until 2015, according to BofAML.
The Obama administration began work last month developing new strategies for selling this mass of properties, which may involve renting more of them. The Federal Housing Finance Agency is also working on a way to refinance more underwater borrowers to entice them from walking away.
“I would essentially rent the house back to those who are living in them now,” said Susan Woodward, an economist with Sand Hill Econometrics. “I don’t think it makes a lot of sense to push 4 million people out of their homes when they’re victims of a slower economy they had nothing to do with.”
Other analysts were skeptical of anyone who could predict accurately what the GSEs or Washington would do, especially after the elections in 2012.
“Do they really think that the government under any administration would let 500,000 homes hit the mark and crash prices all over again, six years after the first crash?” said Scott Sambucci, chief analyst at Altos Research.
He said even if unemployment improved by a full percentage point or two — which he said would be a stretch — the market would still struggle to meet such a supply influx.
“It would crash the market, so no, it’ll never happen,” Sambucci said.
Daren Blomquist at RealtyTrac, which monitors foreclosure filings across the country, said the sale of REO is on track to reach 825,000 by the end of 2011.
“We do expect the REOs to pick back up in 2012 as lenders push through some of the foreclosures delayed by processing and paperwork issues,” Blomquist said, adding the inventory needed to be sold could reach well into the millions.
Annual San Diego home sales hit a four-year low in September, Fidelity Pacific Real Estate said Monday.
Sales declined 4.6% year-over-year for the month and were also down 5% from August. That’s somewhat typical of a slowed demand moving into winter, though a larger increase than expected according to the report.
Home prices continued to decline, down 4.5% year-over-year.
Distress sales, which include foreclosures and short sales, made up about 44% of total sales in the area, and will likely cause prices to remain stagnant.
Housing inventory declined 9%, also relatively normal for the season, though this could be attributed to homeowners reacting to current price trends. Distress sales make up about 35% of active inventory.
Southern California home sales went up a slight 0.3% year-over-year in September, according to a report Thursday from DataQuick.
Everybody wants a bank deal or government freebie! FromHW:
Investors are extremely enthusiastic about acquiring Fannie Mae, Freddie Mac and Federal Housing Administration REO properties in bulk and renting or selling them, Amherst Securities Group said Friday.
Amherst’s report arrives weeks after the Treasury, Federal Housing Finance Agency and the Department of Housing and Urban Development asked industry professionals to submit feedback on ways the government agencies can move distressed properties through REO asset disposition programs.
Some 4,000 proposals were submitted to the FHFA — suggesting investors and others are immensely interested in the issue and want to be heard.
“It is very clear to us that the economic value of the homes involved, and the benefit to the economy, is maximized by bulk auctions to investors (who will then turn them into rental housing),” said Amherst. “The massive housing market overhang is a clear danger to the U.S. economy — it creates significant stress on borrowers, communities, courts and the banking system — and is stifling growth in the broader economy.”
A few weeks ago, Morgan Stanley released a report, saying investors are warm to the idea of acquiring distressed properties in bulk from the government-sponsored enterprises.
Amherst’s report focuses specifically on the supply-demand imbalance that is currently making it difficult for property owners to offload properties. This imbalance has created a systemic shift in the housing market, making it more attractive for investors to eye properties as rentals that can possibly produce yield while improving the overall housing market.
“Selling to investors can absorb this overhang and, at the same time, provide much needed supply to the rental market,” Amherst Securities wrote. “It is clear that the faster the resolution, the faster the housing market can make a meaningful and positive contribution to the U.S. economy.”
The graphs below were posted at Piggington by jacarandoso, and appear to be for the City of SD.
The last two show a decline in list prices, and an uptick in listings for the city, but in the county over the last two weeks the new listings have been a little less than in the previous two years:
New Listings Oct 1-14
2009
2010
2011
Detached
1,366
1,373
1,233
Attached
702
706
553
Totals
2,068
2,079
1,786
There will be stragglers who upload listings over the next few days, but the inventory doesn’t appear to be bulging for the county at-large. Nobody will be surprised to hear that there is pent-up supply, and when and where is finds its way to market will be an interesting development. I see more and more long-time owners listing their homes, and estate sales, but that might just be my little world.
Hat tip to daytrip for sending in a youtube of a demonstration over foreclosures in a NY courtroom. I don’t think this is the answer, and doubt that it will lead to much.
But civil disobedience has always had a place in America, can these protesters find a way to channel it in a positive direction?
The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S.
