For those wondering about the factors that have kept the market rolling, consider this article from the latimes.com – hat tip to daytrip:
http://www.latimes.com/business/realestate/la-fi-mo-foreign-homebuying-surges-20140708-story.html
Real estate sales to foreign buyers and new immigrants surged to new highs in the last year, according to a study released Tuesday by the National Assn. of Realtors, with the Southland being a prime destination.
Overseas buyers and newcomers to the U.S. accounted for $92 billion in home sales in the 12 months ending in March, NAR said. That’s up 35% from the prior 12-month period, and higher than the previous record of $82.5 billion set in 2012. These buyers made up roughly 7% of all U.S. home sales, by dollar value.
The increase was fueled by a 50% jump in activity from Chinese buyers, who bought $22 billion worth of U.S. real estate last year. Experts say many Chinese buyers see U.S. real estate as a better investment opportunity than is often available in China, and in some cases as a safe haven for cash. Many also buy homes here to put their children in U.S. schools.
And Chinese buyers, in particular, have an eye for Southern California. Los Angeles and Irvine were two of their top three destinations, according to the survey, with San Francisco ranking second. Chinese buyers have long been a factor in some parts of Southern California, particularly the San Gabriel Valley; as more come here, they’re spreading to new areas as well.
Los Angeles is the top choice for buyers of several other nationalities, too, according to data tracking searches of Realtor.com. Buyers from India, the United Kingdom, Australia, Ireland and Russia were also most likely to search here. For Mexican buyers, San Diego was the top choice.
The Realtors Assn. said it expects foreign interest in U.S. real estate will continue to grow as the economy grows ever more global.
“We live in an international marketplace, so while all real estate is local, that does not mean that all property buyers are,” said NAR president Steve Brown. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability and an incredible opportunity for investment in their future.”
JTR, I truly appreciate and respect your blog and I hope this doesn’t offend or go in the wrong direction, but as an American I’m concerned. Chinese have long touted how their education is far more superior than the US and is actually the number one country for international students. Now all of the sudden the communist led country sees sending people to the US because of our education system is not the best marketing scheme. Once Chinese buy a property it stays in Chinese hands forever. Look at the population and change of local government control in cities such San Gabriel, Alhambra, Irvine. Some people think this is good for the real estate market in the short term only because it raises sales and values. Long term, China is trojan horsing the US. If you run your country like a business the best way for a hostile takeover is too buy up a majority of the assets.
It would be interested to know what % of foreign owned houses are actually occupied. Sure, it drives up value and they are paying property tax, but how much money is being spent in the local economies? If China is their primary residence, the state / Fed is not getting any income tax.
A survey said 39% of Chinese purchases were for primary residences.
Are we seeing a retail-level redo of the late 80s ?
At the time, Japan Incorporated, not knowing what to do with its excess cash, poured ungodly amounts of money into US commercial real estate, snapping up a lot of trophy properties in the process. Of course, all along, a lot of people were crying “The Japanese are coming ! The Japanese are coming !” Lots of talk about “the Japan who could say no”. Then the recession came in the early 90s and it ended pretty badly for the Japanese investors.
Now, the Chinese are coming. The Chinese are coming ! But this time, it’s mostly retail-level investors/proprietors looking for a place for the cash (and their own person) they don’t trust their home country to keep safe.
I wonder how the story ends…
“up 35% from the prior 12-month period”.
Yup, no bubble here of course. Wonder what will happen to local prices when the foreigners decide to invest somewhere else some day. That day will happen.
A related article here:
http://www.bloomberg.com/news/2014-07-08/chinese-cash-bearing-buyers-drive-u-s-foreign-sales-jump.html
According to the Census, the population growth in North County from 2000-2010 has been driven almost entirely by Asian and Hispanic inflow. I don’t expect this to change much from 2010-2020. I don’t know how it ends, Friakel, but it’s pretty easy to see the demographics changing. Not sure I would equate Japan in the 80’s (population 125 mil) to China today (pop. 1.3 BIL) but I get what you’re saying. China is just so huge. So is India – pop. 1.2 BIL. So I think the trend is going to continue, and if you are looking to buy in areas favored by Asians than you will have more serious competition than elsewhere, and that’s not going to change anytime soon.
I agree with what DAC said, I would add from my experience Asians buyers prefer two things
1) Close to UC schools
2) Newer construction
In that order.
Second/third generations spreading out fast to the newer faster growth inland cities however.
I can second what Jiji said above, I am the one of em. Changing demographic and comparing the census bureau numbers gives you the idea. There are different types of foreign buyers, and 2 major categories 1) Foreign Cash 2) Local immigrant. The 1st cat has only one goa and that is to park the wads. The second is attached to community.
“Many also buy homes here to put their children in U.S. schools.”
What kind of visas are these foreigners getting? You can’t buy a property here and just stay. Do they just come in on Tourist Visas and stay on illegally? The way our immigration system is being handled currently, I wouldn’t be surprised if no one is tracking these “tourists” who stay on.
We worked/lived in japan for a few years and the government knew exactly what visa holders were doing. You couldn’t get a mobile phone or drivers license without showing that you had a Visa and were legally allowed to be in Japan. The opposite extreme of the USA! We’ll never be at that end of the spectrum, but we need to have more control of our borders and who gets in.
I am a naturalized citizen now, that came as a child, with parents that had work Visas and went through all the legal channels to get green cards and then citizenship. I have no patience for those that are here illegally or take advantage of the broken US immigration system.
http://www.zerohedge.com/news/2014-07-10/did-china-just-crush-us-housing-market
Interesting post at Zero Hedge.
Brief snippet: