Wealthy foreigners bought $100 billion in US real estate

[Brian4Liberty]

Wealthy foreigners bought $100 billion in US real estate (http://www.cnbc.com/id/102777978)
By Robert Frank


Overseas buyers snapped up more than $100 billion in U.S. real estate over the past year, as the foreign wealthy sought safe shelter for their fortunes.

According to the National Association of Realtors, sales of U.S. residential real estate to overseas buyers between April 2014 and March 2015 reached a record $104 billion, or about 8 percent of total existing home sales. While the number of properties sold slowed to 209,000 from 232,600 last year, buyers acquired more expensive properties, which brought up the sales total.

Chinese were far and away the top foreign buyers of real estate last year, with buyers from China, Hong Kong and Taiwan accounting for $28.6 billion in sales, according to the report. Canada ranked second, with $11.2 billion, followed by India with $7.9 billion. They mainly favored homes in Los Angeles, San Francisco, Seattle and New York.
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More: http://www.cnbc.com/id/102777978

[Zippyjuan]

They can't export it so why not? I remember when people were worried about the Japanese buying everything.

Just to put that $100 billion figure into perspective, Zillo estimates the value of US Real Estate to be $25.7 trillion in 2013. http://www.zillow.com/blog/value-us-homes-to-top-25-trillion-141142/

[Brian4Liberty]

They can't export it so why not? I remember when people were worried about the Japanese buying everything.

Just to put that $100 billion figure into perspective, Zillo estimates the value of US Real Estate to be $25.7 trillion in 2013. http://www.zillow.com/blog/value-us-homes-to-top-25-trillion-141142/


According to the National Association of Realtors, sales of U.S. residential real estate to overseas buyers between April 2014 and March 2015 reached a record $104 billion, or about 8 percent of total existing home sales.

Eight percent of total US sales, but concentrated in just a few areas. Perhaps 50% of sales in Los Angeles, San Francisco, Seattle and New York?

[timosman]

Eight percent of total US sales, but concentrated in just a few areas. Perhaps 50% of sales in Los Angeles, San Francisco, Seattle and New York?

Yup, and the official story as always is Google/Facebook/Apple employees driving prices up ;-)

[juleswin]

Those fucking bastards, keeping home prices high and screwing poor Americans who are trying to get a bargain on American homes. We need to do something to prevent damn foreigners from investing in American properties.

Btw, there is a certain amount you invest in and you get free VISA to the US and houses are a very good way of achieving that investment mark. Also there is a scheme that will give you green card if you attain a graduate degree in the US. Lots of schemes the US uses to sell access to people from countries without automatic VISA with the US.

[Brian4Liberty]

Yup, and the official story as always is Google/Facebook/Apple employees driving prices up ;-)

That is what a lot of the existing SF residents complain about. But it's more than that. A lot of wealth has accumulated in Asia, and that money is being used to purchase US real estate, no US jobs involved. For instance, a wealthy family will purchase a house for their children. An acquaintance recently sold her small town-home for $800k. It was purchased in cash by the daughter of a wealthy Chinese family. This might be considered a good thing for current real estate owners who are seeing prices go up, but it's not very good for young people who do not own real estate, and may never be able to afford it. And of course that California resident is moving to another State, where she will drive up the price there. Then you will have more people complaining about damn Californians moving to their State and messing it up.

[Brian4Liberty]

...keeping home prices high...

Re-inflating the busted real estate market takes more than just cheap money from the Fed...

[juleswin]

Re-inflating the busted real estate market takes more than just cheap money from the Fed...

Its not really inflation, just an increase in demand which is quite different from increase in money supply. Anyway, I think this is a good problem for an economy to have. The money infusion from all the outside buyers will benefit many Americans. My hope is that those foreigners would expand to the midwest, you wouldn't believe the sort of mini mansions you can buy with $200k here in Omaha.

[timosman]

My hope is that those foreigners would expand to the midwest
Nah, foreigners do not really like rednecks.

[thoughtomator]

A huge amount of that investment went into high-end apartments in NYC and San Francisco. Done behind shell companies this is reportedly a great way to launder and hide large amounts of money.

[Zippyjuan]

High end market does not necessarily drive prices of "starter homes" or average home buyers.


Foreign buyers were focused on higher-end homes. The mean purchase price for overseas buyers was $499,600, nearly twice the national mean purchase price of $255,600. Foreigners are also paying more than they were last year: The mean price paid by overseas buyers jumped 26 percent over the previous year. Most favored the suburbs over the city and most favored single-family detached homes over apartments.


The report said that U.S. real estate remains a relative bargain compared to other global cities favored by the wealthy. For instance, a condo costing $1.6 million in New York would cost more than $4 million in Paris and $2 million in Moscow.

Fully 46 percent of foreign buyers planned to use their properties as a primary residence, while 20 percent plan to use as them for rentals and 15 percent plan to use it them as vacation homes.

Using it as a primary residence means they live in it and spend money in the local economy- creating more jobs.


Overall, Florida was the top state for overseas real estate buyers, accounting for 21 percent of all U.S. sales to foreign buyers. California ranked second, with 16 percent, followed by Texas with 8 percent and Arizona with 5 percent. The top four states accounted for half of overseas buying.

Overseas buyers accounted for only 3 percent of sales in New York state, though that share is far higher for New York City, where most of their buying is concentrated. The buyers were split almost evenly between resident and nonresident foreigners.

Europeans and Canadians were attracted to Florida and Arizona, while California and Texas were favored by buyers from Asia. Buyers from Latin America, including Mexico, favored Texas and Florida.

[Brian4Liberty]

High end market does not necessarily drive prices of "starter homes" or average home buyers.


Foreign buyers were focused on higher-end homes. The mean purchase price for overseas buyers was $499,600, nearly twice the national mean purchase price of $255,600. Foreigners are also paying more than they were last year: The mean price paid by overseas buyers jumped 26 percent over the previous year. Most favored the suburbs over the city and most favored single-family detached homes over apartments.


Same twisted stats again. They are buying in the most expensive areas, thus the mean price is higher. The phrase "nearly twice the national mean purchase price" is not only meaningless, it is deceptive.

[timosman]

A huge amount of that investment went into high-end apartments in NYC and San Francisco. Done behind shell companies this is reportedly a great way to launder and hide large amounts of money.

This is where you suffer directly from stupid government policies.

[juleswin]

Same twisted stats again. They are buying in the most expensive areas, thus the mean price is higher. The phrase "nearly twice the national mean purchase price" is not only meaningless, it is deceptive.

With this kind of inquiry, you want to look at the median prices instead of the mean. If the median number is stable that means that the high end properties are not really affecting average home prices. Now if the median starts to shift upwards, then you can say foreigners are affecting house price for regular Americans. Actually you want to look at all 3 stats but median is going to the best indicator for what is happening to the average home prices.


This is where you suffer directly from stupid government policies.

About time, US citizens benefits from stupid government policies abroad. Imagine that, American is a safe haven for wealth. It has always been Americans running to Switzerland, Caribbean to hide their wealth, now we are competing with those places as a safe haven.

[Brian4Liberty]

With this kind of inquiry, you want to look at the median prices instead of the mean. If the median number is stable that means that the high end properties are not really affecting average home prices. Now if the median starts to shift upwards, then you can say foreigners are affecting house price for regular Americans. Actually you want to look at all 3 stats but median is going to the best indicator for what is happening to the average home prices.


Location, location and location. Real estate is extremely regional. Comparing the amount paid in a expensive area to national stat is meaningless.

[Zippyjuan]

Location, location and location. Real estate is extremely regional. Comparing the amount paid in a expensive area to national stat is meaningless.

Which is actually the point I was trying to make. If they are purchasing in one or a few particular areas, they won't be driving up home prices for everybody. Buying homes in San Francisco won't raise home prices in El Centro.

Mean is the average price. Several high priced homes can raise the mean. The median is the middle- half the homes cost more- half cost less. If they are buying high priced homes, the mean can go up without the median rising as well.

Let's say you have five homes in a town. Two are worth $100k, one is worth $200k, one is $400k and the last $500k. Median is $200k and mean is $260k. The top priced home is sold for $800k. Median is still $200k (half the homes sold for more, half sold for less) but median has risen to $360k. Only one home price changed.

[timosman]

If they are buying high priced homes, the mean can go up without the median rising as well.

Wishful thinking. The overall trend is up, median can not stay the same forever.

[devil21]

A huge amount of that investment went into high-end apartments in NYC and San Francisco. Done behind shell companies this is reportedly a great way to launder and hide large amounts of money.

Also could think of it as dumping various dollar denominated paper for hard assets. Very good possibility this is why the dollar has been so strong lately. As dollar denominated paper is cashed in for actual dollars to use for hard asset purchases (most of these RE purchases are cash sales), demand for currency rises thus driving up the dollar temporarily.

[Brian4Liberty]

Which is actually the point I was trying to make. If they are purchasing in one or a few particular areas, they won't be driving up home prices for everybody. Buying homes in San Francisco won't raise home prices in El Centro.

The home that is sold in the San Francisco area very often results in the old homeowner purchasing a home in Sacramento, Nevada, Utah, Arizona, Oregon, Montana, Texas and any of the other States. Thus it does drive up the price in other places.

[Zippyjuan]

Also keep in mind that foreign buyers are only eight percent of the total market according to the article.

http://abcnews.go.com/Business/wireStory/us-home-sales-jump-average-prices-close-2006-31939464


Here's Why Home Sales Are Finally Surging
WASHINGTON — Jun 22, 2015, 4:58 PM ET

Real estate has gotten hot again.

Home sales are on pace for their best year since 2007. First-time buyers are streaming back into the market. Prices are skyrocketing, aided by a stronger job market and tantalizingly low mortgage rates that are creating pressure for buyers to act fast.

The resurgence is a sign that the U.S. economy — after muddling through a sluggish, six-year recovery — has re-discovered another source of growth. Buyers are more confident about their own prospects. But many also appear ready to close sales quickly because of concerns of being potentially priced out of the market by rising mortgage rates and home values.

"What we've seen is that demand is off the charts in 2015 — and that is really boosting sales," said Nela Richardson, chief economist at the brokerage Redfin. "Last year, buyers were dipping their toes in their water. Now, they're diving in."

The National Association of Realtors said Monday that sales of existing homes climbed 5.1 percent last month to a seasonally adjusted annual rate of 5.35 million. May was the third consecutive month of the sales rate exceeding 5 million homes.

Yet listings have failed to match the greater demand, fueling large price gains. Median home prices climbed 7.9 percent over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak.

About 32 percent of the homes sold last month went to first-timers, compared to 27 percent a year ago. The improvement is substantial but still lags behind the historical average of first-time buyers composing 40 percent of the market.

Several factors help to explain the surge.

First, employers have hired 3.1 million additional workers in the past year as the unemployment rate has slid to 5.5 percent from 6.3 percent. This influx of additional paychecks has led more Americans to feel financially secure after weathering the most severe downturn — sparked by a housing bust — since the 1930s.

"That's the big psychological shift between this year and last year," Richardson said.

Secondly, mortgage rates are affordably low but beginning to rise as the Federal Reserve prepares to a key interest rate for the first time in nearly a decade.

Average 30-year fixed rates were 4 percent last week, according to the mortgage giant Freddie Mac. That average has increased from a 52-week low of 3.59 percent.

Many buyers appear eager to finalize their purchases before rates and prices increase any further, said Jonathan Smoke, chief economist at Realtor.com.

The result is that more homes are selling at a faster clip. A stunning 28 percent of homes are selling within two weeks, compared to 19 percent before the recession, according to a recent survey by the brokerage Coldwell Banker.

[timosman]

Also keep in mind that foreign buyers are only eight percent of the total market according to the article.

http://abcnews.go.com/Business/wireStory/us-home-sales-jump-average-prices-close-2006-31939464

How much of the market is the feds ? They must own lots of properties through shell companies. Just like the planes.

[oyarde]

Eight percent of total US sales, but concentrated in just a few areas. Perhaps 50% of sales in Los Angeles, San Francisco, Seattle and New York?

I already traded those areas for 1 case of beer , but no fear , once I explained property tax , cigarette tax , county tax , city tax , wheel taxes , the EPA , FDA , USDA , FBI , CIA ,etc ,none of them want to live there , then I was able to arrange a more free location for vacation for a small fee , ( few FRN's and another case of beer ) .

[oyarde]

Its not really inflation, just an increase in demand which is quite different from increase in money supply. Anyway, I think this is a good problem for an economy to have. The money infusion from all the outside buyers will benefit many Americans. My hope is that those foreigners would expand to the midwest, you wouldn't believe the sort of mini mansions you can buy with $200k here in Omaha.

UH , I would prefer they do not , having seen some of them drive in Bloomington , I would probably need to up the life ins , which means they cost me more .