[phaster]

Foreign Buyers Splurge On US Homes, Drive Up Prices
by Wolf Richter • July 11, 2014

There’s magic in the housing market. Especially at the upper end, and especially in California’s coastal areas, such as San Francisco and Silicon Valley, where prices have become ludicrous.

So to what extent can the soaring home prices be attributed to foreign buyers? They sank $92.2 billion into the US housing market, or about 7% of the $1.2 trillion in Existing Homes Sales during the period. On the surface, it seems they wouldn’t have a lot of influence on price. But as my source at the GSEs pointed out, each sale impacts the price of 60 homes nearby via the multiplier effect. And in this manner, the price pressures of the 232,000 homes that foreigners bought would impact 14 million homes.

Makes sense to me in that a "rich" foreigner buys the name brand product (in this case real estate in areas that have been showcased in media like media, and that have tourist attractions like disneyland)

Sadly I've come to believe the facade of an attractive California life style in many cases is like communist propaganda during the cold war!

For example did ya know american tourist can visit north korea? It's true at least a small part of it, like at the peace table on the korean DMZ where ya use to be walk around to other side (and technically be in the north), or

http://www.tripadvisor.com/Attraction_R ... gi_do.html

anyway, if ya go the common theme theme in the old USSR was a fancy facade hiding falling down infrastructure/economy.

My point is because of corruption/greed/mismanagement, life here in the USA is starting to look a lot what I've personally seen in many parts of the old satellite states of the USSR.

Check out this youtube video (starting at 3:24), where a Stanford University muni bond expert states san diego is at the being at the top of the list (for being the deepest in the hole overall for unfunded pensions and having an unfunded health care plan)

https://www.youtube.com/watch?v=BRr49iAgI9g

Sadly what I think is going to happen is foreign investors are going to wake up and realize things in lala land aren't built on solid ground.

http://articles.latimes.com/2014/apr/09 ... a-20140410

Basically I'm fearing the change in accounting rules next year which will expose "unsustaiable" underfunder public employee pensions and put these figures on a balance sheet, which will in turn affect bond ratings, which will then tighten up credit (causing an economic downturn)

To illustrate specifically why I am concerned w.r.t. San Diego, it seems bottom line here is 12+ BILLION off balance sheet debt?? (8 billion in pensions plus 4 billion in storm water fixes, and lots of unanswered questions IMHO).

FYI The 8 billion dollar range "pension" figure is just one of the things TPTB in SD don't want the voting public to know about

http://www.sandiegoreader.com/news/2013 ... -canceled/

http://www.sandiegoreader.com/news/2013 ... -whoppers/

There was just a news paper article a few months ago that stated "San Diego’s stormwater bill: $4 billion"

http://www.utsandiego.com/news/2014/feb ... st-shocker

So best as I can figure the $12+ billion figure I quoted for san diego, does not include health care costs!

Looking state wide in California there is 170+ BILLION off balance sheet that the markets will have to factor in (according to former Democratic assemblyman Joe Nation, a public finance expert at Stanford University)

http://www.city-journal.org/2013/23_1_calpers.html

The scary bigger picture is trying to figure out the global economy because of debt(s) in china, japan and the euro zone. I kinda think the game is rigged when Greece and Spain can borrow at an interest rate not much off the US prime rate. Then there is issue of Russia selling natural gas to China AND that trade will NOT be in dollars (looks like they are trying to weaken the US dollar as a "reserve currency").

I guess its blessing that I can see potential problems in the future, because I might be able to figure out a way to prep...

[PrestonSturges]

City dwellers have about twice the rate of college degrees as rural folks. Cities will trend liberal, while the sticks will become more reactionary. Expect rural real estate to be stagnant as the rural economy concentrates on religion and meth labs.

[vtsnowedin]

City dwellers have about twice the rate of college degrees as rural folks. Cities will trend liberal, while the sticks will become more reactionary. Expect rural real estate to be stagnant as the rural economy concentrates on religion and meth labs.

Simplistic. City dwellers retire to the country and bring their meth lab building grand kids with them. The churches in the country are mostly vacant while the golf courses are well attended. There are a lot of unsold regular houses out there with newly reduced prices while nice vacation homes and doomstead size blocks of land are selling quickly.

[PrestonSturges]

Seriously though, we still have an estate of 250 acres of excellent farm land that's all tree stumps and we will probably end up auctioning it for some absurd price or selling it for $1. Because it's all brush piles, ticks, and rattlesnakes it has zero recreational value.

[vtsnowedin]

Seriously though, we still have an estate of 250 acres of excellent farm land that's all tree stumps and we will probably end up auctioning it for some absurd price or selling it for $1. Because it's all brush piles, ticks, and rattlesnakes it has zero recreational value.

I was being serious. I'm doing a town wide reappraisal at present and going over the last three years sales that are not family related. There are no simple fudge factors that define what has happened after the 2008 event. Top end structures ,old or new, on choice lots are selling at or above what they marketed for in 2006. Run of the mill houses fifty to two hundred years old in the village on a paved state road are selling for sixty to thirty percent of what they brought back in 2006. I need to get this right so that sales over the next five or six years are within fifteen percent of the value we place on them this year. I have my work cut out for me.

[KaiserJeep]

Yes. My home which I bought for $123,500 in 1986 rose up to an astonishing $650,000 in 2005.

The crash was prolonged here, my house bottomed out at $420,000 in 2011.

Since then, the recovery bubble is about +53%, it is worth about $644,000 today, almost to the point it was at before the conniption.

[KaiserJeep]

I've been surfing real estate sites in Minnesota, Michigan, Illinois, and Wisconsin in search of the perfect rural retirement home.

To be perfectly frank, the area is still depressed outside of major cities and nearby suburbs. Housing prices are still declining.

The wife almost tripped over her tongue over this one:

http://www.trulia.com/property/3115756618-490-Craig-Rd-Edgerton-WI-53534

...basically somebody's horse farm outside of Madison, WI. Horse-drawn sleighs are visible in the grand old timber frame barn.

I am carefully being non-committal, the place looks like a lot of work to me. My tastes are more towards passive solar and super-insulated homes that could easily exist off-the-grid. I guess the Doomer mentality of the PO.com site did sink in to some extent.

[KaiserJeep]

As for foreign investors, it IS happening. Once every 8-10 months, an elderly Chinese man knocks on my door and inquires if I am interested in selling my home. He has bought several homes in my little planned community of 38 homes, and rented them out.

I'm thinking that when the next Great Depression arrives, he thinks American real estate in Silicon Valley will retain more value than land in China.

[EdwinSm]

Not my neck of the woods, but China might be going POP or just a little air might be leaking out.

Sharp falls in China's once-booming property market
....
Prices across China surged in the decade up until the beginning of this year.

The government decided to try to take some heat out of the market, so people like Jian would have a chance of buying.

The policy seems to have worked, but perhaps a little too well.

Property values have recently been falling fast in many Chinese cities, and some say that a property bubble could be bursting.

At one property development here in eastern Hangzhou, the asking price of new apartments has been reduced by 25%, compared to the original sales price in 2011.

....
For many economists this has all the hallmarks of a property bubble, though they disagree about whether it is bursting or merely deflating....

http://www.bbc.com/news/business-28244140

[JV153]

Sadly I've come to believe the facade of an attractive California life style in many cases is like communist propaganda during the cold war!

My point is because of corruption/greed/mismanagement, life here in the USA is starting to look a lot what I've personally seen in many parts of the old satellite states of the USSR.

Don't know about California but on google earth street view large sections of Philadelphia are just not shown. heh urban blight.

As to housing bubble, prices in Helsinki are going (have already gone way up) .

[Shaved Monkey]

Just saw an add on TV (first time Ive seen it)
Invest in US houses
You can buy 6 US houses for the price of one house in Australia.
They cost less than replacement and you "may" get good returns and growth.
Free flights to the US for approved buyers.

[inglorious]

http://www.bbc.co.uk/programmes/b03tqzqt - unfortunately the documentary isn't available to watch on the web yet. I caught a snippet of it and it seemed interesting.

Estate agent Savills estimates in the last year, as much as 85% of new build property in prime central London was bought abroad.

“Foreign money is definitely pushing up the price for Londoners,” according to Nadia Elghamry from London Residential Research.

“They come in and have money they want to put in to London as it’s a safe haven. They want bricks and mortar-property”.

In Hong Kong, British estate agents organise property expos for Chinese people wanting to invest in London.

For buyers there London offers good value for money. “It’s cheap. It’s as simple as that! £300,000-£400,000. People can afford it here and offer to pay cash,” says Hoi Cheung from SMART Property Investment.

There are a couple of other factors pushing prices up (it's a year old but still largely applies) - http://www.economicshelp.org/blog/8733/ ... ices-high/

Increased demand and not enough new builds. Buy-to-let investments are very popular as rents are constantly increasing. Low interest rates make getting loans a lot more affordable - in the short run. Mortgages have to be re-negotiated after a set period, say 5 years though and those loans may not be so affordable in the future if interest rates go up as they eventually have to.

While digging around I found this article which I thought was interesting - http://www.theguardian.com/money/2014/a ... -investors

[Shaved Monkey]

The Chinese have overtaken the US as the biggest property investors in Australia.

According to a recent Credit Suisse report, Chinese buyers are currently pouring more than five billion dollars a year into Australia's residential market.

The bank says close to a fifth of new properties in Sydney were sold to Chinese investors this year.

http://www.abc.net.au/news/2014-05-26/c ... om/5478392

[Pops]

Kind of getting down to the end of selling season so we had an open house yesterday. A few people showed, maybe a couple were interested, I'd say we netted one prospect. We have 2 pretty good prospects held up selling their own places and a third not on the market yet.


Realtor said the year has been disappointing, we had both been bullish earlier on. Prices are stable and maybe up a little, rates are down and banks are eager but it is just hard to close a deal.

I commented I think people are skittish, inflation in food and fuel, a sluggish economy with a job market controlled by employers and the stock market off in fairyland. He said: "Which should make your house attractive; growing your own food and firewood; with the big shop and pond and stuff. It is just what we are going to build. We would have made an offer if we hadn't started on our own place."

I told Susan out realtor is a doomer. LOL


He himself sold some land to WalMart last year and started on a house this year. Local banks are careful to dot every i and cross every t though and he got caught up in red tape at the bank on a construction loan. He's been stalled for months.

The market is for rentals. Joplin for example lost a bunch of owner occupied houses in the tornado but they are building back apartments.


On a side note, here in Missouri they have given up the pretense that Realtors are advocates for either party to a deal, they explicitly state that they are on the "side" of the deal itself, IOW, their interest is on the side of their commission - which of course anyone with sense knew all along
.