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It's Official: Chinese Buyers Have Left The U.S. Housing Market
Overnight the NYT wrote a gargantuan, 3,800-word piece titled "Chinese Cash Floods U.S. Real Estate Market" discussing the impact of Chinese buyers on the US housing market. There are just two problems with the NYT's herculean effort: i) it is 5 years late in covering a topic this website has discussed extensively since 2010, and ii) it is wrong.
Recall that as we forecast in our take on a post-devaluation China in early September, with Beijing now actively cracking down on hot money outflows and instituting draconian capital controls, two things would happen: bitcoin - as China's most recent preferred mechanism of circumventing capital controls - would surge (it did), and Chinese investment in offshore real estate would tumble.
It has.
Because while the NYT was writing an article titled "Chinese Cash Floods U.S. Real Estate Market" that should have been published in 2010, the WSJ came out with a far more accurate piece, titled the opposite of the NYT piece, i.e., "Chinese Pull Back From U.S. Property Investments" about how Chinese buyers are no longer the marginal buyer of high end US real estate.
Here, just as we predicted, is a summary of the state of the US housing market and the one key support pillar which is no longer there.
Capping a five-year real-estate binge, Chinese nationals surpassed Canadian snowbirds as the top foreign buyers of U.S. homes for the year that ended in March—the most recent annual data—scooping up everything from $500,000 condos in New Jersey to $3 million vacation homes in California to $13 million Manhattan condos.
But in recent weeks, some Chinese buyers have started to pull back, scared off by China’s stock-market selloff, slowing economic growth, currency devaluation and tightened restrictions on capital outflows. On Friday, China’s benchmark stock index fell by 5.5%, its biggest daily slide since August, as Beijing authorities stepped up a crackdown on the securities industry.
* * *
Yang Bin, a 38-year-old businessman from Beijing, said the economic slowdown has stoked his desire to purchase a home in Silicon Valley. “I see many problems with Chinese universities, and the environment and air quality here aren’t very satisfying,” Mr. Yang said. With a budget of about $1 million, he said he wanted to buy a home that his now-8-year-old child would one day occupy.
For now, Mr. Yang is caught in the dilemma prompted by China’s economy, which, he said, “has increased my desire to buy a house in the U.S., but also requires me to wait and watch more carefully.”
Winter is coming.
“We are ready to embrace a winter for Chinese buyers in the next one year, two years,” said Daniel Chang, a New York City-based broker at Sotheby’s International Realty. Mr. Chang, who sells properties in the $2 million-to-$10 million range, said about half of the clients served by his team are Chinese.
It also means the end of obnoxious, scripted "realty TV" shows about millionaire real estate agents .
Christina Shaw, a Realtor with Re/Max Fine Homes in Newport Beach, Calif., said one client who gave her a budget of $10 million to buy two houses in the area was now looking to reduce his budget by about one-third.
A butterfly flaps its wings in the Shanghai Composite and luxury home sales in the US tumble:
Interest from Chinese buyers “went dark” for several weeks after stocks becan their sharp fall, said Tom Mitchell, president and chief operating officer of Tri Pointe Group, a home builder in Irvine, Calif. China’s main stock index, the Shanghai Composite Index, is down 38% since its June peak.
If it seems like it was only two months ago when we wrote that "80% Of All New Home Buyers In Irvine Are Chinese", it's because that is the case. However, the Chinese buying frenzy is no longer present. "Foreign Chinese buyers make up about 30% of customers in a handful of the company’s developments in Orange County and the San Francisco area. Price increases there, he said, have prompted clients to “pause and think.”"
Chinese buyers are now officially spooked: Zhang Xin, chief executive of SOHO China Ltd., a real-estate developer, said last month she wouldn’t buy overseas real estate today because many cities abroad are too pricey.
Some are hoping the lull in Chinese buying will be short-lived: "real estate consultants and brokers say the pullback likely is temporary. Many Chinese view U.S. real estate as not only a good investment but as a haven for savings. Some Chinese buyers also figure a U.S. address would make it easier for their children to enroll in an American college."
“In the very short term there will be some impact for people who don’t have a foreign income stream or who don’t have a bank account or funds in overseas banks,” said Frank Chen, executive director and head of research at property consultancy CBRE China. “But the outbound real-estate investment trend is likely to remain quite strong.”
Perhaps. For now, however, the US luxury market is about to enter freefall, as the marginal buyer enters hibernation.
Even a temporary pullback could hurt markets where Chinese buyers target some of the priciest American homes, often paying in cash. The average purchase price of existing homes in the U.S. by foreign home buyers in the year ended in March was nearly $500,000, nearly double the price for all buyers, according to the National Association of Realtors. One-third of Chinese purchases were concentrated in California for the year ended in March, according to the National Association of Realtors, trailed by Washington, D.C., with 8% of purchases, and New York, at 7%.
Many are eager to spin this as good news:
Some builders also could feel the effects. The chief executive of Walnut, Calif.-based Shea Homes, Bert Selva, told investors this month that the company has seen a “significant slowdown” in Chinese buyers in Orange County.
“That buyer is really drying up. To be honest, I don’t think that’s a bad thing, because I think there was a lot of frenzy driven by that, pushing up prices a bit,” he said in a conference call.
We doubt Bert will share the same sentiment about the collapse in his company's revenues.
Going back to the NYT being woefully inaccurate with its report, here is why they are, as we said, about 5 years late.
Chinese residents began buying American homes in large numbers about five years ago, driven largely by growing wealth and a desire to safeguard savings against political instability, brokers and economists said.
American homes looked like a bargain after the real-estate crash, drawing busloads of Chinese buyers to see properties in California and Manhattan. To many, it seemed “a gold mine everywhere,” said Calvin Lo, a real-estate agent at Berkshire Hathaway HomeServices in Southern California.
Better make that bitcoin mine, because unless the Chinese find a way to smuggle billions using the only method left available, the luxury US housing market is looking at what may be unprecedented freefall.
Chinese individuals are limited to annual overseas investments equal to about $50,000. For years, Chinese have surpassed that limit, in part, by funneling money through relatives and employees. In recent months, the government has made it tougher to transfer money abroad, said real-estate brokers in both countries.
“It’s like barbarians at the gate,” said John Chang, a real-estate broker with Re/Max in New York City. Chinese families want to buy, he said, “but they just can’t get the money out.”
Of course, those betting on a return to the US luxury market may be better off just buying the medium which the Chinese will use to funnel the required funds to the US - bitcoin, which a quick check shows has resumed its climb and has again jumped by about 20% in the past week alone.
Finally, our condolences to the Fed: as Chinese buyers exit US luxury housing double time, watch as the bottom falls off the top in housing, and slowly at first then very fast drags the rest of the market lower, forcing the Fed to undo whatever tightening in monetary conditions it may have launched, or is contemplating.
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Dang. It's that darn American curse >>> http://wp.me/p4OZ4v-3z
Go Al Pacino!
Fat lady > singing
< Good riddance.
< Oh noes!!!!
I'm glad they're leaving the market. They need to fly back to their villages. Their giving green cards to everybody these days.
https://thenanfang.com/chinese-police-secretly-investigating-money-laund...
Chinese money launderers snap up Vancouver real estate because of lenient border laws, loose regulationshttp://www.theprovince.com/travel/chinese+money+launderers+snap+vancouve...
Police sent from China have been secretly investigating officials suspected of money laundering in Canada, where they are believed to have invested a “staggering” amount into real estate.
Vancouver city officials and police have declined to comment on “Operation Fox Hunt”, which was originally described by Xinhua as a Chinese crackdown on officials suspected of corruption who have fled overseas.
It's a little dated, but since then the Canadian gubmint has made a list of every foreign Chinese holding RE in Canada and USA is compiling the same. Will they tax it? Confiscate it?
Who knows? However, I doubt the PRC will forget about those Trillions.
They're in Rowland Heights, San Marino, and Arcadia, CA, too, and for the same purpose.
chinese buyers of US housing aren't going anywhere.....
long game.... taking a break is not leaving
overaly dramatic headline and all lol americans always have such short time horizon
i guess this is culture difference between cultures that are 1000s vs 100s of years old =p
I believe that the Chinese investor has taken it in the shorts.
Frip This House.
The Chinese always wind up holding the bag at the end- it's just their nature.
Please pimp your grade school blog elsewhere. Dude, really, you're embarrassing yourself.
Me Chinese, me play joke, me fuk up FED last hope.
‘Scarface’ Estate Sells for a Fraction of Its Original Asking PriceDirect link> ‘Scarface’ Estate Sells for a Fraction of Its Original Asking Price - WSJ
Total BS...they'll find a way to get it in here.
at the risk of getting their head chopped off. they are cleaning house quick and easy to send a message.
To launder money legally in the USA:
1 Bring cash.
2 Buy real estate with cash.
3 Sell real estate.
Laundry cycle complete and legal!
Hey, if FED wants to prove that central run economy can work let them try it...
GOOD. Maybe nationals can start buying their own homes in their own countries again, instead of getting crowded out by hordes of speculating foreigners flush with Fed fiat. (Well, except for the bit about the 'government' actually owning all homes in the country via the property tax of course.) What was that quote, something about bankers more dangerous than standing armies and your children waking up homeless on land their forefathers conquered?
Thank you, China. Too bad national governments couldn't have done the right thing by their populations in 'better' times.
(Snide LOL at the MSM not managing to keep their spin straight among themselves. What, only 6 major media owners and even with that small number we still have two opposing 'narratives'? How's the cognitive dissonance out there going to manage this one? More difficult to selectively forget this kind of straightforward stuff than it is to forget all those conflicting military narratives. Clearly, the CIA needs to expand its scriptwriting department.)
Just wish the media could make up their mind. Not two days ago there was an article about how Chinese are moving into the American market and buying MORE housing not less. http://www.nytimes.com/2015/11/29/business/international/chinese-cash-fl...
So which is it?
You narcissistic CUNT.
You did not READ THE ARTICLE HERE BEFORE POSTING. That is obvious.
What is worse is that THREE OTHER PEOPLE DID NOT EVEN CATCH THIS so it is also OBVIOUS THAT THEY ALSO DID NOT READ THE ARTICLE AS IT POINTS OUT THE SCHISM IN THE NARRATIVE.
You are the IDENTIFIED NARCISSISTIC TWIT. They are unidentified NARCISSISTIC, SELF IMPORTANT, TWITS.
They think that their arrows mean something. They actually do communicate a message. It is just not what they think.
LOL...at them.
It is far more importamt to you that your ignorance is exposed rather than READING THE ARTICLE and, perhaps, LEARNING SOMETHING.
LMAO.
I hope that the entire economy cascades down on top of your head so that your children starve. But it will only matter to you if you starve. Other than that it is just no big deal, right?
Well this will never do.
Isn't there something on page 19,012 of the ObamaCare Act that bails out realtors, bankers, local taxing authorities and home builders?
Fuck the realtors.
The National Association of Pimps and Hookers and Realtors says it's time to buy.
Don't they always?
<<says it's time to buy>>
What I can't understand is how people started treating a bunch of salespeople like they had any expert or advisory capacity. They're SALES help, for crissake. This is what salespeople DO. Sure, the odd good (honest, long experienced) salesperson can be useful -- I'd listen to a car dealer who'd been in business 20 years, to some degree -- but would people be taking serious advice on their buying decisions from any other saleshelp group? If they did, I bet it'd sound sort of exactly the same...
(In related news, I passed a couple of car lots last week and their signs out front did say -- that it was time to buy!)
It takes less than 2 weeks of education to get a real estate license in my state. I have more respect for used car salesmen.
When I was a Realtor in 1986 I had a bumper sticker on my car that said "Now Is A Good Time To Buy A Home". It was a good time then, but times change. The bumper sticker does not.
Shea homes...lol shit builder...just like Pulte...DR Horton... and KB...they will all start taking Bitcoin within the next year as lack of Chinese demand eats into bottom line.
One more good flush of US housing now that everyone is in a low 30yr fixed...that'll do it!
I agree. Those clowns all build overpriced barns.
My buddie Bunga Bunga want's me to explain a Ponzi to him though.
A simple ponzi is a few people that own everything, and buy some advertizing to sell their SHIT.
A complex Ponzi, is when a small group of people get together, and create an unsustainable ecosystem, based on a piece of "dog shit" idea, and cash out after all the imbeciles have committed.
I see you have still not understood the Satoshi white paper. Like others you will get it some day and buy when it hits $10,000.
What's your address. I want to send a dozen "jelly donuts"?
If you don't understand the definition of "ponzi" after all the information I've provided, you're clearly lacking [common sense]
In theory, the blockchain works.
All the assclowns that provide the infrastructure, are the ponzi. Bitcoins aren't stolen from the blockchain, they're stolen from intermediaries.
The best way to protect yourself, is to reduce your exposure.
Bunga Bunga I'm sure you're a nice person. I appologize for picking on you.
I see you didn't understand it, yet. I got it 3 years ago and bought some. Since then Bunga Bunga has a lot of Bunga Bunga
There will be no interest rate hike ever, I repeat There will be no interest rate hike ever. Mr Yellen is afraid for her chicken fucking neck.
As I promised, I'll eat my own shit if they raise it in 2015.
Lots of buying, but very little evidence of actual cash being brought to the table. Just lots of buying on credit.
The Chinese belief in the superiority of an American university education [sic] shouts to the Heavens just how bad their judgement really is.
what if their belief is not in the superiority of the American university but their belief in the superiority of the reputation of the American university?
They must not get reports on the snowflakes demanding safe spaces over in China.
BTW not all of the Chinese students are doing well. http://www.newsweek.com/us-colleges-expelled-many-8000-chinese-students-...
The new generation get frustrated and quit per this clip. Little Emperors and Princesses run home and their parents do not mind.
https://www.youtube.com/watch?v=M8-Uxx0oHSA - Critical Worker shortage in China (couple of minutes)
From 9-14 to 9-15 Sydney house prices went up ~15% but the aussie$ fell by around the same percentage against the USD (and gold) negating any profits for overseas investors. The aussie hit a low in september but also house prices have fallen since that time. Now the reserve bank is hinting at a further rate cut which will put further pressure on the currency. Chinese buyers still want to buy in Sydney and Melbourne but restrictions by both the australian and chinese governments are making those transactions more difficult. The sydney auction clearance rate this last weekend was 56% vs 70% for the same weekend last year. This is springtime in Sydney and it's traditionally the strongest buying period. The bubble stuill seems to be strong in Auckland but I would be a nervous buyer in that market.
When a 2 bedroom unit in Panmure,Auckland sells for 555,000 you know that something is very wrong.
A repeat of the Japanese buying of Hawaii.
California will leave a bitter taste with the Chinese after the liberals tax them to death for their bloated pension funds.
At the wetback end of the line, the tax collectors are gearing up to shear them for the basics: hourly income tax, low-cost property tax, modest disposible income retail tax. At the luxury end of the market, the taxmen are rubbing them palms thinking about how many freeshitters they can keep in EBT cards courtesy of the Chinese "investor".
How's that DIVERSITY taste, Chinese investor??
It's not like they actually worked in the sweatshops, to earn that money. They merely ran the show and had the right connections, to make their millions.
That being the case, they don't care about the temporary RE correction that might/will happen: Like gold bugs, they are in it for the long run.
BTW... I got this feedback/insight from several Chinese millionaires from south China. Over dinner and drinks. Where the real intel is obtained.
"They merely ran the show and had the right connections, to make their millions."
Translation: They got their money the old-fashioned way: They fucked people over to get it.
You can see these arrogant pricks swanning about the O.C. in designer jeans these days.
Fuck them and the smog-choked, suicides they left behind...
Only non natives call it "the OC".
2nded. We call it North Orange County or South Orange County.
There can't be any influence on the FED. Surely what happens in China does not have a bearing on the US economy, that'll be an insult.
A few anecdotal recounts doesn't make it "official". But it is slowing. My wife found a SFO-PEK ticket online for $276; about 1/5 of the cost a few years ago. That is a print that speaks volumes to me. As does the fact that she is checking out one-ways back to China!
Pent up demand and the desperation to channel monies abroad in China still exist. This is against the growing backlashes from whistle blowers and the unabated hunt for illicit monies often not distingushable in a a country on a corruption purge. It is just that the ponzis are not suffciently sophisticated in US and elsewhere to capture the bonanza. Morality aside, why complain on this circulation of funds tainted from thefts on intellectual properties over the years that are coming home. Give them lemons when they want them.
For those who are memory challenged or too young to know anything that happened 2005, the Japanese did the same thing at the end of the Roaring Eighties. They bought a big piece of Rockefeller Center and thousands of expensive penthouse suites and mansions at the peak of the bubble market. Before the ink was dry the market crashed and they lost many billions of dollars.
Rich foreigners buying up expensive American real estate shouild be the canary in the coal mine for smart people who have more than a 10 year memory.
Mosr murkins have the attention span of a fruitfly
It's those goddamn libruls. Thems whut dun it. It's always them goddamn libruls. It's the niggers and Chinks and the Mezicans and the Mooslims and the Joos. Thems who ya need ta point the finger at. Thems whut dun it.
The factz beez raysis. Tharez no chinese buying homes in murca. Warez mah safe zone?
After the malaise casting a pall over our nation is finally over, pretty much anywhere you choose. Soon, that little nigger boy's ass is gone! It's just unfortunate it has taken eight long years to get rid of that little nigger boy. When he's gone we can all go back to business as usual, not having to deal with the reality of a little nigger boy as the President of the United States of America, and we can all get back to focusing on the important issues facing the country.
Don't forget that Obama was elected. Twice. When he is gone, the retarded citizenry of America will elect another compromised puppet-on-a-string. Then ZH will complain about him/her for 4-8 more years.
Rinse and repeat. Watch the movie "Idiocracy". It's here now.
It's so cute when people still think our elections are real.
no Arthur: it's unemployed southern conservative christians that "did it"
feel better?
Sarcasm in spite of yourself, you nailed every one. Bravo Sir ---
Could be that the manipulation of the price of gold makes previous buyers feel not-so-rich. They aren't selling, but just not feeling as robust as they had been. The manipulation of gold is having a lot of unintended consequences around the world.
Chinese are gamblers, even the prudent ones - it's in their DNA. When it's 'on', it's on like Genghis Khan. But when it's off...
It is not just the Chinese. Pretty much foreigners of all types are selling in my neighborhood. They bought after the 2009 crash when their currencies were much stronger against the dollar. Now they have large appreciation plus more gains when the strong dollar gets converted back to their currencies. They now have 50% gains after paying all the expenses of enjoying a Florida winter retreat.They will sell to Americans who will end up being upside down before too much time passes. I think it all sucks balls that they were allowed to buy in the first place.
IF, and that is a big IF, they can sell to Americanos. Many richer Americanos are buying in South East Asia, Japan and elsewhere. Buying in USA is no longer a good deal.
PATHETiC
that the Chinese can stop their money comin out but we cant stop it comin in overinflating out real estate and filling the place up with cheating school kids aging grand parents and absent parents who go back to China to receive more graft and printed remimbi
Who wants to live next to a bunch of Chinese money launderers with cheating kids maoist culture and spitting and flip flops!
I hear you brother i live in Irvine California. Nothing but chinks, indians and muslims. Can't wait to get out of here.
Sad new for Australian real estate too, which has kept on bloating stubbornly just because.
Now the USA is dreaming of Aussies to pick up the slack
http://www.news.com.au/travel/travel-updates/us-airfares-hit-new-lows-fo...
My neighbor's house was bought by Chinese nationals this year...I don't think the stock market is affecting them too much...
The frenzy could continue...
1. US government announces fast track dual citizenship for any vetted Foreign national (family) who purchases and maintains a home in a designated city.
2. Participating R.E. sanctuary cities, voted per city and approved by the state, are added to the list.
3. Program has a set end date. (to add urgency)
I am not advocating this as a course of action.
"Well, bye."
http://youtu.be/MBfYQOSSPqc
So wrong round eye.
I think it's due to the cash outflow limitation to $50k a year, that makes it trickier to buy a house that's $500k or more!
No, the limitation is nothing new
They left because tey know the colapse of us dollar is immenent, and this coincides with chinas freefall... there about to get goldman sached.