The Phaserl


Is this What Hit Housing in San Francisco, Manhattan, and Miami? Suddenly, Foreign Investors Pull Back…

by Wolf Richter, Wolf Street:

Chinese investors buy fewer homes in the US.

Oh no, we thought when we read the report from the National Association of Realtors. Not now! Not when there’s a huge unstoppable condo glut building up in the teetering housing markets of San Francisco, Manhattan, and Miami, when sales and prices are already dropping. Foreign investors are now needed more than ever to absorb this new high-end inventory and bail out these markets.

That’s what everyone has been praying for. The last thing we need is for Chinese investors to stay away from San Francisco and Manhattan; and Canadian, European, and Latin American investors to stay away from Miami.

But that’s what they’re starting to do – for the first time since the Financial Crisis.

The data for the just released NAR report is based on a survey of 5,960 realtors that covered “transactions with international clients during the 12-month period between April 2015 and March 2016.

In total, foreign buyers purchased $102.6 billion of residential properties, down 1.3% from the same period last year. They bought 214,885 housing units, and that was up 2.8%. But there are two categories of foreign buyers in the report: resident foreign buyers and non-resident foreign buyers:

Sales to resident foreign buyers – the “recent immigrant foreigners” who live and work in the US – rose to 126,300 housing units, the highest on record, after having fallen in the prior year. And the amount they spent jumped to a record $59 billion.

But sales to non-resident foreign buyers – investors who don’t bother to move in – dropped 11% to 88,500 housing units, the lowest since the Financial Crisis. That’s down 25% from the record year 2014. And the amount they spent plunged 19% to $44 billion, the lowest since 2013

In the press release, NAR chief economist Lawrence Yun explained it this way:

“Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year.”

These foreign investors are confronted with a dual problem:

Home prices in the US overall, according to the NAR, rose 6% year-over-year in March just before the survey was taken.

And the currencies of the countries where these foreign buyers obtained their wealth have declined or plunged, which made buying properties in US dollars much more expensive for them.

This led to a peculiar situation for these buyers, according to Yun:

“Led by Venezuela (45%) and Brazil (24%), at least eight countries, including China and Canada, saw double-digit percent increases in the median sales price of a U.S. existing-home when measured in their country’s currency.”

Who are the biggest buyers? The Chinese. For this report, “China” includes Mainland China, Hong Kong, and Taiwan. They bought expensive homes with a median price of $542,084. In total, they spent $27.3 billion, down 4.5% from a year ago. And the number of homes they bought plunged 15% to 29,195.

So who is going to bail out the San Francisco and Manhattan housing markets, steeped in an epic condo glut? No one knows.

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