What happens to the hundreds of billions of dollars that we send to China for consumer products, furniture, apparel, shoes and other stuff? Those billions of dollars are coming back to haunt our housing markets making it more and more difficult for middle income buyers to buy homes in California, Texas, Seattle, New York and other locations.
Foreign buyers purchased $153 billion worth of US residential properties for the 12 months ended in March, 2017. That is a massive 49% jump from a year earlier, according to the National Association of Realtors. Foreign purchases of US residential real estate surged to the highest level ever in terms of number of homes sold and dollar volume.
Most economists (not me and a few other progressive economists) have contended that American consumers should enjoy cheap Chinese furniture, rugs, electronics and clothing even if it is illegally dumped in the US. They argue that we are getting a bargain. But the side effects, the unintended consequences of this practice, is undermining home ownership in America. We will have all this cheap Chinese stuff and have no home to put it in.
Florida, Texas, California and New York drew the most international buyers. Foreign sales accounted for 10% of all existing home sales by dollar volume. In total, foreign buyers purchased 284,455 homes, up 32% from the previous year. Half of all foreign sales were in just three states: Florida, California and Texas.
Middle class home ownership has been the backbone of the American economy and the American dream for generations. The massive influx of foreign dollars is threatening our way of life. Home ownership is down significantly for the first time in American history. In some communities, home ownership has dipped below 50%.
Only 48.3% of households in Los Angeles and Orange counties lived in a home they own in the second quarter of 2017, the second lowest homeownership rate in the nation. US Census Bureau data released recently shows Fresno, California at 44.5%, having the lowest ownership among the 75 largest metropolitan areas. The New York metro area was third at 49.8%.
Housing analyst Logan Mohtashami isn’t surprised by low local ownership. He estimates that 82% of the working-class people in Southern California can’t afford to buy a home in their own ZIP code.
California’s statewide ownership fell to 53.8% rate, down from 55.1% at the start of 2017. It was fourth-worst in the second quarter behind Washington, D.C. (39.2%); New York (50.7%); and Hawaii (53.7%).
Jim Conlan, a real estate broker with Century 21 North Homes Realty in Seattle, says the real catalyst for the dramatic upswing can be found in China. “To be honest, Chinese buyers have been flooding this market the past few years,” says Conlan, who has been selling homes in Seattle for more than 30 years. “Some of them buy homes sight unseen, while others travel here for a kind of real estate tourism and buy real estate after only one viewing.”
For the fourth year in a row, buyers from China ranked first among foreign nationals purchasing property in the United States, according to a survey by the National Association of Realtors (NAR). US home sales to Chinese nationals totaled $27.3 billion — exceeding the total dollar sales figure of the next four countries in the rankings combined. According to Robert Gombos, owner of the well-respected Jasmine Directory, a human-edited catalogue that lists businesses topically and regionally, Chinese real estate related businesses in the US and Britain grew by 37.4% since 2013. (www.jasminedirectory.com).
Chinese investment in US real estate could hit $50 billion by 2025, according to a report by the Rosen Consulting Group and the Asia Society. In San Francisco Bay-area locations, home prices have risen by double digits in the past three years, while the number of buyers from China has nearly doubled since 2012, says Penelope Huang, a broker with Re/Max Distinctive Properties. The increased demand is making the area one of the toughest for younger buyers, she says. “Listings are snapped up in a week or sometimes less in this market,” she says. “That kind of pace of sales directly affects first-time buyers.”
In New York City, Chinese investors are increasingly gobbling up property. In middle-class areas of Brooklyn and Queens, the number of Chinese buyers has nearly doubled since 2012, estimates Jennifer Hsu, a broker with Halstead Property in Queens. “They’re now competing with buyers at the middle of this market,” she says, “and that added competition is making life tougher for people looking to buy their first home.”
The average home price for Chinese buyers in 2015 was $831,800, compared with $499,600 for all other international buyers, the study from Rosen Consulting Group shows. Mark McLaughlin, chief executive of San Francisco-based Pacific Union said that his brokerage firm spends about $400,000 annually on marketing in China, including having a Chinese-language website and advertising in Asian papers. McLaughlin estimates that buyers from China account for 15 to 20 percent of the San Francisco real estate market.
While Americans can buy condominiums in China, the Chinese government owns all urban land. Condo owners in China pay a land lease to their communist landlord.
In order to halt the decline of American homeownership, we should ban all foreign ownership of residential property. Norway and Australia ban the foreign ownership of residential property by non-residents.
Zoe Williams, a well-known columnist for the Guardian, proposed that Britain ban the ownership of residential property by non-resident foreigners. The Guardian is one of the few national British newspapers.
The United States should at least ban the ownership of residential properties by foreign non-residents. I would take it one step further and ban the ownership of residential property by all non-Americans, resident or not.
Joel Joseph is chairman of the Made in the USA Foundation, a non-profit organization dedicated to promoting American-made products. Email joeldjoseph@gmail.com. Phone 310 MADE-USA
From The Progressive Populist, September 15, 2017
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