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Jean,
Thanks for sharing the article. I don’t think it is a good thing. My guess is foreign investors will pay too much and drive local investors out of the market.
In Texas, we have an influx of investors from other states come here to buy. Most of them paid retail prices for new construction – even though they were told they were buying at 20-25% discount.
It was common to see 10 – 15 for rent signs in a new home subdivision. All homes bought by out of state investors. (And they wondered why they had a hard time renting them) They flooded the market with rentals and caused rents to go down too.
With other properties, like REO’s, they would pay 85% of market value even though local investors would not pay more than 70% or less depending on the condition. Same thing happened at our monthly foreclosure auction.
The result was the out of state investors made some bad buying decisions. Our prices looked dirt cheap compared to comparable properties in their area. And I think they same thing will happen with foreign investors. They will believe what ever the real estate agent tells them.
I don’t think it is a good thing.
Jackie
We owe the Chinese about 5 billion, yes 5 billion. What are
your thoughts on this article? Does this mean we are once again being bailed out of our mismanagement of money and credit, or, is this a good thing?Foreign Cash Could Provide Much Needed Relief for U.S. Housing Market Thanks to Weak Dollar
NEW YORK (AP) — The weakening dollar has caused many problems for consumers, but it may also be providing the fuel for one unintended — and very welcome — benefit: a rally in the struggling housing market driven by foreign investors.
For an individual or developer trying to sell a home, interested buyers are just as likely to already have a place in London or Paris as they are to be first-timers new to the market.“European investment is likely to pick up,” said Mark Vitner, chief economist for Charlotte, N.C.-based Wachovia Corp. “Now is the time to come over and take advantage.”
The theory goes that foreign investors step in and replace first-time home buyers who have been squeezed out of the housing market during the recent downturn. These new investors in turn allow current homeowners to sell and trade up to larger homes.
That will help restart owners moving up the housing ladder, a process that had been key to economic growth in recent years.
Some mortgage brokers are already seeing a boost in inquiries about buying property from overseas. Dan Green, a certified mortgage planning specialist and author of TheMortgageReports.com, said the number of inquiries he’s received from outside the U.S. is probably five to 10 times larger than it was a year ago.
A boost in the number of homebuyers would provide needed relief for the beleaguered housing market.
Home sale prices fell every month in 2007 through August, according to the S&P/Case-Shiller index. Existing home sales have declined for eight straight months through September, according to the National Association of Realtors.
As the housing market has plummeted, the dollar has also sunk to record lows compared to other currencies, such as the euro, meaning more spendable cash in the U.S.
“The dollar is on sale,” said Susan Wachter, a professor of real estate at the Wharton School at the University of Pennsylvania.
Today, a foreign buyer would need only 34,100 euros to make a $50,000 down payment on a house. At the beginning of the year, the same buyer would have needed 37,920 euros to make the same down payment.
The influx of foreign investors can help set a floor for the real estate market, Green said.
Because lending guidelines have been so restricted in recent months due to rising delinquencies and defaults, it is more difficult for U.S. customers to get a home loan. First-time homebuyers are especially being squeezed right now, Green said, and that is where the foreigners can provide support.
For investors from countries like Ireland, the exchange rate is providing a boost in spending power, said Phillip Hegarty, the sales director for Castleroc Estates, a Dublin, Ireland-based firm that works with Irish investors to buy residential and commercial real estate in the United States.
“It’s an enticing investment,” Hegarty said.
Hegarty said there is plenty of demand for investment in locations like Chicago and New York, and often that demand exceeds supply.
But New York and Chicago are not the only locations likely to provide popular options for foreign investors. Places like Florida and California are likely to see a surge in foreign investment.
“In a market with great turmoil, (the weak dollar) is one factor supporting some key markets,” Wachter said of the weakening dollar.
Wachter said markets like Miami and San Francisco, which are under pressure from the U.S. slowdown, are increasingly being supported by foreign investors.
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