Foreign money

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acpme_IHB

acpme_IHB

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What are people's thoughts about foreign money and this current RE market, especially in places like Irvine. I live in Woodbury now and grew up in Villa Park. When I was younger I lived in Arcadia and San Marino, two towns similar to Irvine in that there has been a huge influx of foreign wealth into those towns. Once wealthy immigrants bought up and pushed up everything in San Marino, they started buying in Arcadia, tearing down the old homes and building mansions (or mcmansions/persian palaces, in many cases, but very large nice homes nevertheless.) I've seen the same happen in VP, Anaheim Hills, Orange Hills area.





In the Chinese immigrant community, Turtle Rock is considered the cream of the crop because to wealthy immigrants, they will spare no expense to put their kids in University High. So while think it's ridiculous that a 25 yr old, 2000 sq ft house in TR should be worth $2 mil, some rich family from overseas that's going to pay in cash may not think so.





Or is this factor too small vs the overall market to prop up the mkt on its own?
 
<p>Variants of this theme have come up a lot on this forum. Basically the template is as follows:</p>

<p>Premise: People of catagory X are willing to pay any price to buy homes in location Y.</p>

<p>Conclusion: Therefore, prices in location Y will always be high.</p>

<p>X is usually some sort of group like professional DINKs, millionaire investors, or wealthy immigrants. Y is usually some exclusive neighborhood or city. This argument is invalid. Not to say that there not some places where both the premise and conclusion are true (Malibu, Manhatten, maybe Turtle Rock someday), just that the conclusion does not logically follow from the premise.</p>

<p>Why is it invalid? No matter what someone is willing to pay, they only have to pay enough to outbid the marginal buyer. If the some non-immigrant family is willing to pay $800,000 for that 25 yr old 2000 sq foot house, but above $800K they decide to buy in Northwood instead, then the wealthy immigrant only has to pay $800,001. The fact that they are willing to pay $2mil doesn't enter into play. Substitute goods keep prices in line.</p>

<p>So, they only way for people of category X to have much affect on the price is if they themselves become the marginal buyers for location Y, and are forced to outbid other category X people. This does sometimes happen, but it is fairly rare. Will it happen in Irvine? I don't know, but to me it seems like Irvine is still mostly "normal" upper-middle class people for now.</p>
 
<a href="http://piggington.com/the_dumb_money">The Dumb Money</a>




Foreign money is always late to the party and generally a loser. Notice how they buy the downtrends.





<img src="http://piggington.com/images/dumbmoney.jpg" alt="Foreign purchases of US Assets" />
 
Umm, back in 05, I was in the sales office and an older korean couple asked if it's okay to pay in cash?!!...600k. Wow. More recently, a condo in Woodbury sat on the market for nearly a year at 560k. Yet, a similar condo selling in the low 600k is now pending sales. And the buyers are ...huh hum. =)
 
A friend of mine has a theory that if and when china ever attacks or causes trouble in Taiwan, that all of the Taiwanese elite will all move to Irvine thus skyrocketing the demand of homes here.
 
<em>"A friend of mine has a theory that if and when china ever attacks or causes trouble in Taiwan, that all of the Taiwanese elite will all move to Irvine thus skyrocketing the demand of homes here."</em>





irvine_native,





That is one of the funniest bullish arguments I have heard. If people believe we need a foriegn war -- which could potentially ignite WWIII -- in order to save our housing market, things must be pretty bad.
 
<p>Irvine_native,</p>

<p>I have seen where taiwanese immigrated to Canada back in the late 80's granted that they have huge assets. And they have transformed a particular city in Canada. I believe it's either British Columbia or Vancouver. </p>

<p> </p>
 
You're probably thinking about the city of Richmond, in the Canadian province of British Columbia. Technically Richmond is part of the Greater Vancouver Regional District but is not part of Vancouver city. Many people from HK and Taiwan moved there because Canadian immigration policy is looser than Australia or US.





But the #1 destination for Taiwanese businessmen and immigration is still China, estimates range from over 1 million (http://www.austrade.gov.au/Asian-Tiger-Hidden-Treasure-Looking-at-Taiwan/default.aspx) to 2.5 million (http://www.cw.com.tw/english/article/370110.jsp) Taiwanese currently residing in China, from an island country of only 23 million people.





This is probably getting off-topic... I only posted to insert some facts and numbers. Perhaps threads under "water cooler" is more suited for this type of discussion.
 
Having been to Asia a few times I would have to say that those who have $ can definately grow it faster over there. Lower tax rates, and in some cases no taxes, coupled with higher returns on your money combines to makes a huge impact on invested money.
 
I believe San Marino was a very expensive city even before Taiwanese showed up in the late 80s. Arcadia might be a different story though. The rich Chinese/Korean/Japanese will save the market simply don't hold water. Having attneded USC and suffered through five years of PhD and 2 years of MBA, I have met fairly large number of really really rich Taiwanese/Chinese/Korean. They behave very differently than people described by BK in his earlier post. Most of the Chinese in Irving are not from rich families, they are not even from upper-middle class families, most of them are just your average middle-class people. I believe in order to be qualified as upper-middle class, a family needs at least 250k a year.
 
250k/yr would be in the top 1.5% of american households. i think most of us here, being interested in housing in irvine, probably have a skewed perception of what middle class actually is.
 
<a href="http://bigpicture.typepad.com/comments/2007/09/foreigners-and-.html">Foreigners and US stocks: the ultimate contrarian signal?</a>




Will rich foreigners step in to become bagholders for the decline in housing prices?





<img src="http://www.irvinehousingblog.com/wp-content/uploads/2007/09/foreignerusstocks.jpg" alt="" />
 
<p>Nice info, but I hate these single data point charts. One wants to put faith in them, but it's n=1.</p>

<p>In fact, that the red line has already surpassed the past highs invalidates the thesis more than supports it.</p>
 
<p>Tourbillon,</p>

<p>Marshall MBA? Fight On! </p>

<p>I have to concur, I think most Asians in Irvine would not be classified as "wealthy", just well-off. The wealthy ones send their kids to private schools - Phillips Academy, Marlboro, Westlake, etc. Heck, even the not-so-wealthy ones go there on leverage if they can!</p>
 
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