Impact of foreign buyers on US housing market

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NewToOC_IHB

NewToOC_IHB

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Could this even come into play... well-heeled foreigners from up north, across the pond, etc. taking advantage of the weak dollar and saving the US housing market from completing bursting? The article is about Canadians in particular but this variable comes up often in housing bubble conversations and I'm curious how big an impact it could have.



http://hosted.ap.org/dynamic/stories/H/HOUSING_SLUMP_CANADIANS?SITE=CAANR&SECTION=BUSINESS&TEMPLATE=DEFAULT
 
<p>Canadian knife-catchers, American knife-catchers, Asian knife-catchers......is there really any difference ? Good article. </p>
 
Yeah, I hear foreign investors have a thing for depreciating assets.



Sorry, couldn't resist. Really, though, investors are looking for good return. I don't see how a falling dollar helps their return.
 
I understand what you are saying... Still imagine you live in a climate with actual seasons and you've always wanted a summer home in Florida or Arizona or whatever and your currency's jump against the dollar suddenly made your dream such a bargain (relative to history/what you can get at home) now would actually be a good time to buy. Not as good as 1-5 yrs from now, true, but if this is a vacation home you are looking for vs. an investment it doesn't matter as much and in the meantime you are enjoying your vacation home right? Don't get me wrong, I'm not rushing to buy a Florida condo right now but I could see where some of those properties look like a steal now to someone in the UK for example.
 
<p>Being a knife catcher in any country is still a knife catcher.... That is if they take the long view and buy at super cheap prices. I'm kinda doing the same thing with homes/areas. But its still a push... i'm currently buying at VERY low prices about 10% of current prices. And even then, i'm taking a VERY long view on how long I will keep these properties.</p>

<p>good luck</p>

<p>-bix</p>
 
Foreign buyers can have a big impact on local RE market, but only in very limited and very specific areas.





Unless if we're talking about a small island country or territory, foreign purchases usually won't have enough impact to affect the national RE market as a whole.





Also, in certain places, they haver a "foreigner" price and a local price. Like a certain unnamed country where you have gringo vs. Tico prices, where gringo = auto inflate asking price.
 
NewtoOC - Let us answer your question with another question. Pretend you hear condo prices in Hawaii are falling, falling hard, and there is no end in sight for how far the prices will fall. Are you therefore in any particular hurry to purchase a condo in Hawaii?
 
They say this stuff in Miami too, and there are some sales to foreigners, and always have been, but this is certainly not enough to save us, or fill up all those empty condos.
 
Yes I could see it being a non-negligible factor in Miami... or on golf course, beach properties but probably not Irvine tract homes.

It's all a matter of how much money you have and how long you can delay gratification I suppose. My aunt who is a realtor in the DC area bought a condo on the beach in Ft. Lauderdale in 2004/5 right at the height and although she has to be underwater she says she doesn't particularly care that prices have fallen b/c she doesn't plan on selling it ever and she and the family have enjoyed pretty regularly for the past couple years. At some point, if you can swing it financially, you decide life is too short to wait anymore.
 
<em><a href="http://biz.yahoo.com/ap/071224/real_estate_foreign_buyers.html">Foreign Buyers Snap Up 2nd Homes in US</a>


Monday December 24, 1:10 pm ET


By Leslie Wines, AP Business Writer</em>







<em></em>







<em>The British Are Coming! and the Nepalese and the Venezuelans - to Buy in US Housing Market








The events of 2007 have made the U.S. much more affordable for international home buyers. Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.





</em><strong>Now, the voice of reason...</strong><em>





</em>

<p><em>Despite the news waves of foreign buyers in many U.S. markets, few suggest international investors by themselves can entirely offset the nation's housing crisis, brought on by the failure of many subprime mortgage loans made to home buyers with weak credit histories. Hammersmith Group's Valhouli stressed that the fact that international investors are helping to prop up some troubled housing markets only emphasizes the level of stress in residential real estate.</em></p>

<p><em>"Relying on foreign real estate investors is fundamentally as risky as relying on subprime mortgages," he said, noting that both phenomena distort demand and can conceal the depths of the problem U.S. home buyers and sellers face. "Foreign buyers aren't going to save the U.S. housing market. They're just a temporary fix like a finger in the dike. Fundamentals matter."</em></p>
 
<p>Europeans are starting to have their own problems, and there just isn't the volume.</p>

<p>Foreigners have been buying into the South Florida housing mkt for years; there are enclaves of Canadians, Germans, South Americans, etc. The overbuilding is such that this is only a drop in the bucket, and certainly isn't good to save us. And while the Europeans are willing to buy into South Beach, and other parts of the beach, they are hardly going over to Cape Coral/Ft Meyers.</p>

<p>Likewise, they are willing to buy pieces of Manhattan, but New Jersey? I doubt it.</p>
 
<p>The rationale would obviously be that if they feel housing prices in certain parts of the U.S. are approaching bottom and the dollar is poised to go back up, this would be a good time to buy. I think there are merits to this reasoning if you consider markets such as Las Vegas and Florida which have seen a marked decline. I have been watching the Vegas market closely because I am planning on buying there eventually, and they are approaching the rent/mortgage equivalency. With the dollar down significantly vs. Euros, this just might be a good time for them to buy, especially if foreigners feel the $ is on its way back up.</p>

<p>Having said that, I can't see how this blip would impact the U.S. housing market unless they came in shiploads.</p>
 
<p>Gepetoh - I agree this will be a regionalized effect. Wealthy foriegn investors will always be attracted to Vegas. We take it for granted here in CA, but it is like Disneyland for people outside the US. </p>

<p>I think the strong $CAN is driving a small amount of investment in the northern states, and the Euro is helping the east coast in a small way. But the influx of foriegn money here is CA is greater since it is viewed as "the place to be" to a lot of rich people on the pacific rim. Since the $US is sooooo weak right now, but will not remain so forever, this market might still be seen as a good buy for those with a lot of foriegn cash.</p>

<p>Thoughts...</p>
 
<p>Miami yoy is down more than 12% for October per C/Shiller. It probably has at least that much far to fall in the future and maybe twice that. Sellers are not yet capitulating.</p>

<p>Foreign buyers are not stupid.</p>

<p>Why do you think the dollar will improve except small blips in the next few years?</p>

<p>There are some Canadian snowbirds, who come down during the winter to the space coast, but few to no other foreign buyers. And the snowbirds are threatening to sell out and leave because property taxes are so high on non-residents.</p>

<p>Of course, even if property values come down 30% on the space coast, I will still have made a fabulous profit on my house, which we bought in late 96 for $162,000.</p>
 
<p>I see the dollar coming up AFTER the housing market stabilizes when we can allow our monitary policy more freedom to deal with inflation and the dollar. </p>

<p>I think the biggest reason the dollar will go back up in that markets are generally cyclical or act in a cyclical fashion....Stock market , RE, gold. There is always a nice up trend, then a down trend, then back up. But when there is an extreme condition like Nasdaq 5000, or the RE markets, then a severe correction is made. I just think that the dollar is at or approaching an "extreme" type condition compared to where it normally would be and that there will be a correction when the uncertainty lessens.</p>
 
I have a theory that the US is will go into recession (though not a major one) and this will have an impact worldwide. This will have a detrimental affect on foreign currencies so that the $ doesn't have to get stronger since the foreign currencies will get weaker
 
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