Foreign investors: welcome!
So, the media is abuzz with rumors that foreign (non-US) investors are flooding the domestic real estate market.
Foreigners to Boost Housing Market? – By Stephen Bernard, Associated Press, by way of TIME magazine
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.
And, why would foreign investors consider buying in the US?
Can Foreign Buyers Move the Housing Market? – By Ben Casselman, The Wall Street Journal
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.
Just this month, the US trade deficit dropped to something like its lowest level in 18-months, because the cost of goods from the US were less than they were, previously.
Also important, real estate is considered very expensive in many global cities such as London and Paris, and those investors looking to spread their money (and risk) across investments of every type, the US real estate market seems ripe for the picking.
My opinion?
The idea that foreign investors will make anything more than a slight ripple in the overall US real estate market seems unrealistic.
Still, having someone, anyone, available to soak up some of the inventory (especially high-end) is a good thing, right.
Considering many of these buyers either pay all cash or make substantial down payments (either because they can or because they can’t get US financing), they make excellent investors and keep the US real estate market more stable than it would be, otherwise.
Plus, the investors usually buy in such high-profile, expensive cities such as New York, San Francisco (and, I hear … Boston). Keeping our prices high and inventory low.
And that’s what we need, right?
(Oh, and they are also buying in “ex-burbs” such as Jersey City, according to the New York Times.)