Foreigners Driving U.S. Real Estate Prices
From today’s Wall Street Journal: With an eye on the weak dollar, American homeowners are increasingly seeking out buyers who come not from around the block or even a nearby town — but from other countries altogether. And foreigners, hoping for a deal, are more eager than ever to buy here. The upshot: The residential…
From today’s Wall Street Journal:
With an eye on the weak dollar, American homeowners are increasingly seeking out buyers who come not from around the block or even a nearby town — but from other countries altogether. And foreigners, hoping for a deal, are more eager than ever to buy here. The upshot: The residential real-estate market is getting a small shot of globalization.Given the fact that buying homes — and even quickly reselling them — continues at a fervid pace, it would seem that U.S. homeowners wouldn’t have to go abroad to find buyers. But in places like California’s Orange County and New York, prices have climbed so high that the pool of potential purchasers has actually shrunk — to folks who already own homes in the area and have built up equity, or who have quick access to a lot of cash. Expanding a sales pitch to foreigners, especially those whose native currency has risen against the dollar, can help pick up the slack. Another bonus: Since foreigners find it more difficult to get financing here, they tend to pay all cash.
Comment: While we don’t get the sense that many foreigners are buying in Brooklyn, there clearly is a strong spillover effect of local buyers getting priced out of Manhattan by overseas house hunters whose strong currencies make U.S. assets look cheap.
Sold in Translation [Wall Street Journal – Subscription]
When we were looking in Manhattan in 2002 we lost two places to all-cash foreign buyers. It was one of the reasons we came to Brooklyn in the first place.
As a whole, I do believe that foreign investment capital has been a factor in the New York real estate market. Given how much discussion there has been on this board about the dwindling pool of buyers for properties that require $200,000+ downpayments and $300,000+ salaries, the foreign investment capital theory makes sense to me.
It’s a good thing world sentiment toward the US is at low. If most of the world wasnt so pissed off at the US, there would be a whole lot more foreign buyers. As a sidenote, foreigners usually have terrible timing when it comes to RE. Japanese investors got torched buying up manhattan during the last RE bubble. Will the same happen to the Europeans.
I don’t agree at all with the article: I have moved from Europe to the U.S. three years ago, wanted to build equity and bought a brownstone in PS last summer.
In metropolitan Europe the real estate market is at least as crazy as in NYC.
Looking at the strength of the Euro and the weakness of the Dollar – the end of the downfall is apparently not in sight – buying property in the U.S. is the stupidest thing I could do with my savings in Euros.
Unfortunately the high cost of renting, the low interest rate for savings and the high cost of living and education in the U.S. simply did not give me much financial leeway to consider anything else but buying in PS which BTW, in itself, is not a bad thing at all…