Chinese & Canadian Investors Helping To Stabilize Housing Market
Chinese buyers lead foreign investment in US housing market
As the U.S. housing market slowly starts to recover, foreign investment is helping it along.
According to the National Association of Realtors, non-American buyers accounted for $82 billion in home sales last year. More than $7 billion of that is by the Chinese, who are now the second largest foreign home purchasers after Canadians. They’re buying high-end, multimillion-dollar homes from California to New York and paying cash.
“They’re probably the top 1 percent of the Mandarin speakers that are coming from China,” said Brent Chang, a Coldwell Banker realtor in Southern California. “They’re really the people who have their own businesses or maybe were part of the government.”
Some of these homes are specifically catered to Chinese buyers. Fox News visited a home listed at $8 million in Pasadena, Calif., that had two kitchens, the smaller one had ventilation for the cooking for aromatic or “stinky” foods like fish. It also has a lower level in-law suite and even a koi pond.
“People from China do a lot more business in their homes so they want their homes to really scream that they’ve made it and they’re successful, ” said Chang.
The Chinese like the U.S. because their money goes further. In Shanghai, $2 million might only get you a two-bedroom condo.
“You get a huge bang for your buck, you get land, you get good schools, you get a safe environment, nice community life, ” said Linda Chang, a realtor who works with her son, Brent, in the San Marino and Pasadena areas of California.
Chang says while many other real estate markets have suffered, her area has flourished thanks to Chinese and other foreign buyers.
“It’s been fantastic for the U.S. housing market because we have not suffered as other communities have,” said the elder Chang. “In fact, our property values have increased.”
While some of the Chinese buyers live in the U.S. full or part-time, realtors estimate about 40 percent of the homes are for investments. They’re snapping up houses in states hit hard by foreclosures such as Nevada and Florida. Some are buying two or three homes at a time.
According to Shanghai magazine Hurun Report, mainland China has almost 1 million millionaires and nearly half of them say they want to invest in the United States.
“It’s a sign of their status,” said Betty Chan, who deals with Chinese buyers in Las Vegas. “You can show off to your friends and family that I can buy something overseas, not everybody can do it.”
Chan continued: “Most Chinese like to own a Mercedes … it doesn’t matter whether a Mercedes is a good car or not. It’s just showing their status in the community, so owning a foreign house is pretty much a prestigious status in China, so they’re proud to tell their friends: ‘Hey, I own a house overseas.'”
Buyers from China also invested almost $2 billion in commercial property in 2011, or quadruple what they spent several years ago.
Short Sales Now An Option For Homeowners Who Are Current On Their Underwater Mortgage
One of the questions that I get asked about on occassion is ” Can I sell my home via a Short Sale if I am current on my payments?” Up until recently almost all short sales involved mortgages where the homeowner had fallen behind on their mortgage and were seeking a short sale as a way to avoid foreclosure.
Recently, strategic defaults have become popular and many banks are now willing to let a homeowner do a short sale even if they are current on their mortgage.
Trending up: short sales outside foreclosure
MIAMI – Dec. 7, 2012 – More Florida borrowers are short selling their homes without defaulting on their mortgages, a far-reaching change from days when stopping payments was the only sure-fire way to spur bank approval.
About 29 percent of all Florida home sales during late summer and early fall were short sales granted when the homeowner was not yet in foreclosure, according to a new RealtyTrac measure of non-distressed short sales. That’s an increase of 32 percent from the previous year.
In Palm Beach, Broward and Miami-Dade counties, 21 percent of sales were of properties where the owner was not in foreclosure, but owed more to the bank than the home was worth – a 49 percent annual increase. The difference between the sale price and unpaid mortgage balance in South Florida was an average of $106,712.
Daren Blomquist, RealtyTrac vice president, said this is a new trend that reflects recent federal changes that expand what can be considered a financial hardship and attempts to streamline the short sale process. It’s also likely that banks are more reluctant to file a foreclosure, hoping to avoid years-long foreclosure proceedings in court.
“We’re hearing a lot more about short sales happening outside of foreclosure,” Blomquist said. “Everyone is celebrating that foreclosures are down, which is good, but a lot of the reason for that is distressed homes are being disposed of further upstream.”
In a short sale the bank agrees to sell the home for less than what the owner owes on the mortgage.
The federal rule changes only affect loans backed by Fannie Mae and Freddie Mac, which announced the new guidelines during the summer. The rules didn’t take effect until Nov. 1.
Under the changes, borrowers who are current on their mortgage but suffer a hardship such as a death, divorce, or a job change requiring them to move more than 50 miles from their home can be qualified for a short sale by their loan servicers without additional approval from Fannie or Freddie.
“The bottom line is banks are trying to remedy the number of foreclosures any way they can,” said Realtor Dean Hooker of Pompano Beach-based Southeast Realty. “It’s taken them four years to get to this position.”
About 28 percent of all homes sold during the third quarter in Palm Beach County were properties in some stage of foreclosure, but the majority were sold through short sales rather than as bank-owned homes repossessed through foreclosure, according to a separate RealtyTrac report released this morning.
The 12 percent increase in distressed property short sales from the previous year and 28 percent jump from the second quarter was likely spurred by the National Mortgage Settlement and pending Dec. 31 sunset of the Mortgage Forgiveness Debt Relief Act, Blomquist said.
Joanne Epstein, a South Florida Realtor with the Keyes Company/Ragbir Team, said she has 18 short sales she’s trying to close before the end of the year when the act expires. If it isn’t extended, sellers will have to count the debt forgiven by the banks in a short sale as income – an expense that could cost tens of thousands of dollars depending on the tax bracket and amount forgiven.
Epstein is confident Congress will extend the act, even if the vote is taken next year and it’s made retroactive.
“They want people to be able to move on and our country to move on,” Epstein said.
Nationally, distressed short sales also outnumbered bank-owned sales, increasing 22 percent from last year to account for nearly 10 percent of all home purchases during the third quarter. The shift to more short sales is happening as “both lenders and at-risk homeowners realize that short sales are often a better alternative than foreclosure,” Blomquist said.
But it’s also a requirement under the $25 billion National Mortgage Settlement signed by the five largest banks in March.
More than $2.2 billion, or 63 percent, of Florida’s share of the settlement has come in the form of deficiency waivers for short sales. Nationwide, about 60 percent of the debt forgiven through Sept. 30 had been through short-sale deficiency waivers. Not all short sales are distressed sales
Short sale: Bank accepts less for the home than the borrower owes on the mortgage, but the homeowner has not had a foreclosure filed against them.
Distressed short sale: Homeowner has a foreclosure filed against them, but during the court process, a short sale is conducted.
Bank-owned sale: A final foreclosure judgment is awarded by the court. The home is repossessed by the bank then resold.
© 2012 The Palm Beach Post (West Palm Beach, Fla.), Kimberly Miller. Distributed by MCT Information Services
This has been a fast paced first 6 months of 2012. Our local real estate market here in St Petersburg has slowly evolved from a buyer’s market in 2010 to more of a seller’s market in 2012. Prices for resale homes has increased and inventory remains fairly low. So far, demand for housing in our area is driving prices higher and foreclosures while present in our market, they are not having a negative impact on selling prices.
Maybe the banks really knew what they were doing in holding on to many of their bad loans, as those properties have likely increased in value with the rest of our market.
If buyer’s and their agents don’t understand the fundamental change that has taken place in our real estate market, then the buyer’s will not be successful in their home purchase. It is important that buyer’s remember to be realistic with their offers, but to also be prepared. Buyer’s must have either proof of funds, or be pre approved for a mortgage. In today’s market offers with fewer conditions will be more appealing to home sellers. Cash offers may not get a buyer a better price, but it may get the seller’s acceptance. If you are a buyer do your home work regarding value. Because the market has changed, make sure you are using recent sales data in establishing a basis for your offer..
Here is a a good article from the Tampa Bay Times rgarding the changing real estate maket in St Petersburg.
Home Sales Rise In Tampa Bay Area
Just read an interesting article this morning that confirms what we have been seeing in the local real estate market here in St Petersburg Florida. From St Pete Beach, to Tierra Verde and Isla del Sol we have seen a very gradual increase in both sales volume and resale prices. Local inventory of available homes is now below a six month inventory. This inventory level of available homes is usually an indication of a healthy real estate market. If you are thinking of selling your home or Florida property now is a great time to give me a call.
Here is a link to the article that appeared in today’s Tampa Bay Times