As the mainstream corporate media, controlled by Wall Street and the government, continues to spout off about a housing recovery, the data proves that average people are NOT buying homes. Average real people must get a mortgage when they buy a home. Mortgage applications are at 15 year lows and going lower. The talking heads and mouthpieces for the oligarchy conveniently ignore this FACT as they generate their feel good propaganda and publish on-line and in their newspapers.
The number of cash purchases of homes is at a record high. As detailed previously, a huge chunk of these purchases are by Blackrock and the other Wall Street shyster firms as they attempt to drive prices higher and relieve the insolvent balance sheets of the Too Big To Trust Wall Street Cabal. Their buy and rent scheme was developed in conjunction with the Federal Reserve and the U.S. Treasury Dept. Bernanke, Yellen, Geithner, Lew, and Obama have conspired with Dimon, Fink, Blankfein and the rest of the Wall Street criminals to keep young people from ever purchasing a home at a fair price.
The other piece of the cash buying puzzle is detailed below by Mike Krieger. The Chinese central authorities have surpassed even the Federal Reserve in blowing epic bubbles with their easy money cronyism. They have blown an epic real estate bubble in China that is in the process of bursting. The hoard of government connected millionaires and billionaires in China have switched their sights to the U.S., just as the Japanese did in the late 1980’s. We all know how well that worked out for the Japanese.
These Chinese buyers are temporarily rich and they are stupid. They do not care about value. They are just attempting to convert their ill-gotten cash into hard assets. They don’t care about price. The result is that prices, especially on the West Coast, have been driven higher. All the price statistics put out by the NAR, Case Shiller, and the Census Bureau are worthless in assessing the true health of the housing market. The entire “recovery” is a government created fraud.
This central bank created bubble will end just as all their previous bubbles have ended – with tears and wealth destruction on an epic scale. Meanwhile, the well connected cronies on Wall Street and in Beijing utilize the free money to enrich themselves and impoverish savers, the young, and anyone foolish enough to purchase at these prices. So it goes.
American citizens already have a hard enough time affording a home. Squeezed out by financial oligarchs buying tens of thousands of properties for rental income, and faced with real wages that haven’t budged since the mid-1970s, the demographic of U.S. citizens that historically dominated the new home market has been forced to live in their parents’ basements. Just to kick em’ when they’re down, Americans now face the impossible task of competing with laundered Chinese money.
Of course, this isn’t a new trend. I first covered it in January 2013 in the post: Corrupt Chinese Politicians are Buying Billions in U.S. Real Estate. This was then followed up a couple of months ago in the piece: Zillow Opens the Floodgates to Chinese Buyers in Order to Keep Housing Bubble 2.0 Inflated.
While this trend may not be new, it is certainly accelerating. According to the National Association of Realtors in its annual report on foreign home purchases, transactions from Greater China (includes Hong Kong and Taiwan) were up 72% in the past year to $22 billion. In some California communities, 90% of real estate buyers are from China. Yes, 90%. Naturally, many of them are buying multi-million dollar homes in “all cash” transactions.
Bloomberg reports that:
Henry Nunez, a real estate agent in Arcadia, California, met with so many homebuyers from China that he bought a Mandarin-English translation app for his phone.
The $1.99 purchase paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one designed for smoky wok cooking. The buyers were a Chinese couple who paid $3.5 million in cash.
Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the year through March, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.
Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales.
Publicly traded builders are responding by catering to Chinese buyers in areas with high demand.Brookfield Residential Properties Inc. staged feng shui blessing ceremonies before beginning work on projects in Anaheim and Foothill Ranch communities in Orange County, south of Los Angeles. The New Home Co. consulted with a feng shui master on the land plan for its Orchard Park development in San Jose, California, that opened in April.
Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.
“About 90 percent of my buyers are from China,” said Peggy Fong Chen, a broker with Re/Max Holdings Inc., who sold 80 homes in Arcadia last year. “They want new construction. They want two levels. In China, it is considered a mansion if it has two levels.”
Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and ’80s, tearing them down and erecting sprawling houses like the one Nunez sold for $3.5 million, which has a double-height entry hall and wood-paneled library.
“Local people really cannot afford these most of the time,” Chen said.
Since when did anyone care about the interests of the average American citizen anyway?
“A Chinese national bought one of our houses at Arcadia in Irvine after reading about it on a blog,” Tri Pointe CEO Doug Bauer said in a telephone interview. “It was a Chinese blog. We couldn’t even read it.”
Some wealthy Chinese have come up with ways to evade the yearly $50,000 per-person limit on taking money out of the country so they can buy U.S. real estate, Yu said. Methods include laundering money through Macau casinos and cooking the books of import-export companies, he said.
“A lot of people over-invoice export proceeds, so they can park some money outside,” Ha Jiming, chief investment strategist for Goldman Sachs Group Inc.’s China investment management division, said at a Los Angeles conference in April.
“It’s just the beginning of a tidal wave,” he said in a telephone interview.
Overseas buyers are changing Arcadia, according to Nunez, 55, who has lived in the city since he was 6 years old.
“You drive every street and there are three or four new houses being built,” he said. “It’s just incredible, the demand.”
It appears the only people not buying American real estate are Americans needing a place to live.
So what is the fuel behind this demand? As suspected, it appears much of it comes from Chinese laundering dirty money. They are scrambling to get it out of the country before the authorities crack down on the source of these funds. It appears The Bank of China is playing a central role in this money laundering, which may be angering Chinese authorities. We learn from Bloomberg that:
Bank of China Ltd. denied a report by the state broadcaster alleging it broke the nation’s foreign-exchange rules by providing services that help clients move “dirty money” abroad.
Reports by China Central Television and other media “contain discrepancies with and misunderstanding of the facts,” the Beijing-based lender said in a statement on its website late yesterday. “References to an ‘underground bank’ and ‘money laundering’ are inconsistent with the facts.”
CCTV said Bank of China Ltd. was among lenders that circumvented the foreign-exchange regulations. Customers at the country’s fourth-largest lender by market value can convert unlimited amounts of yuan into other currencies through a product called “Youhuitong,” CCTV said in the 20-minute broadcast yesterday, which included interviews with several unidentified employees of the bank.
“Bank of China introduced a cross-border yuan transfer service in 2011 that only allows money to be moved for immigration and overseas property investment purposes,” the lender said. The company has strict and robust operational procedures for its cross-border yuan transfer business, it said.
Youhuitong targets customers who wish to invest in or migrate to North America, Australia and some European countries, CCTV said, referring to documents shown by unidentified Bank of China employees.
Now just imagine what will happen to the U.S. real estate market in these areas when Chinese authorities decide to turn off the spigot…