[Foreign Buyers] Let’s Not Overstate Their Housing Market Assistance

Posted by Jonathan J. Miller -Monday, October 31, 2011, 12:27 PM
2 Comments

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The USD Index tracks a basket of currencies measured against the US Dollar. The USD Index includes the currency of our trading partners including the Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Franc and Swedish Krona.

This past summer, the participation of foreign buyers seemed unusually strong. However the USD Index spiked in September and then weakened again but not to the summer lows. This may take some of the wind out of the “sales” (sorry) for foreign buyers in Q4.

There was a nice summary of the foreign buyer phenomenon last Friday in US News and World Report by Meg Handley:

Internationally oriented sales amounted to $82 billion for the year ending in March, according to the most recent data from the National Association of Realtors, about 8 percent of total U.S. sales and $16 billion more than the same period last year.

In fact, US Senator Chuck Schumer introduced a bill to incentivize foreign buyers to buy residential real estate. What I like most about the bill, is the $500k threshold since there are higher housing prices along the US coastline and FHFA reduced the conforming mortgage limits to high priced housing markets on October 1, 2011 – which are mainly on the east and west coasts.

The bill, if passed, as well as the weak US Dollar, are not the ultimate answer to the housing mess but clearly the solution is going to be comprised of many items, rather than one big idea.

2 Responses to “[Foreign Buyers] Let’s Not Overstate Their Housing Market Assistance”

1. Foreign buyer broker says:

   November 8, 2011 at 8:29 AM

   Jonathan,

   Always enjoy reading your commentaries, thanks for the constant, data and fact backed, updates.

   Specific to my segment of the foreign buyer market (China, Hong Kong), their buy decision is less driven by strength of the USD and more by the bubbly prices back home. The USD Index has been in the 75 pt range going back a couple years as I recall. I think the USD Index is what sophisticated investors talk about but don’t really use to act upon when it comes to buying property simply because the buying process, instead of a click of the mouse, takes about 3 months.

   The Schumer bill is definitely in the right direction since the US is not very foreign investor friendly (eg vs UK).

   Wei min
   • Jonathan J. Miller says:

     November 8, 2011 at 9:01 AM

     Thx Wei Min!

     Yes that’s a great clarification. I agree and the reasons are part of a package. One of them as you point out is the “flight to investment safety” – nothi g spooks investment like volatility or expected decline. Bubbles are a tough thing to process.