patrick.net

www.library.ca.gov/crb/02/07/02-007.pdf

There are 11.5 million houses in California. Estimating them to be worth, say 100K each. Perhaps there are some investors from china coming in here, but I'm betting not enough to hold that out.

Everyone says, people move every 5-7 years, lets use 10 years. That is 1.15M homes per year?

1.15M X $100,000 each = $115,000,000,000

That is quiet a bit of money. Granted they wouldn't have to buy them all up, only enough to cause prices to go up. Maybe 10% of those houses? So 1,150,000,000 per year, and they could perhaps influence the housing here. Assuming houses cost 100K of course.

Welcome to Squanderville!

http://www.youtube.com/watch?v=5DvuyvuHmJI

The Chinese sovereign wealth fund with their hundreds of billions of USD is not interested in owning single family properties. That would make no sense.

As for private investors:

"...buying houses for their families and investing in factories and other facilities to be closer to the North American market.”

Chinese buying/opening up factories in the US? That's good to hear. Americans opening factories in China is the much, much, much more common news.

I highly doubt private Chinese investors have any impact on the US housing market, beyond what an immigrant from India or the UK or wherever would.

I don't think many chinese investors from China are affecting the market. Being a long range landlord would be hard. Plus, buying a California house on Chinese salary would be pretty tough.

Chinese immigrants living here, on the other hand, absolutely are. Go to an open house in Saratoga, Cupertino, Los Altos, and majority of the visitors will be Chinese or Indian. I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they'll give up the fancy car and drive a Camry, don't go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

Some people really prefer to own property, which is obviously not the case for a lot of the patrick.net posters who enjoy other things more.

How Much RMB or Foreign Currency Can Be Physically Carried Out of or Into China?

According to the Administrative Rules of the People's Republic of China on Cross-Border Transportation of National Currency issued by China's central bank in December 2004, travelers are allowed to take up to US$5,000 equivalent of foreign currency and 20,000 yuan of local currency (US$1=7.7 yuan) into or out of the country.

There is no need to declare this to customs if the currency you carry is less than the limit.

Amounts up to US$10,000 will require a Permit for Taking Foreign Currency Out of the Customs Territory issued by a bank. Anyone who takes more foreign currency than US$10,000 is required to show a legal warrant issued by agencies of the State Administration of Foreign Exchange (SAFE)

For travelers who leave the country a second time within 15 days, the limit of foreign currency is US$1,000. If you leave the country a second time on the same day, the limit is US$500. If you have a declaration record of foreign currency when entering the country, customs will examine this before authorizing you to pass.

It is quite easy to exchange your currency into CNY, Chinese yuan, at your arrival airport, as well as hotels and banks in China, so it is not really necessary to bring Chinese currency to China.

(China.org.cn March 23, 2007)

Aren't there a lot of recent homeowners in The Fortress from Taiwan, Hong Kong, Singapore? (I know some from all of those places).

Some people really prefer to own property, which is obviously not the case for a lot of the patrick.net posters who enjoy other things more.

I don't think that's accurate. It is not a choice between fancy dinners and swank cars or owning property; some people really prefer to own property that isn't overvalued and held at that overvaluation by government froth.

This is just non-empirical evidence, but it seems cities with lots of Chinese residents have high real estate prices. Look at Vancouver, Toronto, SF, and London. Could just be a coincidence though, as there are other cities with high real estate prices with a low Chinese population. The high prices come down to high demand,willingness to pay high prices, and lots of wealthy people.

Recently I have been to and surveyed house prices in Vancouver, Toronto, SF, LA and San Diego. The locals said there are lots of Chinese bring money into those cities. The Chinese have different motives, they don't care about returns (as an investment), they just want to move their money out of their countries and park them here. They will pay whatever the prices are, during bubble of down draft. See graphs on my post here http://patrick.net/?p=28783

So what do we think is going to happen in China soon?

This is just non-empirical evidence, but it seems cities with lots of Chinese residents have high real estate prices. Look at Vancouver, Toronto, SF, and London. Could just be a coincidence though, as there are other cities with high real estate prices with a low Chinese population. The high prices come down to high demand,willingness to pay high prices, and lots of wealthy people.

SF NYC etc etc ? Makes you wonder why so many "ChinaTown's" in the states are near slum conditions. Perhaps you should ask the HK chinese who came here pre-97 before the hand over to mainland...So why didnt prices skyrocket back then?

I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they’ll give up the fancy car and drive a Camry, don’t go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

So lets get this right!

You CAN TAKE MORE THAN $5,000 out of the China?

A degree from Chinese University and unkown foreign references gets you a Silicon Valley job immediately?

sybrib says

Aren’t there a lot of recent homeowners in The Fortress from Taiwan, Hong Kong, Singapore? (I know some from all of those places).

Sure I know a few myself, many came here in the 60s and 70s. They still chatter in Chinese,
you think they came off the boat yesterday.

Well, for one thing:

http://apiproblemgambling.com/uploads/2009/09/08.1019.CasinosaBigDrawforLocalAsians.pdf

So I'm not sure where someone is getting the idea that all Asians/Chinese are somehow frugal. Not so.
Many are addicted to gambling.

Some of my neighbors are Asian and Indian and yes, they drive older cars (I do too - a 2000 luxury car), they also do not appear to be going for fashion at all. Except for the teens.

But the main thing is that the women have sacrificed beauty for property. I guess the male still gambles, whatever, however ends are met by the wife making the sacrifices.

In the SV, asians were big borrowers for Option ARMs. Many are in trouble now and will lose their home.

http://abcnews.go.com/US/wireStory?id=8634199

Wanted to add that I doubt Chinese nationals are buying up *many* luxury properties here in the U.S.

I've read that they are buying *some* properties, however, the main buying of farm and manufacturing assets is being done by the chinese gov't.

Hedge funds and REITs are buying on the lower to mid-end.

Sad to say, but a generation (boomers) has made housing an investment tool and has put it in a speculative category for certain investors.

I am aware that many X'ers and Millennials are very angry at the boomers and are holding them responsible for this mess. Quite right to do so, imo.
If you want to exact revenge, the best way to do it is to not patronize the places they go to, not hire them, not have anything to do with them.

For example, what I did was cancel my AAA membership because boomers tend to belong to that outfit and are the primary (only actually) age group employed by the Auto Club.

So you do what you can and let it go from there. I am very angry about this and by now, should be living in Malibu beachfront with my income, but it will never happen, thanks to a generation that used shelter as leverage.

Another reason why prices are still higher in better areas is because there is demand. People want to have their children go to schools that are safe. They want to live in safer cleaner neighborhoods and the demand for those attributes is still higher than for the low to mid-end.

Here in California, if you want an expansion of safe, clean neighborhoods, you are really going to have to clear out the illegals and gangbangers in L.A. and SF. These groups have made hundreds of square miles of valuable land with desirable weather unlivable for the citizenry.

Unfortunately, it will take a concerted effort probably spanning one generation to clear them out (this is short work which the national Guard can do) and then to redesign and rebuild and repopulate with law abiding citizens.

Misstrial says

Unfortunately, it will take a concerted effort probably spanning one generation to clear them out (this is short work which the national Guard can do) and then to redesign and rebuild and repopulate with law abiding citizens.

oh yeah, I sure can't wait until 'we' have full on fascism here and 'we' can just go in a 'do' this, that would be great...

It would best if we clear 'them' all out, to gitmo or something, or wait, I saw a movie the other day where they had a great solution. New York had become so overridden with crime by degenerates they just put a big wall around it and then everyone who was guilty of being a degenerate or a thought crime or something was just put in there. It was great, the police got to shoot a whole of people and they had these sexy black uniforms, the other people in the New York gulag, well shit who cares, they were just 'untermensch' anyway.

It seemed like a nice society the 'law abiding citizens' lived in, too.

Hi kentm:

Calm down, your online tone is quite rude.

Actually I have lived in Mexico and this is something they would certainly do to us.

Many Mexican nationals living here illegally are on the run from Mexican law and are wanted in their own country for serious crimes.

Others are here still because they cannot afford to move back. We would be doing them a favor.

Check my username, btw, I am not advocating anything that would be illegal.

Thanks.

Wanted to add that anarchists and others who do not want to uphold existing laws can enjoy anarchy at its finest by simply emigrating to Greece.

whats keeping higher end property up are longer reset/recast periods, artificially low interest rates, and dipping into savings, Helocs & 401ks just to keep their overpriced boxes.

Yes, first gen Chinese immigrants on average save more, live more frugally, but they are still subject to market forces, economic conditions, local employment, and they also don't always make good investment decisions. I know plenty of my dad's Chinese/taiwanese/HKnese friends that got burnt both by the dot com stock bust and then got burnt again by the housing bubble. They save all their money living frugally, yet still end up with very little because of their tendency to "follow the herd" in investment schemes.

Speaking of the herd mentality - its not limited to the Chinese as we all know.
We all are susceptible as this cartoon shows :) Enjoy!

http://www.burnabrain.com:80/how-stockmarket-works/

I think the Chinese contribute to higher prices. Alhambra and Monterey Park homes are still very high.

As an Indian myself, I thought fellow Indians didn't gamble on these risky option-ARM mortgages. We are a risk-averse bunch and typically opt for 30 yr fixed.

Or so I thought......

More and more, I am finding out about other Indians & Chinese who got these loans. These are professional tech workers (aka yuppies).

Just the other day at office, I overheard two indian workers chatting:

one guy : our loan is resetting. We bought the house for 850k in san jose. Now the house is worth may be 750k. Nobody will refi
another guy : dude, I am the same situation, not sure what to do. may be I should stop paying the mortgage so the bank will negotiate.

any one watched the ENRON documentary? There was one douche-trader exclaiming 'burn baby burn' at the california wild fires.
I feel like chanting that too.... does that make me a bad-person ? :-)

Permanent_Marker:

Is it risk or just greed? I bought 5 years ago with a 30-yr fixed in Mtn View. We spent and could afford $850K. The broker told us we could qualify for $1.2M.

I knew the bubble would pop, so we might be OK with our current situation. If we had over extended with a plan to flip in 2 years, we would be drowning too right now.

As you now hear from your comrades, there were just too many "buyers" taking the bait.

When all aspects of buying of a home give assurances that option X is as safe as any other method, people will take them. This doesn't mean a risk adverse person avoids it, because it's "not" risky. When all of your friends are doing, when the media is extolling the virtues of it, and every money manager is telling you to buy, you do it.

The people buying up land in large chunks in places like Vancouver, are doing so on scale, but there aren't that many of them. I remember hearing of stories where they were given a book of properties and they would check off 30 or so and have a realtor go get those. That happens sometimes, but in general, it's one person buying a single property, not 30, there just aren't that many billionaires in the world. They aren't skewing the numbers by some insane amount. Vancouver is expensive because of the nature of land, it's walled in by mountains and sea. Expansion into the valley happens, but when there are only 2 lane highways, driving 60km into the city isn't pleasant.

permanent_marker says

AMore and more, I am finding out about other Indians & Chinese who got these loans. These are professional tech workers (aka yuppies).

If you know their home addresses, just find their loan information in ProperShark.com. You will be surprised how many people drank Opt-A Kool-Aids in 2004-2006.

bikes2work says

As you now hear from your comrades, there were just too many “buyers” taking the bait.

I too personally know some of them. "Oh, you can always refinance" was the basic mantra in those days.

SiO2 says

I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they’ll give up the fancy car and drive a Camry, don’t go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

1. Americans live through their credit cards, meaning, they buy more than they can afford. Asian value system teaches them to live within their means and have their priorities straight. Lets put it this way, if we had good schools everywhere (like in the east coast), the Chinese and Indians would not try to squeeze into the over-saturated places like Saratoga, Cupertino and Los Altos.

2. It is not that the Chinese or Indians do not spend their money. If that was true, they would not be spending the money on buying an over-priced house in the first place. The reality is, their priority is different. An American gets an erection out of an expensive show-off car and dining in expensive restaurants with an intention to impress the women, the Chinese and Indians get an erection by sending their kids to the "best" school so that they can SHOW OFF their kids in their community.

For Americans it is bread,butter and women and for Chinese and Indians it is show off.

Countries that have more confidence, and feel they can pay back loans and/or have enough to survive tend to spend more and save less.

In the US, it's not that difficult to find another job. Even if it's a fast food job, you *CAN* get another job. There are social programs to assist people out. The unemployment rates aren't 40% like in many asian countries, where 1 member supports an entire house hold, which would include grandparents, siblings, children, spouse.

In the US, one or two people in a family might find themselves out of a job, but the chances of everyone in an entire family finding themselves unemployed, with no access to any type of loan/cash is almost impossible.

Other countries save because they have to, the US spends because it can. Debt spending has been happening since the 1950's, it didn't kill us back then, it probably won't kill us now. At least 70% of families earn more than they spend in the US. Which means there is still 30% out there spending too much. It's not every american, the news just makes it sound that way.

Well said buddy!

newbie says

SiO2 says

I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they’ll give up the fancy car and drive a Camry, don’t go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

1. Americans live through their credit cards, meaning, they buy more than they can afford. Asian value system teaches them to live within their means and have their priorities straight. Lets put it this way, if we had good schools everywhere (like in the east coast), the Chinese and Indians would not try to squeeze into the over-saturated places like Saratoga, Cupertino and Los Altos.
2. It is not that the Chinese or Indians do not spend their money. If that was true, they would not be spending the money on buying an over-priced house in the first place. The reality is, their priority is different. An American gets an erection out of an expensive show-off car and dining in expensive restaurants with an intention to impress the women, the Chinese and Indians get an erection by sending their kids to the “best” school so that they can SHOW OFF their kids in their community.

The chinese have a few cultural differences. They are just entering a phase in their country where they can take risks with their education. They went into careers that traditionally had decent returns. Like accounting.

Poetry, Arts, Music, Physics, Math, or areas that didn't generate a solid income were frowned upon. As a country becomes more confident, they expand. It used to be that everything was invented here, and manufactured over there, because they spent so much time learning accounting, and exact sciences that it became hard to look outside the box. Their schools didn't emphasis on this. Now, I think more of their children are opening up, and they're starting to innovate over there as well.

This is less about the chinese, and more about their economic situation. This can be seen in most poorer countries around the world. Many countries push for education in useful areas and frown upon the arts and what not. We've lost a lot of entrepreneurial spirit here as well, but it only makes sense. Average employee wages aren't too bad. In a 5 man operation, the difference in income between employee and employeer isn't going to 100:1, it'll probably be 4:1, maybe 5:1. Not only that, the amount people earn will be enough to feed them and house them. In other countries, they can end up with 100:1 ratios where the owner makes enmasse and employees are paid peanuts. Really, if you aren't thinking of creating your own business, you're not thinking about your survival. Here if you're not thinking of creating your own business, people look up to you, like good job! go for it! We view things differently here.

For many of these cultures, such as Indian, they feel *VERY* lonely when they get over here. They were brought up in a hose with 10+ people, parents, siblings, grand parents, etc. They often crave having others around. Our society is designed to operate on 1 couple + children (until 18) at home, no one else. We are paid/demand wages of this level. Anyone who stays at home living with their parents for a couple years, and saving knows how fast they can save. Without rent, cable bills, etc, their saving increase rapdily. For indians, by having many family members under one roof, they are simply living the way they are used to, and in the process saving enmasse. It's a cultural thing for them. For them it's great.

SF ace says

Just look at what is happening in the bay area closely. For example, a big 4 accounting firm in the bay area, which employs about 5K -10K on the aggregate is dominated by Chinese, perhaps as high as 50%

I doubt you will find more than 30% locally. In other regions is much much less than that. They are very good at memorizing accounting standards for the CPA exam. But when you reword the same problem on the CPA exam, they flunk out. The prior version of the CPA exam was changed to combat this problem of easy passing by simply memorizing the answers. The problems have gone from all multiple choice to more actual problem solving and writing skills. And who is pushing for this ? The big 4 who have been burned over the past few years.

The one thing I have about much of the Asian population here in San Jose is that they operate great numbers of little shops. Hair salons, small restaurants, smoke shops, nail shops, flower shops and all sorts little cash businesses. There are so many, one has to wonder how all of them manage to survive. I knew a rather prominent restaurant owner once, and besides being a total slave driver, the other key to his success was taking the first half of the days take and putting right in his pocket. That's right. Those reciepts never showed on the ledger. Those cash businesses are big tax evading cash cows. Perhaps incomes in San Jose are significantly higher than IRS figures report because of so much unreported (and untaxed) income. Is this part of the reason so much real estate is being paid for with cash?

SF ace says

I guess that sort of explains why San Francisco, Cupertino, Fremont, Vancouver (Richmond), San Gabriel Valley, and Washington DC prices are high, areas with a high density of Chinese than without. New York just has a lot of people, not a high density of chinese.

So why did California home prices dive in the early 90s and current nose dived!!!!

Yes Chinese folks like to gamble too.. perhaps gambling with homes was not a good idea.

Well I'm not trying to suggest that it all falls to one ethnic group or another. All colors are included in this issue. That issue is a pervasive general lawlessness. If you think you can get away with something and profit it's all good. Penalties for many of these sorts of things amount to a slap on the wrist and the cost of doing business. They pay a fine and it's back to business as usual. When you commit a felony, you need to go to prison. Once that starts happening, people will quickly surmise that maybe playing it straight is the least risky course of action.

There are several other factors that are being missed and chalked up to Asians (or others) living together, and how we maybe should try the same thing.

The key isn't that they have the "right" answer, it's that they do things DIFFERENTLY than we do. We have chosen to live on our own, there are reasons for that as well. We are tight on time, we want to socialize with like minded people (not necessarily our neighbors, or the garbage men), and we're a pretty honest society which shows in our productivity. The more honest a group is, the harder it is to live with each other. How long can you hold your tongues when your cousins/aunts/family come visiting and say something truly outrageous? We can't. Imagine living day in, day out with those people. We can't do it. You need to be a little liberal with your thoughts to do that. Less honest, more social, more forgiving. We can't easily live under a single roof due to this. It's not that we have given up family values, it's that we've embraced honesty to the point where we can't live with others easily. We've optimized our time so well, that talking to the garbage man who comes by weekly isn't something we're interested in doing, we have limited time. We want to talk with other like minded people, about subjects they're experts in.

That being said, *IF* we moved in all together to buy property like the asians do, what would happen? We just changed our culture, the average wealth per family goes up... and property sky rockets. Now buying a single home will be WAY more expensive. The asians don't have it "right" they just do it differently, and in our culture, it pays off very well.

As for all cash businesses. Countries where honesty isn't necessarily a needed value (trust is needed, not honesty, honesty), they often feel that if you aren't properly fact checking them, then it's YOUR fault for not collecting the proper taxes. Many countries that have a value system that don't encourage honesty (but do encourage trust - don't get them confused!!), have incredibly complex systems to catch cheats. Work is done by multiple parties, work is rechecked by 3rd parties, overlapping work by individuals. Governments look at multiple aspects of a business to determine it's taxes, vs just the account ledger. Some countries just tax the hell out of goods that they know are too expensive for the average person to buy. Put a 100% tax on a BMW, and that person who cheats on his taxes, pays his taxes one way or another. If they choose to do nothing with their money, so be it. But if they want to actually use their hard earned money, just find ingenious ways to properly tax it. In aftrica, I was told that the currency changes every year or so. You need to take ALL your hard currency in and exchange it before it's devalued to 0. The people who bring in big bags of money with no proof of paying taxes, well they pay their taxes then.

1. Newbie says "Lets put it this way, if we had good schools everywhere (like in the east coast), "

Believe me, there's plenty of bad schools in the east coast. Inner cities of Camden, Phila, Baltimore, make East SJ look pleasant. And rural areas have problems too.
Having said that, it's probably true that the median school in NY, NJ, PA is better than the median school of CA. Spending $12k/year may have something to do with that. It's high here (like Palo Alto) but average in those places.

2. Another factor about Chinese/Indian etc is that we don't see the "average" Asian here. We see the immigrants, who tend to have college education, more driven, and more risk-taking (as mentioned above). Think about it, what a risk to move across the ocean to a place where you hardly know anyone. Yet I know many people that did this, with less than $1k cash, and now are successful. There's definitely some selection bias here.

3. More related to property bubble in China- I was flipping through the channels the other night, and the Chinese language station was showing a drama. This scene showed a mad frenzy of people bidding on apartments. There was a model of the building in a display case, uniformed agents marking the board with who was bidding on which place, and a lot of people making the bids. Hmm kind of like "flip this house" a few years back in the US.

@SiO2,
Totally true about the average vs what we see here. We're getting the best of the best. And when they come here, and put in whatever hours were required of them to become the best of the best over there, they come the best here often. Taking those risks and working hard.

Having an open "bidding" process might be more common over there. And at least you see who you are bidding against and can bid to your hearts content. It might cause some homes to become over valued, but really it comes down to, what can you afford, and what are you willing to pay for it. The old adage of "If you win every auction, you're paying too much" is true here too. Bidding is bad for emotional people, but at least they get to see their "opponents" or whats going on behind the scenes.

deanrite says

The one thing I have about much of the Asian population here in San Jose is that they operate great numbers of little shops. Hair salons, small restaurants, smoke shops, nail shops, flower shops and all sorts little cash businesses.

Been true for a long time. Even Castro st in Mt View and Murphy St in Sunnyvale Chinese restaurants back in the early 70s. Yes I would say there is plenty of cash transactions going on, but the fact is the IRS goes after more strongly on small business due to easy cash "spoilage". Its actually very easy for the IRS audit to have full access to business and person bank accounts and verify the accounting records.

SiO2 says

2. Another factor about Chinese/Indian etc is that we don’t see the “average” Asian here. We see the immigrants, who tend to have college education, more driven, and more risk-taking (as mentioned above).

Ug! you mean like the Vietnamese who were tought in French schools back in Nam and came here in the early 1970s? the same ones that were taking Chemistry, Calculas, and Computer programming back in the 1970s in our High Schools later to be employed by Silicon Valley back in the 1980s?
Geez! I guess the largest "asian" community really doesnt count. They are just 'average'! LOL! What a riot!!!

@thomas

Two points that should be made. The ones who were taking the courses back in the 1970's were still likely first generation children. The parents were still likely pushing extremely hard on them to excel, as if they were back in their homeland countries where maximum education was a must to just survive, not just for personal "growth". Also, when the community is injected with the brightest immigrants, it's going to skew the appearance and results of any that aren't living up to those "standards". While it might not hold true all the time, the number of over achievers per 100,000 people is probably a decently small number normally, so by injecting even a small number of extra over achievers into that number, it's going to appear that the per 100,000 number is way higher than the norm for those cultures.