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Chrisman’s Corner: U.S. Housing Market Influenced by Overseas Events

The Chinese impact on U.S. home prices has garnered attention in the national press, and certainly along the West Coast where JMAC does the majority of its business. Within the past few years, there has been a rise in international investors in the real estate market, particularly among Chinese buyers, and this in turn has positively impacted many of the areas in which JMAC’s brokers operate.

The interest by the Chinese in our markets has resulted in “upside risk” for home prices. Many factors are important when considering the drivers of this trend, for example, there has been downward pressure in Chinese real estate, equities and currency compared to the U.S. The strength in America’s economy over the past few years has resulted in more Chinese buyers into the U.S. market. The U.S. housing market, which includes many areas where JMAC’s brokers are, also provides a more stable return than the Chinese market.

Another factor is the increase in Chinese students in the U.S. as more seek permanent residency in the U.S., increasing the demand for buying a home. According to the National Association of Realtors, 28 percent of international sales were from Chinese buyers and close to 70 percent of these buyers are paying with cash only.

This has helped U.S. home prices to appreciate in many areas, but may result in more Americans renting instead of buying as affordability declines. U.S. real estate will also provide a more sustainable and profitable asset as the Chinese Yuan depreciates. In late 2012, the U.S. housing market began to outperform the Chinese housing market, and just last April, the Chinese home price growth hit a low of negative 6.3 percent. The influx of Chinese investors into U.S. real estate began to increase when U.S home prices started to outperform Chinese home prices.

As the U.S. economy begins to accelerate beyond the Chinese market, the flows of Chinese investors into the U.S. will also increase, providing a more stable impact on the U.S. economy, and for our brokers.