The flood of foreign buyers of American single-family houses might be tapering off. But whether it will cool off prices in Seattle is a more complicated question.
One of the causes behind rising U.S. house prices in recent years has been foreign buyers. For example, they accounted for $102 billion in purchases from April 2014 to March 2015, with Chinese buyers in the lead. This was about 8 percent of total existing sales for this period.
Now a new report from the National Association of Realtors (NAR) says this trend may be tamped down by continued rising house prices here and a strong dollar. The latter makes houses even more expensive in foreign buyers’ local currencies. The trade group also cites tighter capital controls in China, an effort to keep people from moving too much money offshore.
This might provide some moderating effect on a hot housing market. But Seattle might not feel it for awhile. As my colleague Sanjay Bhatt reported, King County single-family house median prices hit a new high last month. Listings are scarce — in part because potential sellers are afraid they couldn’t afford a new house here if they sold.
On top of Seattle’s attractiveness with a strong economy, it has drawn foreign capital into both residential and commercial real estate. Wealthy Chinese have snapped up prime properties, especially on the Eastside, in all-cash offers. Markets such as Seattle are drawing an elite foreign clientele — people with the means to evade capital controls. In the NAR’s 2015 report on foreign buyers, Seattle was singled out among a handful drawing significant attention.
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As a result, don’t expect the trend to cool prices here in the near-term, barring a Chinese recession or other economic shock.
Today’s Econ Haiku:
AP loosens up
Now that’s a DRAM shame