More rebalance

Dr. Housing Bubble reports: 

Chinese investors heavily favor coastal regions 

The National Association of Realtors (NAR) recently released data on foreign real estate buyers. What was interesting is that the latest figures show that international buying is at an all-time record high coming in at $92.2 billion dollars of volume. Overall this was 7 percent of the $1.2 trillion in transactions but keep in mind this is highly targeted action. Not much buying in Nebraska, Kansas, Alabama, Kentucky, North Dakota, etc. This is a big deal when it comes to purchasing in a market with low inventory. What I find fascinating is that in these prime areas is that even local area families simply cannot afford to purchase their own home should they compete in today’s market and buy again. These are your lottery holding Fancy Feast eating baby boomers in most cases. In one prime area, you have a home selling for $700,000 and all similar homes around this property sold for $250,000, $300,000, or $150,000 yet there are very few homes for sale in this area. This is similar for other markets where crap shacks are going for $700,000 or more.

This is happening along the west coast, and parts of Texas.  New York has had its run.  15%, then, of home sales along the west are from Chinese buyers. That is 90 billion/yr, or about a half point of US GDP and about one point of GDP in  California. That flow is subject to  currency fluctuations, and the yuan is propped up, at the moment.  At this point, a sudden stop in  those flows puts us in a mild recession.