What about foreign buyers?

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plantguy90's picture
plantguy90
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What about foreign buyers?

Funding the Baby Boomers question; what about foreign buyers?  OK, so you dont expect many Americans to be able to step up or into the breach, but what about others in other places where maybe people exist who have a phenomenal savings rate and have money that hasn't imploded?  Asians and aGermans come to mind, as well as the rich of every country.  The US may not be as attractive a place as its currently percieved, but it will still hold some allure.  Our pollution isn't bad considering other places in the industrialized world, and you do get lot more land for your buck or whatever, no?

bearing01's picture
bearing01
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Re: What about foreign buyers?

So,

Asians should move to the US so they can feed our social security ponzi scheme?

Don't think so.  Foreigners aren't that stupid.

SamLinder's picture
SamLinder
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Re: What about foreign buyers?
bearing01 wrote:

So,

Asians should move to the US so they can feed our social security ponzi scheme?

Don't think so.  Foreigners aren't that stupid.

Maybe not all of them but, if we can get just enough of them over here to keep the Ponzi scheme going ................. Wink

robert2009email's picture
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Re: What about foreign buyers?

To plantguy90,

There are plenty of foreign buyers of american real estate - happens every day, and the recent housing collapse makes it more likely, not less likely that they will come here while they still have the ability to do it.

I'm not sure why foreigners believe this is the place to be in the impending crisis, but one look at our currency versus the Euro, the Pound, the Mexican Peso makes it obvious that that is their conclusion.  (I don't know why those currencies are so weak now - could things really be that bad in other countries?  Surely not worse than life here?  Maybe Chris could shed some light on this mystery.  If he does, I would greatly appreciate some insight into the only currency in the world to have massacred the dollar since this collapse - the japanese yen.  Why?  Why is at 89 yen to the dollar?  Shouldn't it be approaching 140! ???)

And the foreigners do not worry about our social security system - it doesn't even factor into the equation.  The rich buy land here and do not contribute to the scheme while the poor / middle classes have been trying to immigrate here for decades - it's a looooonnnngg process.  (I have many friends who have jumped through all of the hoops.)

Cheers,

Robert

 

bearing01's picture
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Re: What about foreign buyers?

The US dollar is strong now because:

1. The Federal Reserve is coordinating other foreign central banks to print more of their money so they can too weaken their currencies in line with the US dollar.  The US has printed much more though, the effects haven't been felt yet.

2. All countries are now proping up the US dollar because if they don't then it will collapse.  The US is supposed to have the largest economy in the world and if everyone lets the US dollar and economy plummit then they believe we'll never get out of this depression.

3. Many people have US dollar denominated  debt.  If they're a foreigner then they have to print or earn their currency and then exchange it for US dollars.  This keeps the US exchange rate strong.  Look at the US dollar exchange rates any day the stock market tanks.  The US dollar gets strong because people are either buying US dollars to pay off stock market loans (margin calls) or they are buying US dollars to flee to US treasury bills.  

Also, Credit default swaps (debt insurance) is denominated in US treasuries so any day that a CDS has to unwind that props up the T-bills.

Also, people feel confident that the purchase price of T-bills are not going to fall because the Fed won't let it.  The Fed will keep printing US dollars to buy and bid-up the face value of the T-bills to keep the interest rates low.  People therefore believe they can run to T-bills and won't suffer loss because the Fed won't let their bonds decline in value.  All this makes the dollar appear as a short term safe haven.  When the day comes that people don't run to T-bills anymore then the dollar will be toast.  When the tide turns and people run from T-bills then if the fed doesn't hyper-inflate to prop up the Treasuries then interest rates will sky-rocket.  That will cause the economy to come crashing down again considering the fed is now keeping it a float with artifically low interest rates.

plantguy90's picture
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Re: What about foreign buyers?

Well, I dont know for sure, but the security provided by our great military and the kindest laws in the world seems to me the reason the US is still considered a safe haven.  I dunno how that affects the equasion, but it does bring in buyers to support a bottom in housing long term?

bearing01's picture
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Re: What about foreign buyers?

You feel safe living in the USA because of its military strength?  Does 9/11 ring any bells?  And the constant warning of terrorist attack by the red/amber color scheme for terrorist warning introduced a few years ago... along with the constant illuminated billboard signs you pass on the way to the airport warning of heightened security due to terrorist threat.... did you forget that?  Or do you not live in any US city?  Do you have any idea the loss of US freedoms living in this country due to policies introduced by the homeland security?

I can think of at least 5 other countries that I would feel safer living in than the USA.  The US has many enemies mainly due to its Imperialism presence in other countries and its foreign policy.

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plantguy90
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Re: What about foreign buyers?

I dont know where you are going with this; my point was trying to gauge the attractiveness of US property to foreign buyers and how it may cusion the Boomers' plight..

9/11? Give me a break. Do I think armies of muslims are getting ready to burn and behead their way through the United States? no.  I do not fear terrorists, and they would have to be more successful to discourage a foreign buyer.

Did we lose a lot of civil liberties because of the overreaction to 9/11? yes, agreed.  I'm no fan of DHS, I think its Republican pork welfare.

Is the US still an attractive place in compared to alternatives to rich foreigners?  Perfect example would be Chinese buyers. 

Sure go buy a house in Norway, but is that really competitive to owning a second home in the US for most foreigners?  The universities are still here, this is till a nice melting pot in a relatively peaceful world.  The Asians may lose faith in the dollar, but not in US real estate..

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Re: What about foreign buyers?

plantguy90,

I think a better solution would be to let house prices fall to a level that makes them affordable to people that are currently renting but would like to buy a home at an affordable price.  Many people in that scenario were prudent and thought it irresponsible to buy houses they could only afford with risky loans.  To afford a house at a reasonable interest rate with the intent to pay it off and own it some day... not as a speculative buy with the hope of getting rich - is required to have a healthy housing market.  Having foreigners come in and buy up houses will only keep those same houses unaffordable to Americans.  Take for example Vancouver British Colombia, it's a high Asian population.  Hong Kong money makes the housing extremely expensive and unaffordable to most other Canadians.  I don't see foreigner influx as the solution.  I believe the problem was that too many houses got built and were way over priced and were unaffordable to the median income family.   The correction we are going through right now is making homes affordable again to those who couldn't afford before.  Those houses will be purchased some day, when the price is right and people manage to save up a down payment.

My next concern regarding buying US realestate is what will be the future property tax and ability to claim tax credits on the mortgage or taxes.  With a broke gov't and all this debt it is inevitable that taxes will rise.  The California gov't is broke and I expect bigger taxes in my future.

plantguy90's picture
plantguy90
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Re: What about foreign buyers?

Well I was only a kid when Howard Jarvis led that prop 13 revolt, and I was aginst that.  California until then seemed to have enough money.  After prop 13  spending on infrastructure seemed to stand still, and CA started to decay.  Hey if you like living in CA, you should pay for that privilege, but the supply siders with their low-tax mantra have it all wrong IMHO. 

Asian buyers aren't a solution, but is it a factor?  That's my question.  Yes, I do think in the future more places will look like Vancouver.  It already seems that way to me, I rarely hear non-accented English in the cities and airports.   If you are a successful person no matter what part of the world you made your $$$, you may still find the US an attractive place to invest.

The earth is flat again, we all need to respond accordingly. 

 

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Re: What about foreign buyers?

NY City is also dominated by foreign owners.  I don't like it either because it creates zones of impossibility for the working poor.  (Also, think of what happens when too many rich, too many intellectuals leave a country - look at South Africa for example.)

I finally have an opportunity to agree with one of Bearing01's posts!  I would agree that this country is certainly not in the top 5 safest places on the planet.  I would also agree that our cities are not safe.

It's funny how statistics never tell the whole story - people like to see crime statistics going down, but the truth is that if you walk in the wrong neighborhood in any city in the USA at night, you will pay dearly for it.  But we are used to it - a common response to this statement is, "you shouldn't have been there" or "every country is like that".  These people forget that just a few decades ago people didn't even bother locking the door at night.  And not every country is like that.  I've walked the streets of Tokyo and Havana at crazy hours by myself, loaded with cash and drunk even, but never had a problem.  Anyone who tries that in Miami, DC, Chicago, LA, or even NY is as good as dead.  (Maybe it helps that the people in Tokyo and Havana do not have guns.)  

Now, who will take the bait from that last statement?  hahaaaa!! 

 

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plantguy90
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Re: What about foreign buyers?

I'll play.  Odd that this forum is talking about taking drastic measures to prepare for your future and you want gun control to be one of them?  No thanks, like you said, this is the US of A, with its own distinct new world history, written by guns.  You go ahead and cruise around wherever you like in any state you wish, but I'll just "cling" to my guns, thank you very much.  Rabbit stew and squirrel nuggets,mmmmmmmmmmmm, mmmmmmmmmm good.

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Re: What about foreign buyers?

To plantguy90,

If you were a vegetarian you could eat nuts instead of squirrels, and spinach and lettuce instead of rabbits.  Then you would be healthier and happier.  Being a vegetarian is also better for the environment, especially if you incorporate organic methods and permaculture.  (And I'm sure the squirrels would appreciate not being shot ... it's not very nice.)  :-)

We have strayed from the topic a bit here ... the original thread was about foreign buyers of expensive real estate being sold by baby boomers.  I think we can all agree that it is happening, in Vancouver, in NY City, in Miami, all over California ... it's happening and it's probably not good, though I am struggling to find a good reason why it isn't good in economic terms.  ???   When the Japanese bought up so much of our real estate in the 80's everyone thought that was going to be a disaster, but they suffered, not us.  Maybe this is a good thing?  Anyone???

Cheers,

Robert

plantguy90's picture
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Re: What about foreign buyers?

I think the US is already a haven for the upper class from other countries, until now (?) they all have to suffer some serious exchange rate loss when they buy assets here, but it does not seem to deter them.  To me that's a trend that will hold for a while.  We already shipped out our middle class, one look at Chinese TV and you see where they all went.  Look at Taiwan and its teetering towards our no middle class structure.  Rich owners, no more manufacturing jobs, replaced by lousy food service jobs.   How come nobofy smart has answered my question of the factor of foreign buyers?

(I should be a vegetarian, I would live longer, but its difficult for my carnivorous ways.  However varmints are varmints, and they chew up my farm looking for water, and while I don't have time to shoot them, I don't have a problem with the concept of getting rid of pests.  Like anything its the large corporate farms that do the most damage to the environment, but the laws that people enact to protect the environment play right into the big corporate farmer's hands, the little guys get squeezed out because they cant afford all that govt interference.) 

I blame it all on this faith in endless growth espoused by Kenysian Economics.

 

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Re: What about foreign buyers?

To plantguy90:

I'm a vegetarian, but I hunted for most of my life.  I was just kidding you a little bit - the fact that you kill the varmints doesn't bother me too much.  It helps if you eat them and use their hide for something, or the remains as fertilizer.  My father and I never killed anything that we didn't plan to eat, but I got sick of seeing hunters, especially yuppie so-called friends who couldn't shoot to save their lives killing pheasant or quail or rabbits and then just wasting them.

I switched to a vegetarian diet for many reasons that many find unusual - health, the environment, cost, ethics.  I don't judge others for eating meat unless they are purposely torturing or hurting animals.  Actually, and this is going to sound hypocritical, but I would rather a man kill a deer or a moose on his property and eat it than to allow the mass production of cattle by mega-corporations that pump them full of drugs and treat them like crap for profit.  The hunter knows what it means to take a life, he has to clean the animal, prepare the meal.

Now back to the middle class, you do realize that NAFTA was a scam to avoid paying tariffs, right?  I have an uncle that lives in central Mexico, so I drive down to visit him occassionally.  If you haven't seen it, you won't believe the miles and miles and huge factories ... one after another, all american.  They keep the home office executives in Houston, build the product in Mexico (it's cheaper and fewer laws to deal with) and then ship the product back to the USA, but no tariffs to worry about thanks to NAFTA.  These free-trade agreements help only the mega-corporations.  The average american, or mexican eventually, will get the shaft as long as there is another third world country to exploit ... and there are many to exploit.

I wish Chris Martenson or some other economist would address the issue of foreign buyers here ... there sure are a lot of them.  Does the damage they do by leaving their home country and bringing their wealth here make it a zero sum, globally?  I have no idea.

Cheers,

Robert

 

 

plantguy90's picture
plantguy90
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Re: What about foreign buyers?

Robert,

We think along similar lines.  Lately when I read an economist's views I often wonder if that guy has ever left the country, much less paid attention to what goes on around the globe.  Most Americans would be shocked to learn thet they don't have the shiniest cities, or the best medical care, or a vibrant culture that comes from a happy, functional middle class.

Sadly its aldready bread and circus here, soon we will vote our freedom's away.  Maybe gutting education, both systematically and culturally was a plot by the govt to dummy up the general population so they become more pliant, and eat right out of the hands of the politicians.   

I like conversing with you, but noone else has an opinion or thopuight on the matter? 

So what is the future of a country that does nothing but house the wealthy from other countries?  Well, it does sound like a nice safe place to live... 

Farmer Brown's picture
Farmer Brown
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Re: What about foreign buyers?

Plantguy and Robert,

My take on foreign capital entering the US to buy real estate is this:  as gravity is to water, safety and profits are to capital.  Capital will flow wherever saftey or better yet, a return on the principle are perceived to exist.  

If foreigners are buying US real estate, in a way that's good, because that's a vote of confidence in our economy.  I suspect this trend will ebb soon as the true nature of the economic collapse becomes more apparent, but normally, such a practice is not as bad of an indicator as some people think.  

As a personal observation, I live in Costa Rica.  CR has been the recipient of huge amounts of foreign direct investment over the past two decades.  This FDI has come in the form of US ex-pats gobbing up beautiful CR real estate on beaches and mountain tops, as well as companies like Intel, P&G, Abbot Labs, and many others outsourcing such things as call centers, accounting centers, and manufacturing centers.   This is a bad sign for the US (and it's repeated all over the world), as it's basically a statement that says, our money is more productive in fill-in-the-blank-country.  It's a great sign for CR, as it's created jobs, increased the availability of goods and services in the marketplace, and created tax revenues for the government.  

I suspect the amount of FDI coming from each corporation into CR will decrease substantially very soon as these corporations lower production to meet the decreasing needs of an economically depressed world.  However, on the bright side, while each corporation may lower it's production, I see the distinct possibility of more corporations coming here as they flee the prohibitively expensive US mainland as a place for doing business.  So, while the average investment may go down, the total number of investments may go up and balance us out.  That's my hope, anyway.  Otherwise, we're in th same boat as everyone else.

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Re: What about foreign buyers?

Patrick,

I would imagine Costa Rica has several tax, technology, talent/education availability, work ethic and other incentives that make it attractive for starting new business.  Do you have many labor unions down there that businesses must battle with?  Any tax shelters/holidays?  The US gov't has been doing a real good job at making it more attractive & feasible to create factories abroad than at home.

As for capital flowing into US housing market, if the US dollar takes a turn downward I would imagine foreign dollar holders will come to the US to buy whatever American assets they can get their hands on. This would likely happen in a high inflation or hyper-inflation condition.  After many years of trade deficit and the resulting borrowing from Asia, while we owe them dollars the real debt is owing them their wealth back.  We don't produce enough wealth (I mean products or services in demand that improve the quality of life) to export it back to them.  Therefore, if the dollar crashes or of the US Treasury market crashes those who can will sell their bonds and buy up whatever American wealth they can get for their dollars.  I would imagine realestate would be on their list of assets.  Maybe the prices are deliberately inflated by the Fed, but at least it's something.

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plantguy90
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Re: What about foreign buyers?

That will indeed be an odd time, hyperinflation and everybody who has any money left buying US real estate, and those prrices are going to go ???  Some here will see it as a sign of recovery haha.  The recent sales dsata might just reflect that.  I personally know a Chinese banker who told me there are Chinese buyers waiting on the sidelines and they are arranging buying tours to come here and look around.  

 

 

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