[quote=flu]strong hands won’t sell if they cash flow much better than that 1%CD that most people have been tucking their money into. Just saying.[/quote]
Right. That’s why I said this in my previous post: “Strong hands don’t have to wait for a rising market, and if returns on investments are far higher elsewhere, they will be quick to sell the least profitable investment (possibly houses) to free up cash for more lucrative ventures. For these owners, it’s just business…no emotions involved.”
[quote=flu]Also, there’s a fundamental reason why some of the latest foreigners from asia are different from what happened during the japan days..When the Japanese went on the real estate binge, it was about speculation. The latest real estate binge isn’t strictly about speculation. It’s about the 1% in those countries taking a hedge against political/economic instability in their homeland, in case the government decides to start going after them. Besides, foreign purchase, BTW still doesn’t make the majority of home purchases, despite the media the rhetoric- 25% i believe was the last number for all foreign purchases, most of them from canada. And most of them from asia are at the high end of real estate. So you folks worried about an “Red Dawn” like invasion can stop worrying.
Also, don’t discount how much homes are held by institutions. Remember that many of them got into the rental business as well and are just waiting to home prices to rise to sell and profit, as many other folks that bought at low prices will.[/quote]
Many of those institutional buyers are working on behalf of foreign buyers. And it’s not just the Chinese who feel that U.S. real estate is a more secure store of wealth than their own currencies and local investments, people from many different countries are buying U.S. real estate as a hedge against their currencies collapsing. Some Americans are doing this, too!
As you know, I’ve long been pointing to institutional buyers as being part of the problem, irrespective of the nationality of their clients.
I don’t think that people are worried about a “Red Dawn” invasion, just that all of these extra buyers are putting pressure on prices, forcing locals out of the market.
Americans have been doing this to people in other countries, too, like Mexico (decades ago, it was the big thing to buy land down there because it was so cheap to buy with US dollars) and other developing areas that have a much weaker currency/poorer local population than ours. The locals in those countries don’t like it when we do it, either, which is perfectly understandable, IMO.
[quote=flu]Personally, I’m in no hurry to sell. The only time I would is if/when home prices reach 2x of what I paid for, and then I might consider it of if San Diego turns into blight town (which is unlikely, and if that happened, you wouldn’t be interested in buying anyway). Why sell when it’s a steady source of rental income, that will most likely beat that CD for a long long time? And for more “affordable homes” that were bought at good times, that’s the problem that I see. There’s no hurry to sell.[/quote]
Yes, you’d be right to hold on to your real estate if CD rates are <1%, but what if rates were to skyrocket to 10%, or higher? How would you feel then? And what if housing prices were likely to decline at the same time that other investments were offering much higher returns (and the potential for much higher capital gains, too), particularly if rates rise significantly?
That's the issue. If rates go up significantly, or if some other investments suddenly look much better than real estate, speculators will start to shift away from real estate, and many of them will sell if they feel that housing prices will go down in the future and/or if they want to free up more cash in order to purchase these other assets.
As others have pointed out, low interest rates around the world are really fueling this speculation. Both because there is nowhere else to turn, but also because it causes concern among many investors/savers/speculators regarding the future value of the currency they hold -- pushing them into hard assets as opposed to cash or similar holdings.
