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Comment by sk5t | Hacker News Reader

It's impossible to read almost any mass-media article about real estate without leaving wearied by loaded phrases and unfounded conclusions. In what other sphere is a decrease in purchasing "fleeing the market"? Where are the fire sales, or even, where are the begrudging foreign property sellers?

Still somewhat fresh in memory are NAR economist Lawrence Yun's bizarre rationalizations in the runup to the 2008-09 GFC.

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I agree those things are typical in articles like this, but a 40% drop in foreign sales can quite reasonably be described as fleeing the market. It's not a trivial decrease.

It needs context. Are 100% of American home buyers foreign? Wow, that's quite dramatic. Are 20% of buyers foreign? Okay, so that's an aggregate decline of 8 percent-- while impactful, not nearly as exciting of a number, which matters in a journalistic sense these days.

Note that an 8% decline does not capture the demand implications. If the market is pretty sensitive to demand, 8% is a pretty big number.

The main problem Chinese face currently is getting money out of China that is the reason Chinese property purchases are down it is the same in Asian cities and countries where Chinese were doing a lot of purchases last few years.

I don't know man?

What was it? Like 36% decrease in foreign buying overall? China specifically was like a 60% decrease?

I'm not an expert or anything, so what I think means exactly jack. Having mentioned that, those decreases seem to me to be far in excess of anything that could be reasonably explained by economic factors alone. Something must be going on.

"Fleeing" seems like a legitimate label for it.

It says in the opening paragraph "tighter currency controls by the Chinese government". As with most financial articles there is no discussion of the relative magnitude of the effects at play. Financial journalists are perfectly happy to ignore the elephants in the room and report a laundry list of tiny effects that might have had an impact and then devote 1 line to whatever causes 80% of the change observed.

Fleeing implies they have a choice and are choosing to leave because of poor prospects in US housing. That might be true. But the choice might be involuntary or be due to sharply rising prospects in China or elsewhere. If China those capital controls are significant, maybe a better title is "Chinese purchasers dragged away from US housing kicking, screaming and cursing their own government". That is a possible interpretation based on what is included in the article.

But 36%?

I mean, the Canadians don't have currency controls. Neither do the Mexicans. All three of the Big Three foreign real estate buyers have pulled back in a material fashion this year.

Like I said, I just think something must be going on here. I don't think this can be waved off as "Well, it's just China."

Compared to Mexico and Canada, China's economy has changed dramatically in the past 20 years. A middle class emerged in China. Tons of wealth created. A large number of potential purchasers of foreign real estate. Mexico is today where China was at the turn of the century (when comparing GDP).

What's your source? Mexico's per capita GDP is the same as China's and Mexico's data is probably more accurate. Mexico is a middle income country and NAFTA has been transformative for Mexico in the last couple of decades.

I wasn't citing the per-capita numbers. Here's total GDP:

China, 2000: 1.2 trillion USD [0]

China, 2017: 12.2 trillion USD [0]

Mexico, 2000: 700 billion USD [1]

Mexico, 2017: 1.15 trillion USD [1]

If GDP is a proxy for wealth, China --over the past ~2 decades-- had way much more potential in investing in foreign real estate. I don't understand why per capita GDP would be more relevant in determining which nation would have more capacity in investing in foreign real estate. That capacity for investment seems independent of how the wealth is divided among a countries citizens.

[0] https://www.google.com/search?q=china+gdp

[1] https://www.google.com/search?q=mexico+gdp

"That capacity for investment seems independent of how the wealth is divided among a countries citizens."

The rest of your comment makes sense. But this last part doesn't seem right: if wealth were distributed evenly in China, then there might be no Chinese buyers for US real estate. It's only due to inequality ('how the wealth is divided') that there is a segment who can afford this.

I don't think we'd be able to infer the wealth distribution from GDP per capita, either. Total GDP tied with the Gini coefficient might tell a reasonable story. But the premise of Gini Index of 1 leaving all people too poor to invest directly in U.S. Real Estate makes sense. I'm pretty confident that China's wealth distribution is far from perfectly equal among all citizens.

"I don't think we'd be able to infer the wealth distribution from GDP per capita"

Yup, totally agree with this and the overall point you were making in your comments.

Wot?

"Hispanics are experiencing the largest homeownership gains of any ethnic group in the U.S., a turnaround for the population hardest hit by the housing bust that could help buoy the market for years."

https://www.wsj.com/articles/wave-of-hispanic-buyers-boosts-...

Uh...

We're talking about foreign buyers.

We mean "Mexican" buyers as in, actual citizens of Mexico.

Not Mexican buyers as in, "That guy has a funny, spanish sounding last name, he must be Mexican."

We're not talking about Hispanic Americans.

Note that there are also millions of Mexicans which are US residents but not US citizens.

> As with most financial articles there is no discussion of the relative magnitude of the effects at play.

Principal Component Analysis is really difficult to do on a live economy because no one is omniscient and policies/events enter and go in a less than ideal simultaneity.

The inability to acquire fully convertible currency means they have to leave the market. Yes, they are being forced, but the same could be said about any influence they would have to react to.

These sentimental words definitely serve better as triggers of trading algorithms. Maybe related?

>price goes up

People can't afford housing because Chinese are buying up all the houses.

>price goes down

People lose life savings because Chinese are not buying up all the houses.

I don't agree with either statement at all but the second statement seems predicated on the first. That is, some people bought in a bubble the Chinese created and they lost their savings when the bubble popped and the Chinese stopped buying. This does not at all resemble the dichotomy of, damned if you do or damned if you dont, like you seem to be implying.

Again I do not agree with either statement even remotely. I haven't done any serious research on the current housing market and dont harbor any feelings or ideas on it.

In a dual-sided market, price movement negatively impacts one group, and positively impacts the other. The negative headline generates more clicks.

>prices remain the same

Zero growth, return on investments bad, need economic stimulation quick

And yet somehow I managed to time my purchase right in the inflection point.

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