What happens to the hundreds of billions of dollars that we send to China for consumer products, furniture, apparel, shoes and other stuff? Those billions of dollars are coming back to haunt our housing markets, making it more and more difficult for middle-income buyers to buy homes in California, Texas, Seattle, New York, and other locations.
Foreign buyers purchased on $153 billion worth of U.S. residential properties for the 12 months ended in March, 2017. That is a massive 49-percent jump from a year earlier, according to the National Association of Realtors. Foreign purchases of U.S. residential real estate surged to the highest level ever in terms of number of homes sold and dollar volume.
Most economists (not me and a few other progressive economists) have contended that American consumers should enjoy cheap Chinese furniture, rugs, electronics and clothing even if it is illegally dumped in the U.S. They argue that we are getting a bargain. But the side effects, the unintended consequences of this practice, is undermining home ownership in America. We will have all this cheap Chinese stuff and have no home to put it in.
Florida, Texas, California, and New York drew the most international buyers. Foreign sales accounted for 10 percent of all existing home sales by dollar volume. In total, foreign buyers purchased 284,455 homes, up 32 percent from the previous year. Half of all foreign sales were in just three states: Florida, California, and Texas.
Exacerbating Income Inequality
Middle-class home ownership has been the backbone of the American economy and the American dream for generations. The massive influx of foreign dollars is threatening our way of life. Home ownership is down significantly for the first time in American history. In some communities, home ownership has dipped below 50%.
Only 48.3 percent of households in Los Angeles and Orange counties lived in a home they own in the second quarter of 2017, the second-lowest home-ownership rate in the nation. U.S. Census Bureau data released recently shows Fresno, California, at 44.5 percent, having the lowest ownership among the 75 largest metropolitan areas. The New York metro area was third at 49.8 percent.
Housing analyst Logan Mohtashami isn't surprised by low local ownership. He estimates that 82 percent of the working-class people in Southern California can't afford to buy a home in their own ZIP code.
California's statewide ownership fell to 53.8 percent, down from 55.1 percent at the start of 2017. It was fourth-worst in the second quarter behind Washington, D.C. (39.2 percent); New York (50.7 percent); and Hawaii (53.7 percent).