Arcadia Home Sales – “The city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions.”
Arcadia Home Sales:
City Is Preferred Area For Chinese Millionaires
Influx Of Funds Is HUGE Benefit … But There Is Loss As Well
There is really nothing that “new” about the fact that “Asian money” has been moving into the San Gabriel Valley. This has actually been going on since the 1980’s, and in total has been a supportive factor to the area.
Now, however, we’ve recently seen a huge increase in activity of very wealthy Chinese buyers relocating to the area from overseas. In fact, at this point, 60% of all Chinese milllionaires have already emigrated to the U.S., or say they plan to in the very near future.
Located in the San Gabriel Valley, our Los Angeles suburb of Arcadia is “ground zero” for these buyers. The “classic” Arcadia homes of about 1200-2400 square feet or so are disappearing faster than a magicians rabbit. They are being purchased for $1 million or so, torn down by the new owner … usually a developer … who then builds an 8,000 square foot mansion that is then sold to a wealthy Chinese buyer. The city estimates that there will be over 150 such transactions this year, most of which will never see the local multiple listing service.
Why the interest in the area by these very wealthy Chinese buyers? Well, there are lots of them. First is that most of them really just want to get their money out of China. Government policies there are unreliable. No one is sure what they’ll be from day to day. That uncertainty exists everywhere, but U.S. laws and regulation, as well as the government itself, are considered much more stable and reliable. Then there are considerations such as schools and universities. Most wealthy Chinese would much rather their children attend the great Arcadia schools and U.S. colleges and universities, rather than attend classes in their homeland.
For some really great background and insight into exactly what’s going on here, we want to share a comprehensive article by Karen Weise, from Bloomberg Business Week:
Bloomberg Business Week October 15, 2014
“A year ago the property would have gone for $1.3 million, but Arcadia is booming. Residents have become used to postcards offering immediate, all-cash deals for their property and watching as 8,000-square-foot homes go up next door to their modest split levels. For buyers from mainland China, Arcadia offers excellent schools, large lots with lenient building codes, and a place to park their money beyond the reach of the Chinese government.”. …
Some “Cultural Tension” … But The Beat Goes On …
As with all change, some of this is not easy. There are those who bemoan the way the area has changed over the last decade or two. And yes, that’s true. On the other hand, nothing actually stays the same in this world, and without the influx of cash these buyers have brought to the area … much of which has gone to infrastructure improvements such as a $20 million performing arts center at Arcadia high School … the area could very well still be mired in recession. Many of the folks selling the smaller, older homes we speak of have been “property rich and cash poor”. While they have sold the home they may have intended to be their last, most of them are still in the area, just relocated a few miles away where things are less expensive. And, now they have a couple of million dollars in their bank account.
The biggest danger here … and what we should probably be most concerned about, rather than the loss of a “small town ambiance” that was destined to disappear anyway sooner or later … is the question of what could happen if this inward flow of Chinese funds was suddenly cut off. The Chinese government is not predictable in this regard. It’s pursuing some policies that encourage their nationals to purchase property here, but it also pursues other policies that discourage it. China is quite capable of completely cutting off these funds at any time. If that happens, values in the area could plummet because no one else but this type of buyer is really capable of purchasing in the area.
We’ll be following this story, and we’ll share the best, most reliable information. So keep your eyes on this space.
Southern California Home Sales – “For the better part of this year, investors have been slowly trickling out of the home buying market, but in August they apparently cut off the cash flow in a big way.”
Southern California Home Sales:
Investor Activity Slows
Slower Market Activity As Investors Stand Aside
Yesterday we reported here that Southern California Real Estate Values were still growing, but are now growing at a much slower rate than we’ve seen recently. This is actually good news as it makes for a more stable, less volatile market.
Several factors have contributed to this slowdown of rising prices, but the most obvious of those is probably the fact that investor buyers have begun to stand aside somewhat. Here in the San Gabriel Valley, for instance, the market has been driven recently by investors … particularly international buyers from China … looking for overseas real estate investments and finding a spot they like here in Southern California.
Investor activity nationwide has slowed dramatically over the last month or so. However, the pullback by these buyers is not limited to individual international investors, but involves corporate buyers as well.
Here’s an informative article by Diana Olick, from CNBC :
“Just 12 percent of August purchases were by individual investors, down from 16 percent in August (of last year); investors had been making up nearly one-third of home purchases during the worst of the housing crash nationally, and in some markets they accounted for well more than half.”. …
Read More Here: http://www.cnbc.com/id/102021503
Will Traditional Buyers Now Step In?
What we’d like to see happen here is that the slowdown of investor activity would leave some “space” in the market that might be filled by first-time buyers and those looking to move up. But, there are many factors at play here and a variety of influences that contribute to the decisions of traditional home buyers when they consider entering the market. Only time will tell if these folks are ready to jump into the game.