Chinese investors are withdrawing the real estate market in the US

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The speculation  of real estate market was boosted up by Chinese investors since 2008. Not only in the domestic market, even Chines investors expended their strategy to the US. Actually, the real estate market domestically displaying inflation, for a young graduate people is impossible to buy a house. Several of us are suffering with situation at once.

Currently, some investors said there were overheating in the housing rental market over a year. They early entry investors are sensitively begun to withdraw from the real estate market because of “dumb money “has poured into the market. [1. http://finance.sina.com.cn/world/mzjj/20140303/074518383046.shtml]

It is obviously can be seen from the mainly private institutional investors have stopped to invest in real estate. They changed the mind from long term planning to become cautious or go to earn a quick buck. This situation is again because of the rental rate in housing market and the low volume of investment. Based on the economic date in gradual improvement, the unemployment rate falling, was supposed to recovery of the real estate market is not a surprising scenario. [2. http://finance.sina.com.cn/world/mzjj/20140303/074518383046.shtml]The prices are stop rising, existing home sales fell instead; apparently American people are no longer willing to buy a house.

According to data from Realty Trac, it is displaying that data of purchasing of house soaring, up to about 8% of total sales. The data seems to be not high, but concerning on the over demanding market may leads to house price rising to 11% in 2013. An illusion of property is shown to ordinary buyers. In 2014, as the twin mortgage rates and house prices, the housing market may no longer be a buyer’s market. This may tell people, basic housing needs below expectations.

At the same time in the U.S. real estate market, sales of previously-owned homes account for more than 90% of the entire housing sales. Since the bubble burst at the beginning of 2006, the U.S. real estate market has been adjusted. In 2012 the market is growing rebounded, and it became a major bright spot in the economic recovery.  In fact, due to fed’s QE, hot money flooding the market, a sort of asset prices have been pushed up then the profit margin  was squeezed, some financial institutions not only as a mere buyer, also enter the rental market to seek more profit.

In addition, Fannie mae (3.8, 0.04, 1.04%) had warned that due to excessive financial institutions to participate in the U.S. real estate market (including some of the “shadow banking”), which may cause adversely affect. Fannie mae chief economist Doug Duncan said, according to the current institutional buyers are retreat from the real estate market, and developers are still accelerating building, the results will lead to house prices falling.[3. http://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2013/q22013_credit_summary.pdf] If the activity is still active, and institutional investors suddenly feel they have earned enough and start selling, the moment of falling house prices is coming.

We can see from the figure RealtyTrac, institutional investors have been rendered after purchasing power peaking in the early last year. Furthermore, the trend of shock slump is low in January this year since March 2012. Whether because of the cold weather or because of the reason of the fed to cut the QE, people should think deeply what the meaning behind this phenomenon is.

U9272P31DT20140303074441Moreover, while the unemployment rate fell, but the employment market is in a depression situation. The labor force participation rate was only 62.8% in December 2013. Because of it was difficult to find job lots of people have given up. The loan of student has been over the $1 trillion mark in 2012. Many of them in their 20 s and 30 s found that young people find a job in the recession time becomes difficult, as while paying heavy student debt, combined with the wages are actually falling in the United States, so that such a large investment houses may considered as their main frustration. For now, they seem to prefer to rent a cheaper house to live instead of choosing the expensive ideal place in their dream. Of course, there are some young people are still living with their parents.

Some people are cautious, think if the economy is getting worse, and Chinese buyers may leave quickly, like Japan before. Chinese economic is showing weakness increasingly; furthermore China’s financial system has recently started under stress. These concerns will dissipate if Chinese government reduces the pressure on banking industry. If the Chinese government, reduce the pressure on China’s banking industry suffered, stimulate economic growth, these concerns will dissipate, but many economists believe that China’s economy is dangerous, and the risk has been enhanced.

However, Chinese commercial giant, CEO of the largest commercial real estate names Zhang xin together with Safra Brazil merged Stake of GM building in New York.[5. http://cn.nytimes.com/business/20130627/c27property/] China’s large developer Dalian Wanda Group (Dalian Wanda Group) also said that intends to build a luxury hotel in Manhattan (Wanda also plans to build a hotel in London). How could Chinese government or Chinese commercial giants support for the citizens that provide real benefits? Will they keep the investment to real estate in limited?

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