A housing bubble initially started from a surge of well paid high tech workers is transitioning into an international and speculation driven bubble.  In 1991 % of cash bought homes was 15% in CA, now it’s over 32% (2013).  Since 2013 it has only accelerated and now some houses are worth double what the cost 2 years ago.  Realtors give fancy van tours of houses and serve wine.  The tour is lead by bilingual staff and all information is bilingual.  Housing prices are sometimes rounded to 888 numbers because 8 is a lucky number in China.

Headline from a Korean Time article.

Foreign home-buying in California: 36 percent by Chinese, 66 percent paid all cash

I’ve seen two documentaries in the past week on this subject.  It’s sad that so many middle class are being pushed out, rents are tripling and people are forced to take up 3 hour commutes or move all together.  That is exactly what is happening.  The documentary highlighted several couples, each with Master’s degrees and both working professionally, that were unable to afford to live where they were raised.  Texas, CO, Oregon and Washington state are seeing large numbers of people moving there because they can’t afford California.

California’s as a state spend the largest % of their income on housing in the nation.  What does that mean?  It means no disposable income to buy things that actually grow the economy.  10-20% of the houses bought by Chinese are never occupied, this means they aren’t contributing to the local economy.

The most telling moment for me was an interview with a realtor that states, “”I don’t think it’s going to end. I think the act of supply and strong demand is going to drive this market forever“.  I don’t know what it is about human nature but we never see good things coming to an end.

Housing prices have soared past their 2007 housing bubble highs by 200%+  Eventually these tech companies are not going to be able to afford hiring people because the salaries necessary to do so.

The influx of Chinese investors will be the last straw I suspect.  As the yuan takes hits and gets devalued, China set up capital controls, there is a flight of money out of China so Californian real estate seems like a good place to park it.

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