A record amount of foreign money is flowing into the U.S. housing market.
Overseas buyers and new immigrants accounted for $92 billion of home purchases in the U.S. in the 12 months ended in March, according to a study from the National Association of Realtors. That’s up 35 percent from the year before, and the most ever.
Nearly one-fourth of those purchases came from buyers from China. And the place they’re looking most is Southern California. Among U.S. cities, Los Angeles was the top destination for real estate searches from China on the association’s realtor.com website, according to the study; San Francisco was second; followed by Irvine.
The report highlights the growing effect of global capital on some local housing markets. The $92 billion amounts to 7 percent of all money spent on homes in the U.S. during those 12 months, and nearly half of it was concentrated in a few cities, including Los Angeles.
There are several reasons why so much global—and especially Chinese—cash is flowing into Southern California, says Jed Smith, managing director for quantitative research at the REALTORS group.
Some families are buying houses for their children attending California universities, or even high schools in some top districts. Others see the U.S. as a smarter investment than the overheated Chinese housing market. And, in some cases, wealthy Chinese are parking money in a safer haven than is available at home.
“California’s a nice place to live, and by and large the U.S. is a good place to put your money,” Smith says.
That’s driving prices in parts of the region that have long been popular with Chinese buyers. Home values have returned to pre-recession levels in parts of the San Gabriel Valley, for example. And in Irvine, home to a booming population of young Asian families, new residences are getting scooped up by Chinese buyers.
Scott Barrack, the managing director of Space Global, a Shanghai-based firm focused on connecting Chinese investment with large downtown Los Angeles real estate projects, says that “Los Angeles is also benefiting from the infusion of Chinese capital, with many parts of the city experiencing an unprecedented resurgence in real estate, and thus overall economic activity.”
Many international buyers are drawn to parts of the region where their fellow countrymen already live, says Sheril Liu, a real estate agent in Irvine. Whether it’s family connections or simple familiarity with names, new buyers tend to follow the old ones.
“These are the famous cities they know,” says Liu, an immigrant from China who estimates that half her business now comes from buyers from China. “They know San Francisco. They know Los Angeles. They know Irvine.”
Good schools help. Liu says many of her clients are families with children, planning to move to the U.S. and looking for a top-ranked school district. And the high-cost of Chinese housing market means that even neighborhoods in the U.S. where the median price is pushing $900,000 can look like a steal.
“The real estate market in China is crazy right now,” Liu says. “You can sell a condo over there and easily afford a big single-family home here.”
As the Chinese-to-U.S. market grows, more agents are trying to find ways to tap it. MSM Luxury Estates in Beverly Hills, for example, opened an office in Hangzhou last year to better reach new customers. So far, says chief executive Moe Abourched, it has done quite well.
“We’re seeing more of an influx all the time,” he says.
Abourched says his firm is working with a range of customers—including would-be immigrants who need mortgages, wealthy younger Chinese who can pay millions of dollars in cash, and investment groups aiming to buy land to build new subdivisions aimed specifically at Chinese buyers.