Is China’s Falling Stock Market Good for American Home Buyers?
You have likely heard: The stock market of the world’s second-largest economy, China, took a nosedive last week, falling 11.5%, causing a panic among global financial markets, and losing nearly $10 trillion since a June 3 peak.
And for the ripple effect, Japan’s Nikkei closed 4.6% lower last week, Hong Kong’s Hang Seng index closed 5.2% lower, and Australia’s main index closed 4.1% lower. The S&P 500 fell 3.2% on Friday, Nasdaq futures fell 5%, and, on Monday morning, the Dow lost 1,000 points. Ouch.
Could this possibly be good news, at least for the little-guy home buyer?
Well, the Chinese don’t have just their toes dipped in American real estate; they have their entire bodies submerged in it. Chinese investment in American real estate markets exceeded $10 billion in 2014.
“Chinese buyers have become the most aggressive foreign investors in New York City, surpassing Russians in volume and mass,” reports The Epoch Times.
But tough economic times could mean less competition from Chinese investors, possibly cooling some markets and making a wee bit of room in inventory at least in the luxury market.
“There’s still a strong desire to buy in America, but maybe they’re not coming in with quite as strong offers,” Ken DeLeon told KCBS. Agents, the piece continues, are worried that “an extended global financial crisis could bring a chill wind to the Bay Area’s red-hot—and still-rising—home prices.”
But apparently it’s a different story on the East Coast. The Epoch Times reports that the stock woes may benefit New York.
“Interest in luxury tower apartments, as well as larger commercial real estate opportunities, is likely to even increase as China’s millionaires seek safe investments and higher returns in the United States,” it writes. “The Chinese stock market crash may encourage Chinese corporations to seek higher returns in New York.”
But tell that to New York City real estate brokers, who, according to the Real Estate Board of New York, lost confidence last month.
“Anticipation of an interest rate increase in the future and uncertainty about some aspects of the global economy, particularly the Greek and Chinese economies, were the key concerns cited as impacting their confidence in the market six months from now,” REBNY reported in a survey.
Is there any clearly good news for the home buyer? OK, no, not totally clear, but there’s a little something foggy on the horizon. Janet Yellen, chairwoman of the United States Federal Reserve, was moving toward an increase in interest rates, the first time since December 2008, when it was slashed to near zero.
Now, there’s speculation that “higher interest rates could further rattle markets,” writes The New York Times. That interest hike looks pretty unlikely right about now. And that is good news if you’re mortgage shopping.
By Lisa Selin Davis, Realtor.com