patrick.net

So what do we think is going to happen in China soon?

This is just non-empirical evidence, but it seems cities with lots of Chinese residents have high real estate prices. Look at Vancouver, Toronto, SF, and London. Could just be a coincidence though, as there are other cities with high real estate prices with a low Chinese population. The high prices come down to high demand,willingness to pay high prices, and lots of wealthy people.

SF NYC etc etc ? Makes you wonder why so many "ChinaTown's" in the states are near slum conditions. Perhaps you should ask the HK chinese who came here pre-97 before the hand over to mainland...So why didnt prices skyrocket back then?

I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they’ll give up the fancy car and drive a Camry, don’t go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

So lets get this right!

You CAN TAKE MORE THAN $5,000 out of the China?

A degree from Chinese University and unkown foreign references gets you a Silicon Valley job immediately?

sybrib says

Aren’t there a lot of recent homeowners in The Fortress from Taiwan, Hong Kong, Singapore? (I know some from all of those places).

Sure I know a few myself, many came here in the 60s and 70s. They still chatter in Chinese,
you think they came off the boat yesterday.

Well, for one thing:

http://apiproblemgambling.com/uploads/2009/09/08.1019.CasinosaBigDrawforLocalAsians.pdf

So I'm not sure where someone is getting the idea that all Asians/Chinese are somehow frugal. Not so.
Many are addicted to gambling.

Some of my neighbors are Asian and Indian and yes, they drive older cars (I do too - a 2000 luxury car), they also do not appear to be going for fashion at all. Except for the teens.

But the main thing is that the women have sacrificed beauty for property. I guess the male still gambles, whatever, however ends are met by the wife making the sacrifices.

In the SV, asians were big borrowers for Option ARMs. Many are in trouble now and will lose their home.

http://abcnews.go.com/US/wireStory?id=8634199

Wanted to add that I doubt Chinese nationals are buying up *many* luxury properties here in the U.S.

I've read that they are buying *some* properties, however, the main buying of farm and manufacturing assets is being done by the chinese gov't.

Hedge funds and REITs are buying on the lower to mid-end.

Sad to say, but a generation (boomers) has made housing an investment tool and has put it in a speculative category for certain investors.

I am aware that many X'ers and Millennials are very angry at the boomers and are holding them responsible for this mess. Quite right to do so, imo.
If you want to exact revenge, the best way to do it is to not patronize the places they go to, not hire them, not have anything to do with them.

For example, what I did was cancel my AAA membership because boomers tend to belong to that outfit and are the primary (only actually) age group employed by the Auto Club.

So you do what you can and let it go from there. I am very angry about this and by now, should be living in Malibu beachfront with my income, but it will never happen, thanks to a generation that used shelter as leverage.

Another reason why prices are still higher in better areas is because there is demand. People want to have their children go to schools that are safe. They want to live in safer cleaner neighborhoods and the demand for those attributes is still higher than for the low to mid-end.

Here in California, if you want an expansion of safe, clean neighborhoods, you are really going to have to clear out the illegals and gangbangers in L.A. and SF. These groups have made hundreds of square miles of valuable land with desirable weather unlivable for the citizenry.

Unfortunately, it will take a concerted effort probably spanning one generation to clear them out (this is short work which the national Guard can do) and then to redesign and rebuild and repopulate with law abiding citizens.

Misstrial says

Unfortunately, it will take a concerted effort probably spanning one generation to clear them out (this is short work which the national Guard can do) and then to redesign and rebuild and repopulate with law abiding citizens.

oh yeah, I sure can't wait until 'we' have full on fascism here and 'we' can just go in a 'do' this, that would be great...

It would best if we clear 'them' all out, to gitmo or something, or wait, I saw a movie the other day where they had a great solution. New York had become so overridden with crime by degenerates they just put a big wall around it and then everyone who was guilty of being a degenerate or a thought crime or something was just put in there. It was great, the police got to shoot a whole of people and they had these sexy black uniforms, the other people in the New York gulag, well shit who cares, they were just 'untermensch' anyway.

It seemed like a nice society the 'law abiding citizens' lived in, too.

Hi kentm:

Calm down, your online tone is quite rude.

Actually I have lived in Mexico and this is something they would certainly do to us.

Many Mexican nationals living here illegally are on the run from Mexican law and are wanted in their own country for serious crimes.

Others are here still because they cannot afford to move back. We would be doing them a favor.

Check my username, btw, I am not advocating anything that would be illegal.

Thanks.

Wanted to add that anarchists and others who do not want to uphold existing laws can enjoy anarchy at its finest by simply emigrating to Greece.

whats keeping higher end property up are longer reset/recast periods, artificially low interest rates, and dipping into savings, Helocs & 401ks just to keep their overpriced boxes.

Yes, first gen Chinese immigrants on average save more, live more frugally, but they are still subject to market forces, economic conditions, local employment, and they also don't always make good investment decisions. I know plenty of my dad's Chinese/taiwanese/HKnese friends that got burnt both by the dot com stock bust and then got burnt again by the housing bubble. They save all their money living frugally, yet still end up with very little because of their tendency to "follow the herd" in investment schemes.

Speaking of the herd mentality - its not limited to the Chinese as we all know.
We all are susceptible as this cartoon shows :) Enjoy!

http://www.burnabrain.com:80/how-stockmarket-works/

I think the Chinese contribute to higher prices. Alhambra and Monterey Park homes are still very high.

As an Indian myself, I thought fellow Indians didn't gamble on these risky option-ARM mortgages. We are a risk-averse bunch and typically opt for 30 yr fixed.

Or so I thought......

More and more, I am finding out about other Indians & Chinese who got these loans. These are professional tech workers (aka yuppies).

Just the other day at office, I overheard two indian workers chatting:

one guy : our loan is resetting. We bought the house for 850k in san jose. Now the house is worth may be 750k. Nobody will refi
another guy : dude, I am the same situation, not sure what to do. may be I should stop paying the mortgage so the bank will negotiate.

any one watched the ENRON documentary? There was one douche-trader exclaiming 'burn baby burn' at the california wild fires.
I feel like chanting that too.... does that make me a bad-person ? :-)

Permanent_Marker:

Is it risk or just greed? I bought 5 years ago with a 30-yr fixed in Mtn View. We spent and could afford $850K. The broker told us we could qualify for $1.2M.

I knew the bubble would pop, so we might be OK with our current situation. If we had over extended with a plan to flip in 2 years, we would be drowning too right now.

As you now hear from your comrades, there were just too many "buyers" taking the bait.

When all aspects of buying of a home give assurances that option X is as safe as any other method, people will take them. This doesn't mean a risk adverse person avoids it, because it's "not" risky. When all of your friends are doing, when the media is extolling the virtues of it, and every money manager is telling you to buy, you do it.

The people buying up land in large chunks in places like Vancouver, are doing so on scale, but there aren't that many of them. I remember hearing of stories where they were given a book of properties and they would check off 30 or so and have a realtor go get those. That happens sometimes, but in general, it's one person buying a single property, not 30, there just aren't that many billionaires in the world. They aren't skewing the numbers by some insane amount. Vancouver is expensive because of the nature of land, it's walled in by mountains and sea. Expansion into the valley happens, but when there are only 2 lane highways, driving 60km into the city isn't pleasant.

permanent_marker says

AMore and more, I am finding out about other Indians & Chinese who got these loans. These are professional tech workers (aka yuppies).

If you know their home addresses, just find their loan information in ProperShark.com. You will be surprised how many people drank Opt-A Kool-Aids in 2004-2006.

bikes2work says

As you now hear from your comrades, there were just too many “buyers” taking the bait.

I too personally know some of them. "Oh, you can always refinance" was the basic mantra in those days.

SiO2 says

I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they’ll give up the fancy car and drive a Camry, don’t go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

1. Americans live through their credit cards, meaning, they buy more than they can afford. Asian value system teaches them to live within their means and have their priorities straight. Lets put it this way, if we had good schools everywhere (like in the east coast), the Chinese and Indians would not try to squeeze into the over-saturated places like Saratoga, Cupertino and Los Altos.

2. It is not that the Chinese or Indians do not spend their money. If that was true, they would not be spending the money on buying an over-priced house in the first place. The reality is, their priority is different. An American gets an erection out of an expensive show-off car and dining in expensive restaurants with an intention to impress the women, the Chinese and Indians get an erection by sending their kids to the "best" school so that they can SHOW OFF their kids in their community.

For Americans it is bread,butter and women and for Chinese and Indians it is show off.

Countries that have more confidence, and feel they can pay back loans and/or have enough to survive tend to spend more and save less.

In the US, it's not that difficult to find another job. Even if it's a fast food job, you *CAN* get another job. There are social programs to assist people out. The unemployment rates aren't 40% like in many asian countries, where 1 member supports an entire house hold, which would include grandparents, siblings, children, spouse.

In the US, one or two people in a family might find themselves out of a job, but the chances of everyone in an entire family finding themselves unemployed, with no access to any type of loan/cash is almost impossible.

Other countries save because they have to, the US spends because it can. Debt spending has been happening since the 1950's, it didn't kill us back then, it probably won't kill us now. At least 70% of families earn more than they spend in the US. Which means there is still 30% out there spending too much. It's not every american, the news just makes it sound that way.

Well said buddy!

newbie says

SiO2 says

I think that these immigrants are willing to spend a higher percentage of income on owning than are people born in the US. So they’ll give up the fancy car and drive a Camry, don’t go out to expensive restaurants, then use that money to buy in the desired neighborhood and school district.

1. Americans live through their credit cards, meaning, they buy more than they can afford. Asian value system teaches them to live within their means and have their priorities straight. Lets put it this way, if we had good schools everywhere (like in the east coast), the Chinese and Indians would not try to squeeze into the over-saturated places like Saratoga, Cupertino and Los Altos.
2. It is not that the Chinese or Indians do not spend their money. If that was true, they would not be spending the money on buying an over-priced house in the first place. The reality is, their priority is different. An American gets an erection out of an expensive show-off car and dining in expensive restaurants with an intention to impress the women, the Chinese and Indians get an erection by sending their kids to the “best” school so that they can SHOW OFF their kids in their community.

The chinese have a few cultural differences. They are just entering a phase in their country where they can take risks with their education. They went into careers that traditionally had decent returns. Like accounting.

Poetry, Arts, Music, Physics, Math, or areas that didn't generate a solid income were frowned upon. As a country becomes more confident, they expand. It used to be that everything was invented here, and manufactured over there, because they spent so much time learning accounting, and exact sciences that it became hard to look outside the box. Their schools didn't emphasis on this. Now, I think more of their children are opening up, and they're starting to innovate over there as well.

This is less about the chinese, and more about their economic situation. This can be seen in most poorer countries around the world. Many countries push for education in useful areas and frown upon the arts and what not. We've lost a lot of entrepreneurial spirit here as well, but it only makes sense. Average employee wages aren't too bad. In a 5 man operation, the difference in income between employee and employeer isn't going to 100:1, it'll probably be 4:1, maybe 5:1. Not only that, the amount people earn will be enough to feed them and house them. In other countries, they can end up with 100:1 ratios where the owner makes enmasse and employees are paid peanuts. Really, if you aren't thinking of creating your own business, you're not thinking about your survival. Here if you're not thinking of creating your own business, people look up to you, like good job! go for it! We view things differently here.

For many of these cultures, such as Indian, they feel *VERY* lonely when they get over here. They were brought up in a hose with 10+ people, parents, siblings, grand parents, etc. They often crave having others around. Our society is designed to operate on 1 couple + children (until 18) at home, no one else. We are paid/demand wages of this level. Anyone who stays at home living with their parents for a couple years, and saving knows how fast they can save. Without rent, cable bills, etc, their saving increase rapdily. For indians, by having many family members under one roof, they are simply living the way they are used to, and in the process saving enmasse. It's a cultural thing for them. For them it's great.

SF ace says

Just look at what is happening in the bay area closely. For example, a big 4 accounting firm in the bay area, which employs about 5K -10K on the aggregate is dominated by Chinese, perhaps as high as 50%

I doubt you will find more than 30% locally. In other regions is much much less than that. They are very good at memorizing accounting standards for the CPA exam. But when you reword the same problem on the CPA exam, they flunk out. The prior version of the CPA exam was changed to combat this problem of easy passing by simply memorizing the answers. The problems have gone from all multiple choice to more actual problem solving and writing skills. And who is pushing for this ? The big 4 who have been burned over the past few years.

The one thing I have about much of the Asian population here in San Jose is that they operate great numbers of little shops. Hair salons, small restaurants, smoke shops, nail shops, flower shops and all sorts little cash businesses. There are so many, one has to wonder how all of them manage to survive. I knew a rather prominent restaurant owner once, and besides being a total slave driver, the other key to his success was taking the first half of the days take and putting right in his pocket. That's right. Those reciepts never showed on the ledger. Those cash businesses are big tax evading cash cows. Perhaps incomes in San Jose are significantly higher than IRS figures report because of so much unreported (and untaxed) income. Is this part of the reason so much real estate is being paid for with cash?

SF ace says

I guess that sort of explains why San Francisco, Cupertino, Fremont, Vancouver (Richmond), San Gabriel Valley, and Washington DC prices are high, areas with a high density of Chinese than without. New York just has a lot of people, not a high density of chinese.

So why did California home prices dive in the early 90s and current nose dived!!!!

Yes Chinese folks like to gamble too.. perhaps gambling with homes was not a good idea.

Well I'm not trying to suggest that it all falls to one ethnic group or another. All colors are included in this issue. That issue is a pervasive general lawlessness. If you think you can get away with something and profit it's all good. Penalties for many of these sorts of things amount to a slap on the wrist and the cost of doing business. They pay a fine and it's back to business as usual. When you commit a felony, you need to go to prison. Once that starts happening, people will quickly surmise that maybe playing it straight is the least risky course of action.

There are several other factors that are being missed and chalked up to Asians (or others) living together, and how we maybe should try the same thing.

The key isn't that they have the "right" answer, it's that they do things DIFFERENTLY than we do. We have chosen to live on our own, there are reasons for that as well. We are tight on time, we want to socialize with like minded people (not necessarily our neighbors, or the garbage men), and we're a pretty honest society which shows in our productivity. The more honest a group is, the harder it is to live with each other. How long can you hold your tongues when your cousins/aunts/family come visiting and say something truly outrageous? We can't. Imagine living day in, day out with those people. We can't do it. You need to be a little liberal with your thoughts to do that. Less honest, more social, more forgiving. We can't easily live under a single roof due to this. It's not that we have given up family values, it's that we've embraced honesty to the point where we can't live with others easily. We've optimized our time so well, that talking to the garbage man who comes by weekly isn't something we're interested in doing, we have limited time. We want to talk with other like minded people, about subjects they're experts in.

That being said, *IF* we moved in all together to buy property like the asians do, what would happen? We just changed our culture, the average wealth per family goes up... and property sky rockets. Now buying a single home will be WAY more expensive. The asians don't have it "right" they just do it differently, and in our culture, it pays off very well.

As for all cash businesses. Countries where honesty isn't necessarily a needed value (trust is needed, not honesty, honesty), they often feel that if you aren't properly fact checking them, then it's YOUR fault for not collecting the proper taxes. Many countries that have a value system that don't encourage honesty (but do encourage trust - don't get them confused!!), have incredibly complex systems to catch cheats. Work is done by multiple parties, work is rechecked by 3rd parties, overlapping work by individuals. Governments look at multiple aspects of a business to determine it's taxes, vs just the account ledger. Some countries just tax the hell out of goods that they know are too expensive for the average person to buy. Put a 100% tax on a BMW, and that person who cheats on his taxes, pays his taxes one way or another. If they choose to do nothing with their money, so be it. But if they want to actually use their hard earned money, just find ingenious ways to properly tax it. In aftrica, I was told that the currency changes every year or so. You need to take ALL your hard currency in and exchange it before it's devalued to 0. The people who bring in big bags of money with no proof of paying taxes, well they pay their taxes then.

1. Newbie says "Lets put it this way, if we had good schools everywhere (like in the east coast), "

Believe me, there's plenty of bad schools in the east coast. Inner cities of Camden, Phila, Baltimore, make East SJ look pleasant. And rural areas have problems too.
Having said that, it's probably true that the median school in NY, NJ, PA is better than the median school of CA. Spending $12k/year may have something to do with that. It's high here (like Palo Alto) but average in those places.

2. Another factor about Chinese/Indian etc is that we don't see the "average" Asian here. We see the immigrants, who tend to have college education, more driven, and more risk-taking (as mentioned above). Think about it, what a risk to move across the ocean to a place where you hardly know anyone. Yet I know many people that did this, with less than $1k cash, and now are successful. There's definitely some selection bias here.

3. More related to property bubble in China- I was flipping through the channels the other night, and the Chinese language station was showing a drama. This scene showed a mad frenzy of people bidding on apartments. There was a model of the building in a display case, uniformed agents marking the board with who was bidding on which place, and a lot of people making the bids. Hmm kind of like "flip this house" a few years back in the US.

@SiO2,
Totally true about the average vs what we see here. We're getting the best of the best. And when they come here, and put in whatever hours were required of them to become the best of the best over there, they come the best here often. Taking those risks and working hard.

Having an open "bidding" process might be more common over there. And at least you see who you are bidding against and can bid to your hearts content. It might cause some homes to become over valued, but really it comes down to, what can you afford, and what are you willing to pay for it. The old adage of "If you win every auction, you're paying too much" is true here too. Bidding is bad for emotional people, but at least they get to see their "opponents" or whats going on behind the scenes.

deanrite says

The one thing I have about much of the Asian population here in San Jose is that they operate great numbers of little shops. Hair salons, small restaurants, smoke shops, nail shops, flower shops and all sorts little cash businesses.

Been true for a long time. Even Castro st in Mt View and Murphy St in Sunnyvale Chinese restaurants back in the early 70s. Yes I would say there is plenty of cash transactions going on, but the fact is the IRS goes after more strongly on small business due to easy cash "spoilage". Its actually very easy for the IRS audit to have full access to business and person bank accounts and verify the accounting records.

SiO2 says

2. Another factor about Chinese/Indian etc is that we don’t see the “average” Asian here. We see the immigrants, who tend to have college education, more driven, and more risk-taking (as mentioned above).

Ug! you mean like the Vietnamese who were tought in French schools back in Nam and came here in the early 1970s? the same ones that were taking Chemistry, Calculas, and Computer programming back in the 1970s in our High Schools later to be employed by Silicon Valley back in the 1980s?
Geez! I guess the largest "asian" community really doesnt count. They are just 'average'! LOL! What a riot!!!

@thomas

Two points that should be made. The ones who were taking the courses back in the 1970's were still likely first generation children. The parents were still likely pushing extremely hard on them to excel, as if they were back in their homeland countries where maximum education was a must to just survive, not just for personal "growth". Also, when the community is injected with the brightest immigrants, it's going to skew the appearance and results of any that aren't living up to those "standards". While it might not hold true all the time, the number of over achievers per 100,000 people is probably a decently small number normally, so by injecting even a small number of extra over achievers into that number, it's going to appear that the per 100,000 number is way higher than the norm for those cultures.

You will find many of them never heard of or even wanted to live in San Jose or Sunnyvale before the fall of Saigon. They came here because many were Catholics.

To somehow claim it attracted, or injected, the brightest immigrants is a desperate (pathic) try of rewritting history to suite some parties myoptic view of this regions history.

@thomas

There are roughly 2% of the population with a phd. 1 in 50. How many people need to be brought into this country as a minority to shift that rate WAY up? How many people immigrating have higher educations? Higher education means faster immigration. The US pushes it's immigration standards. It is possible to get in without a higher education, but the higher the better and the faster track you're put on.

Many of the work visas require high education requirements. All of those people are seriously pushing their minorities education level through the roof.

Many people in Saigon might not have know where San Jose was, but paying for a flight requires money. If I told you it cost $100,000 to fly to the moon, who do you think would live on the moon? A flight from Saigon to here might not be 100K, but if you're making $3/day, a $1000 ticket + legal fees does push those people out of line for immigration. Some might push to make it work, but the majority who do make it over, will be doing well enough in their origin countries to pay for expensive legal and relocation costs, while the poor can't.

pkennedy says

Many people in Saigon might not have know where San Jose was, but paying for a flight requires money. If I told you it cost $100,000 to fly to the moon, who do you think would live on the moon? A flight from Saigon to here might not be 100K, but if you’re making $3/day, a $1000 ticket + legal fees does push those people out of line for immigration. Some might push to make it work, but the majority who do make it over, will be doing well enough in their origin countries to pay for expensive legal and relocation costs, while the poor can’t.

I disagree. People who have good amount of wealth wouldn't want to come here. They have full-time servants/maids, chauffeurs, lands, political clouts. Why would they come here? To drive Toyota Camry on I-280? One of the primary reasons people migrate to another country, willfully, is opportunity. Wealthy people don't need to move to another country to find opportunity. I know many people who moved to USA/Canada from China and India in 1960s, 1970s. They did not have anything when they moved here. They were able to come here because they had support from family members living in USA.
Since 1990s another group of immigrants started coming here. They are primarily professionals - engineers, doctors etc. Again, for same reason - opportunity.
So, saying only "best of the best" wealthy people are migrating to USA is a kind of stretch.

pkennedy says

How many people immigrating have higher educations? Higher education means faster immigration. The US pushes it’s immigration standards. It is possible to get in without a higher education, but the higher the better and the faster track you’re put on.

Not necessarily. This excel sheet from DHS provides some stats about permanent residency issued to immigrants. Majority of them are family based or immediate relative of US citizens (parents, children, brother etc). Employment based immigration is minuscule compare to family based category.

2006 stat:
Family based + immediate relatives: 222K + 580K
Employment based: 159K

From the article...

State-owned China Investment Corp. last year bought a 15.8% stake in AES Corp., which operates an electric power plant in Huntington Beach. (Robert Lachman / Los Angeles Times).

OK, CIC, went on the open market and bought 15.8% of shares in AES. So what? Many local companies also take a stake by buying minority shares in other companies. They may turn around this or next year and sell it for short term gains. It doesnt mean squat for real estate.

There are truly stupid newspaper articles out there.

pkennedy says

Many people in Saigon might not have know where San Jose was, but paying for a flight requires money. If I told you it cost $100,000 to fly to the moon, who do you think would live on the moon? A flight from Saigon to here might not be 100K, but if you’re making $3/day, a $1000 ticket + legal fees does push those people out of line for immigration. Some might push to make it work, but the majority who do make it over, will be doing well enough in their origin countries to pay for expensive legal and relocation costs, while the poor can’t.

Jesus PK, dont you recall the fall of Saigon and the exodus in 1975, choppers evacuating the Viets off the roof tops of the US embassy onto the US Navy Carriers? Not to mention the Boat People up to 1980s. These people left South Vietnam with the cloths on their back and a hair brush in their hand! Over 110K people were evacuated.

Wow I think the statement of Chinese investors buying up land in the US was taken too heavily. My interpretation, along with my realtor's interpretation is that contractors (or investors, and statistically Chinese), are buying up the properties in an attempt to flip these properties. Another segment of that statement is that Chinese families are the ones putting huge down payments of 50%++. According to my realtor here in the San Francisco area, majority of the buyers closing on these cash-only sales are Chinese.

@P2D2

One thing to consider, is that 160K of employment is huge compared with family. Family might still overwhelm the, but % wise, they're skewing the education level way up there, compared with the average American family. Family members are likely to have decent educations, education is a MUST in most of these countries, to even get a basic job. There will obviously be a fair number without a decent education, but proportional to the number of educated coming in, it's being massively skewed towards educated.

I fully agree with you that wealthy people aren't going to move. However, it's possible to be very well educated without having wealth. In most of those countries, unless you're running the company, you'd not making anything, even with a great education.

Many also think they can come here, jack up their savings rates and head home one day with pockets full of money. Live simply, save and move back one day. Of course after having a family here, and living here for 10 or 15 years it gets hard. After getting into the "spend it all!" mentality, it gets even more difficult.

Vain says

Wow I think the statement of Chinese investors buying up land in the US was taken too heavily.

Indeed, it practically impossible! You cannot take more than $5000 out of the country. What the heck are you going to buy with that. Ponder what would happen if some get cought smuggling currency out of China. This is China, a Communist nation, not some western democracy which has some ideas of peoples rights to move out as they please.