Key Highlights
- Chinese Nationals have been the #1 foreign buyers in the US for the past 7 years
- Chinese buyers accounted for $13.4B in the US housing market between April 2018-May 2019, according to the National Association of REALTORS® (NAR)
- More than one third of home purchases in California made by Chinese Nationals
China has been on lockdown since the announcement of the coronavirus outbreak. Production lines of workers in manufacturing plants that employ over one million people across Taiwan alone have, in just one plant, diminished from 4,000 people to a dozen. In another plant, production lines have dropped from 1,000 workers to just 60 people as workers are staying inside their homes.
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Tom Rafferty, head of China research with the Economist Intelligence Unit within the international Economic Unit company that provides economic forecasting, country risk service reports and industry reports, said, “If this (coronavirus outbreak) drags past March, that really becomes quite bad. Then you’re talking long-term dislocation in supply chains. You’re talking about a negative impact on the consumer sector, which is not temporary. And when you factor all these things and perhaps a cooling housing market, you get some pretty nasty economic data.”
Compared with China’s swine flu epidemic nearly 30 years ago, the ramifications of this coronavirus outbreak are, according to Rafferty, “much larger” because there is no double-digit GDP growth in China, no cushion, as there was last time. China’s economy grew at its slowest rate in nearly 30 years this last year.
Jonathan Miller, president of Miller Samuel, is no more optimistic. He told Fortune Magazine, “Everything coming out of China is on hold and that would include, for the most part, Chinese Nationals buying US real estate.”
Both Lawrence Yun, chief economist with NAR, and Danielle Hale, chief economist with realtor.om, agree with Miller. Yun said, “China has been the most important source of foreign demand for US real estate. The upper-end sector of the market in which Chinese buyers had been propelling that market tier have quickly vanished…and we can expect that upper-end to suffer as a result.”
Hale said, “In the short term, the virus could dampen (luxury) sales further.”
The coronavirus is also stirring discussions about its impact on US interest rates. In the recent meeting held last week by the Federal Reserve, minutes reflect that Fed Chair Jerome Powell called the coronavirus a potential “risk” to the US economy that the Fed would be closely monitoring.
“China is the world’s second largest economy, with a worldwide supply chain,” reported realtor.com. “So what happens in China affects all businesses around the world, which then affects global financial markets. Amid market turmoil, investors tend to pull money out of the stock market and park it in safer, more stable US Treasury bonds. And when bonds are strong, mortgage rates fall…” as we’ve already seen.
Thanks to Fortune Magazine, HousingWire, and realtor.com for source data.
Also read: Possible Consequences for Real Estate IF Recession Hits – Part II Is There A Connection Between Student Loan Debt & The Subprime Mortgage Crisis?, 2020 Real Estate Market Predictions
