TheMReport

58 | TH E M REP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS THE LATEST LOCAL EDITION China Set to Overtake Others in U.S. Homebuying RISING INCOMES OVER THE PACIFIC MAKES U.S. REALTY APPEALING CHINA // As the countries neigh- boring the United States lose their economic edge in the nation's home market, analysts at Capital Economics suggest China might soon become the top foreign buyer of U.S. housing. In a report released earlier this week, the National Association of Realtors (NAR) found foreign purchases of U.S. real estate surged in the 12 months end- ing in March to $92.2 billion, an increase of 35 percent over the prior period. In a note to clients, Paul Diggle, property economist at Capital Economics, insisted that foreign contributions to the housing recovery remain mar- ginal even with the increase. "Foreign buyers remain rela- tively peripheral to the housing recovery for a number of reasons," Diggle wrote. "For Canadian and Mexican buyers . . . currency movements have compounded the impact of rising house prices, reducing the extent to which U.S. housing looks undervalued." Meanwhile, income growth in China has made U.S. housing a relatively cheap investment. From April 2013 through March 2014, Chinese buyers ac- counted for 16 percent of foreign home sales, up from 12 percent in 2013 and just 5 percent in 2009. In dollar volume, China's share is higher, accounting for $22 billion—about 24 percent—of sales during that period. "Put another way, the value of homes bought by Chinese buy- ers in the US has increased from $1.2 [billion] to $7.5 [billion], or slightly more than 500 percent, over five years," Diggle said. While that's still only a small fraction of the more than $1 trillion in total home purchases over the past year, Diggle adds that the influence of Chinese buyers has climbed as high as 35 percent of all sales in California and a further 28 per- cent in Washington, New York, Pennsylvania, and Texas. That concentration extends even further in the market for single- family homes selling for more than $500,000 in suburban areas. Even with tightening mon- etary policy keeping foreign de- mand down in the near future, Diggle predicts Chinese buyers could outweigh Canadians as the largest source of foreign demand within five years should trends continue. "The strength of Chinese demand is another reason to watch closely developments in the Californian housing market, where housing is now no better than fairly valued at the statewide level and starting to look frothy in a number of metros," he concludes. Home Sales Finding Positive Trend Again THE THIRD TIME'S THE CHARM, AS HOMES-SOLD-PER-MONTH CONTINUES STILL UPWARD. COLORADO // The latest National Housing Report from RE/MAX found that for the third month in a row, home sales in May rose higher than sales in the previous month. May sales were 11.5 percent higher than in April, but stub- bornly remained below the same period last year by 9.9 percent. Of the 52 metros included in the study, a mere three experi- enced lower sales than the previ- ous month. Overall, home prices continued to rise higher in May, with a 7.7 percent increase over the previous year. "The usually strong spring selling months appear to be following traditional growth patterns. We've now seen three straight months of increased sales over the previ- ous month—although we may not match the growth rates we saw last year, we are seeing significant in- creases in both sales and prices, and that's a positive sign," said Margaret Kelly, RE/MAX CEO. The National Housing Report commented that while both credit availability and inventory remain tight, May was the sixth consecutive month with fewer year-over-year inventory losses than the previous month. The month's supply of inventory dropped to 3.8—a supply of six months indicates an equally- balanced market between buyers and sellers. RE/MAX found that in the 52 metro areas studied, the median sales price of all homes sold during May was $198,750, 4.6 percent higher than the median price in April and 7.7 percent higher than the median price last year. Home prices have risen continuously for 28 months. The report notes that although prices continue to rise due to limited inventory, prices are not rising as rapidly as the 10.8 percent increase seen in May 2013. "Among the 52 metro areas surveyed, 39 reported higher sales prices than one year ago, two were unchanged and nine reported double- digit increases including: Detroit, Michigan +25.4%; Honolulu, Hawaii +16.9%; Las Vegas, Nevada +16.1%; Orlando, Florida +14.2%; Miami, Florida +13.9%; Chicago, Illinois +12.7%; Atlanta, Georgia +11.5%; Boise, Idaho +10.2%; and Los Angeles, California +10.0%.," the report found. Homes spent an average of 66 days on the market, which was eight days lower than the aver- age seen in April and four days lower than the average in May last year. May is the 24th con- secutive month with an "average days on the market" below 90. Report: Weak Labor Market to Blame for Housing Weakness TWO STEPS FORWARD AND 800,000 BACK IS NO WAY TO MAKE PROGRESS. CALIFORNIA // The un- employment rate was un- changed in May, staying put at 6.3 percent with 9.8 mil- lion Americans unemployed. Unemployment is the lowest it has been since September 2008. However, RealtyTrac's Octavio ANALYTICS

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