Bringing this topic up with hopes that people with more insight could pitch in and provide insight or personal opinions/experiences from all parts of US or even the world. I acknowledge that this post will upset a lot of people with a lot of skin in the game. So you have been warned in advance! Please do not read further if you feel this is the case for yourself and ruin your weekend!
I do not wish to offend anyone, but rather stimulate discussion and hear what everyone else's opinion on the subject matter.
Quick backstory on how I got here. It's been a while since I've posted (my last post was in late 2018 after I completed the last 3 house flip projects for a RE Investor who was rehabbing and flipping homes from 2015-2018). My job for this investor (who is an agent and interior designer) was serving as an analyst, constructing proformas, consulting on my opinion on macroeconomic markets and outlooks for real estate, consulting on microfinancial decisions (I am an Economics major with a specialization in International Macro-Finance & Econometrics), and managing day to day duties of rehabs on site. After these projects concluded and were sold, a decision was made by him in part due to financial stability (I still needed to work) created over last 2 years and cracks we began seeing in the global economy.
The risk substantially increased given that we are approaching the end of the US business cycle and most importantly when China began reducing foreign capital outflows of their citizens into assets, especially Real Estate really began to tighten in late 2018. Capital controls imposed on Chinese citizens really began around 2016, which may explain why homes prices really started jumping up early 2017 as the controls became effective around June-July of 2017 so presumably many buyers were rushing into safe haven assets in anticipation of this happening.
Long story short on China, many citizens have fears of policies over there and feel that a weakening Yuan over the next several years in addition to bank runs and an impending credit crisis (China has printed more money over last 2 years than ever in their history) will have heavy implications on their wealth and they wish to diversify and send as much money out as they can before things begin to get really messy. Keep in mind that Chinese own a lot of dollars and treasuries after helping bail us out in 2008-2009 crisis and many projects whether they are infrastructure in Africa, Silk Road in Asia, or Investments by citizens in other countries are ALWAYS done in dollars. This in effect weakens the currency as citizens dump yuans for dollars making their saving and currency worth much less and reduces purchasing power.
I don't know if anyone thinks these implications around the world can have serious implications on the real estate market world wide as I believe. It seems that something will have to fundamentally change in order to see real estate appreciate at the rate it's been appreciating at. Some examples of potential future drivers will be: something similar to what Bush did when he signed the American Dream Downpayment Act of 2003, China easing up on Capital Controls (this would be a great sign, but with trade war and China's issues with their own economy I seriously doubt this), IPOs over last 2 years creating much needed wealth for employees (takes 12-24 months for them to be able to exercise stock options), a dot com like bubble in the stock market (I think this is most likely scenario given stock buybacks and QE and I won't be surprised to see stocks doing something absolutely unbelievable over the next 1-5 years similar to 97-end of dot com bubble), or heavy doses of QE and easier access to credit for most people.
Working in the Bay Area, we saw first hand how many buyers were foreign and how many paid for houses in cash without even looking at the homes in quite a few cases. My interest in Real Estate (especially in Bay Area) has faded since because I believe heavy dose of deflation should set in sometime over the next 10 years bringing up some very attractive opportunities to buy Real Estate at a major discount (40-60% targets from highs). I have been saving up and building my credit with hopes of making purchases after prices begin bottom according to my own thesis on what I expect to play out in the global economy over the next several years.
While I cannot speak on behalf of all RE markets far and wide, I think this thesis represents many major cities where Foreign RE was invested in heavily (Think LA, Seattle, Bay Area, New York, Vancouver, Toronto, Sydney, Melbourne, Singapore, London, and many many cities in Europe). Look at what's happened in all these major cities where foreign buyers have disappeared. How has this affected the market where you lived? Have you been affected at all or haven't? What do you think have been drivers in your areas? Please comment below, I would love to hear everyone else's opinions. How has the market in the Bay Area looked since 2018 (I haven't really kept up to date as much as before)? I would love to hear why people think my strategy may be flawed as well, so comment down below.
