Foreign Cash is Now Bidding for “Rat Infested” Homes in America’s Latest Housing Bubble

I’ve been following closely the recent attempts by the domestic oligarchy in charge of the corporatist-facist state we call America to create a new housing bubble for several years now.  For a little while, I was merely confused as to how prices were starting to rise when college graduates have no jobs and are six figures in debt, while at the same time real incomes are dropping for the rest of the populace.  Rather quickly, the pieces starting falling into place.  It became clear that the primary demand in the market was not from new families or recent college grads.  Nope, it was pretty much all financial oligarchs with private equity firms buying up properties in bulk as “investments.”  An entire asset class of “buy to rent” was born.  I tweeted the following a few days ago:

I can sum up the housing market like this. Rich baby boomers with PE firms outbidding each other as they enter the dementia phase of their lives.

I firmly believe that the above statement sums up what is now the primary backbone of the latest housing bubble.  Alas, there is more.  On top of these boomers that know nothing other than real estate and financial speculation, there is a flood of foreign money, in many cases criminal money, being laundered into U.S. real estate.  We discover that this foreign cash is now preventing regular citizens from buying or even renting in the San Francisco Bay Area.  From Mercury News:

Many homes that would be purchased in a normal market by average buyers are ending up in the hands of cash-paying absentee owners, typically investors, according to the real estate information company DataQuick. That’s especially true of foreclosures and lower-priced homes and condos.

David Yang, 36, who works in solar power, is moving into a home in South San Jose — the 10th one he bid on in five months of looking. “Every house in a good neighborhood probably will receive 20 to 30 offers,” he said. “It’s really crazy.”

His agent, Sharmila Banerjee, said that “cash is coming from China, India, Russia, but there can be difficulties transferring money from outside the country.” When one such deal fell through, another one of her clients had his offer accepted, she said.

In February, 1,044 houses and condos — 28 percent of the sales — in the counties of Santa Clara, San Mateo, Alameda and Contra Costa were bought by absentee buyers. That is the highest percentage since DataQuick began tracking them in 2000. In Contra Costa County, absentee buyers were 35 percent of the sales.

Real estate agent Melissa Haugh said everyone in her office was stunned at the price, paid in cash, for a Santa Clara fixer-upper.

“The house had a rat infestation, there were holes in the walls, windows that leaked, mold around windows, water damage to floors. It needed $100,000 in work,” she said.

Haugh, of Keller Williams Realty, said she priced the house based on recently sold homes in the neighborhood, including one that was a version of the same home that had been completely remodeled and landscaped. The fixer-upper, listed at $419,000, sold in a week for $629,500.

“We ended with 69 offers, all but five for cash,” she said. “It’s mostly foreign investors. I’ve never seen this much cash, ever.” The home went to a couple buying the home for their daughter.

And renting is no solution, said Shannon Masse-Winks, the Oakland designer. “It doesn’t make sense to rent,” she said. “Rent has been skyrocketing. I think that’s really sad. It shouldn’t be that only if you are a corporate executive you can live here. That’s not what the Bay Area is all about.”

Actually Shannon, that is increasingly what America is all about thanks to Bernanke and his crony capitalist Wall Street masters.  Mission Accomplished.

Oh, but this story gets even better.  A lot better.  So what do you think is the Obama Administration’s response to the fact that average Americans cannot afford to buy or rent homes thanks to financial oligarchs and dirty foreign money crowding the space?  Yep, you guessed it.  They want to force banks to lower lending standards so that the broke citizenry can enter the bidding wars in the latest housing bubble.  Actually, this works out great since it provides the oligarchs with a sucker to flip their homes to before the whole house of cards cones crumbling down again.  Even better, it will all be backed by you the taxpayer!  Sort of like how Wall Street always suckers retail into stocks before the market crashes.  We learn from the Washington Post that:

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Assurances to banks that they will not face charges!  As if they needed any more?

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

“We need to align as much as possible with IG and the DOJ moving forward,” FHA Commissioner Carol Galante said. The HUD inspector general and Justice Department declined to comment.

The effort to provide more certainty to banks is just one of several policies the administration is undertaking. The FHA is also urging lenders to take what officials call “compensating factors” into account and use more subjective judgment when deciding whether to make a loan — such as looking at a borrower’s overall savings.

“My view is that there are lots of creditworthy borrowers that are below 720 or 700 — all the way down the credit-score spectrum,” Galante said. “It’s important you look at the totality of that borrower’s ability to pay.”

Government bureaucrats deciding who should get credit and who shouldn’t.  I mean, what could possibly go wrong?

Full Mercury News article here.

Full Washington Post article here.

In Liberty,

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  1. If they wanted to help citizens attain stable home ownership they’d stop playing games with home inventory on banks balance sheets, release them onto the market at prices heavily marked down by the imbalance, and then extend credit to (only) owners living in those homes. There just setting people up for failure at these prices and with this economy.

  2. I am a CPA in Australia. I have been approached by property spruikers who found me via LinkdIn, to push clients to invest in US property. I am not interested nor legally able to advise clients but I am Australian, so assume the Russians Indians and Chinese are doing it, so I agree with the article claims. I feel sorry for young Americans being priced out by foreigners, just to bail out banks.

  3. Last weekend, I happened to talk to real estate brokers from Memphis,TN and Atlanta. They both said that they lived and died by selling REO to hedge funds. I have no doubt that the hedge funds are being fueled by QE.

  4. Leaks reveal secrets of the rich who hide cash offshore

    Millions of internal records have leaked from Britain’s offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.

    The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.

    In France, Jean-Jacques Augier, President François Hollande’s campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.

    In Mongolia, the country’s former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.

    But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners’ identities normally remain secret.

    The names have been unearthed in a novel project by the Washington-based International Consortium of Investigative Journalists [ICIJ], in collaboration with the Guardian and other international media, who are jointly publishing their research results this week.

    The naming project may be extremely damaging for confidence among the world’s wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.

  5. Enter the EPA>

    The EPA, along with destroying businesses, granting millions of tax dollars to the UNU-ISP (UN), is about to destroy home ownership.

    I would love to be a ‘fly on the wall’ at the next Blackstone meeting after they get wind of this:

    “Additional costs will be added to how new homes are built, whereas the sales of older homes can be stopped in their tracks until they meet stringent government codes.”

    “The new federal EPA, HUD and DOE home regulations filter down to local inspectors who are required by law to impose them or fail the home inspection. Unnecessary and unreasonable code can be imposed on homeowners who find they “can’t fight code.” There is virtually no appeal.”

    “…the Environmental Protection Agency will have power to force many homeowners to virtually rebuild their homes to meet stringent environmental requirements before they can sell them. Living in a house that does not meet the EPA’s “green” regulations for roofing, windows, doors, insulation or heating and cooling systems will be slapped with fines. Electrical companies are now installing “smart monitoring systems” to track usage of energy by residents.”

    This is part of a much bigger plan, when thousands of people are forced to ‘walk away’, and that includes the hedge funds like Blackstone that have been buying thousands of single family homes, the federal government will ‘have no choice’ but to seize the properties (Agenda 21). IMHO

    Homeowners vs. EPA Home Invasion

    Posted: 11 Feb 2013 04:02 PM PST

    By: Sharon Sebastian

  6. Huh. How about getting a referendum on a State ballot that prevents foreigners from buying property in the United States? Or is that too “anti-free trade! It’s anti-free trade!” for everybody?

  7. Govt. Making housing more affordable to the masses? Looks like we have gone full circle! Been here before. Stupidity knows no bounds especially in govt.!

  8. The Obama policies were sold as more regulation in the Bank / RE industry and now they are encouraging the same actions that they promised to prevent through regulation.

    They are as they are insane

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