Foreign investors pricing many out of market

Posted: 6/28/2016

According to the newest reports from the California Association of Realtors, housing values and home sales have seen a modest increase over the past three months and continued economic growth is visible going forward. Tight housing inventory however, has caused the trending median home price over $500,000, which is causing concern that once again people will be unable to afford a home. The record median home price was set in 2007 at $594,530.

Low affordability has become a major issue in many cities throughout the state. The influx of foreign capital in the California real estate market has caused stiff competition with first-time buyers. Typically, a first-time buyer will need a mortgage. When competing with a foreign buyer who is willing to pay all cash, it pushes the first-time buyer out of the market and pushed housing values up. With the current financial crisis in Britain, many global investors are now flooding to America for a safer investment.

Similarities between the newest housing trends echo much of what occurred up to the massive bubble burst of the housing market in 2007. With homebuyers unable to afford the purchase of a home, lenders began offering creative but dangerous types of negative amortized loans. Economists are also worried that with any global financial recession, investors will pull out of the California housing market, causing another setback.