Look Who's Buying America Now!

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American Real Estate owned by JapanAccording to The Wall Street Journal, the most popular story on WSJ.com on Monday was a report about how Lennar (LEN) may apply for a $1.7 billion loan from China to help finance major multifamily housing developments in San Francisco.

Valued at $10.5 billion in total, the projects to reincarnate two former Pacific Coast naval bases as mixed-use residential and commercial real estate have run aground over lack of funds. As a result, Lennar appears poised to open the door to China owning an interest in a big chunk of prime U.S. beachfront real estate. And that's just the start.

The Selling of America

Turns out, while Americans are still reeling from the aftershocks of our housing bust, a whole lot of people from around the globe are eager to take advantage of the "bust-ortunity" in cheap American homes. The National Association of Realtors reports that over the 12 months ended in March, nearly 9% of all real estate purchases in the U.S. (by dollar value) were made by buyers abroad. In some markets, real estate professionals are seeing foreign buying at rates more than twice as fast. One real estate agent in Chicago, for example, observed that 20% of the deals he's closed so far this year involved buyers from Canada, Australia, and elsewhere.

It's only natural that this news would scare some people. It raises echoes of the "Rising Sun" period of Japanese economic dominance back in the 1980s, when Japanese firms flooded the American market with bags of cash, buying up everything from Columbia Studios to the Pebble Beach golf course to Rockefeller Center itself. What's different this time, though, is that it's not just one country's megamillionaires doing the buying. The whole world has embarked on a U.S. shopping spree.

International purchases of U.S. real estate surged 24% over the past 12 months, with plenty of buyers coming from China, true, but also Canada, Mexico, India, and the U.K. (Indeed, as it turns out, Canadian buyers outnumber Chinese by more than 2 to 1.) But few of these countries bear any resemblance to the dominant Japan of the '80s. To the contrary, Mexico, India and the U.K. each have significant currency weakness problems of their own, so this is anything but an attack on a "weak U.S. dollar."

What it is is a recognition that there are pretty incredible values available in U.S. real estate today. According to the Journal, international buyers are focusing their attention in particular on hard-hit real estate markets in Florida, California, Arizona, and New York (but also sunny Texas) -- places where the U.S. housing market boomed particularly hard in the last decade, and places where the discounts to past prices now look particularly compelling.


Is It Bad for America?

On one hand, this kind of buying frenzy is likely to rub a few people the wrong way. "The foreigners are coming," they'll declaim, with all the jingoistic outrage this implies. It probably doesn't help that a lot of Americans are out of work these days, can't get a mortgage, or are underwater on their current homes. So even if they agree that there are good deals in housing to be had, they can't participate.

That has to grate.

But on the other hand, it's hard to get too upset over the prospect of some $82.5 billion (and counting) in foreign capital being poured into the country in a time of economic weakness. More so when you learn that unlike so many buyers back in the 1990s and early 2000s, these are not buy-and-flip purchasers we're talking about.

To the contrary, the Journal reports that 39% of the people buying up all this real estate intend to keep the homes as their primary residences. Add in the 23% who are buying vacation properties, and you've got a strong majority of good, responsible homeowners arriving in town. Folks who are going to keep the paint fresh and the lawns mowed -- and consequently boost the property values of their neighbors.

In short, if we absolutely, positively must sell America to foreigners, these are exactly the foreigners we should be selling to.

Fool contributor Rich Smith does not own shares of any company named above.

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223 Comments

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lawrencentral

This America stuff is not workin. Maybe I'll move to China.

July 19 2012 at 2:06 AM Report abuse +1 rate up rate down Reply
Pumpkinpie

GOP SUPPORTED CORPORATE PROSTITUTION of AMERICA.
COMMUNISTS OWN AMERICA now.
What a PITY.

July 10 2012 at 3:08 AM Report abuse -1 rate up rate down Reply
barackobamaout

This article tries to sugarcoat the situation. BUT, when foreign companies start buying American properties they realize that is is a good financial deal, meaning that the price is very low - - - What made the price low is the question. Our stupid financial dealings - - -- We are spending far more then what we are taking in. We have become an entitlement society and that will always fail - - - The people with money will be like the scavengers in the street picking up the good deals - - - Not a good situation for the U.S.

July 10 2012 at 12:53 AM Report abuse rate up rate down Reply
richard

Americans don`t care anymore. Japan already owns half of California, so China is going to buy more of "America". Most of those so called "Americans" out there buy import cars, Japanese mostly, is it any big shock that Asia is taking over the coasts of America? The United States of Asia. Sickening.

July 09 2012 at 11:22 PM Report abuse +1 rate up rate down Reply
qaqs9000

It seems a lot of people are having a good time with this article. Fortunately I am old and will exit this earth before long. You that are young should take a greater interest in what this will lead to. Globalization has been a prime goal of several international groups. They really could care less about America and are intent to reduce this country to a third world status. There were several books written back in the 70's that warned of the corporate taking of America. We are there now. We now are faced with the selling of our country and it will happen if this is allowed to happen. Fix it or you will lose it. Republicans are the corporate sellers of the country and the backbone of the globalization movement. Vote them all out. ALL republicans must go or the country will go. Take your choice and good luck.

July 09 2012 at 10:05 PM Report abuse -1 rate up rate down Reply
4 replies to qaqs9000's comment
HI FRENCHY

someday we will someone from china and iran competing from the president job in this county...

July 09 2012 at 6:13 PM Report abuse +1 rate up rate down Reply
HI FRENCHY

twenty years from now we will have someone from china and iran competing for president in this country ...

July 09 2012 at 6:11 PM Report abuse +2 rate up rate down Reply
ChuckBurns

Things started falling apart with America's Free Trade Agreement. Making slaves out of the world.

July 09 2012 at 5:47 PM Report abuse +3 rate up rate down Reply
1 reply to ChuckBurns's comment
lawrencentral

Yup, you're correct. And remember who's watch this happened on; none other than Bill Clinton. He signed NAFTA into law in betrayal of his big union supporters. He heavily and aggressively promoted trade with China and other Pacific rim nations with the promise of opening their markets to America. He fast tracked the agreement with China and even took the uncalled for step of designating them America's "most favored trading partner" status.

July 19 2012 at 2:16 AM Report abuse rate up rate down Reply
ectullis

Who isn't?

July 09 2012 at 5:36 PM Report abuse +1 rate up rate down Reply
drakkusshadows

All good things must come to an end.

July 09 2012 at 4:14 PM Report abuse +1 rate up rate down Reply