Chinese Homebuilders Expand in America as U.S. Auto Loans Hit Record Levels

Chinese Homebuilders Expand in America as U.S. Auto Loans Hit Record Levels (Liberty Blitzkrieg, Sep 2, 2014):

Just a little tale from the streets of America
Sparkled promises paved with pathos and hysteria
Trenchant, weary native sons
Step back, step back
And see the damage done
Meander to the horizon 
The streets of America

– Bad Religion, Streets of America

Late last week I published a post titled, Your Wall Street Slumlord Arrives in Europe – Goldman and Other Financial Firms Launch “Buy to Rent” in Spain, in which I highlighted the fact that U.S. financial oligarchs had recently turned their sights toward Spanish real estate after feasting on the American market for several years and driving home prices to unaffordable levels for much of the native population.

Interestingly, today I came across an article in the Wall Street Journal that noted Chinese homebuilders are beginning to make a more aggressive push into the U.S. market. One of the main reasons for this phenomenon appears to be:

Chinese builders, meanwhile, are venturing abroad in part because of weakness at home. They are dealing with huge gluts of newly built but unoccupied apartments outside of cities like Beijing and Shanghai. Many have cut prices, which has crimped profit margins. And tightened credit standards in China have hampered demand.

I found this sort of amusing considering the fact that U.S. financial oligarchs have already done their business and have moved on to even more dilapidated markets such as Spain. While part of the reason for Chinese homebuilder interest may indeed be the fact that anything looks better than China, there may be another, less obvious reason. To build homes for Chinese citizens to live in.

While the companies interviewed for the article swear this is not the case, if you read between the lines it appears that these homes are being built not for Americans, but for Chinese.

We learn from the Wall Street Journal that:

Small Chinese builders are following their larger brethren into the U.S., betting that the recovering American housing sector will help them expand as China struggles with its cooling market.

Landsea Green Properties Co. , a Chinese home builder listed on the Hong Kong Stock Exchange, has started residential projects spanning hundreds of planned homes in San Francisco, New Jersey and in Ventura County, Calif., near Los Angeles.

Executives of both companies said their houses will be built with American labor and mostly target U.S. buyers. “Our U.S. operation will function in every aspect like a U.S. home builder,” said John Ho, managing director of Landsea’s U.S. division, Landsea Holdings Corp. “Our people all are local. The only thing that makes us different is that our equity and background is Chinese.”

“Mostly” target U.S. buyers and “will function in every aspect like a U.S. home builder.” Remember those lines as you read on…

The builders will cater, at least in part, to Chinese buyers looking to move to the U.S., a category that has risen rapidly of late. A survey released in July by the National Association of Realtors found that Chinese buyers purchased $22 billion of U.S. homes in the 12-month period ended in March at an average price of $590,826, accounting for 24% of home purchases by foreigners by dollar volume. That is up from $12.8 billion, or 19%, in the previous 12 months.

Here we go. Chinese buyers looking to move to the U.S. is clearly a key customer. So what does “mostly” or “in part” really mean? My guess is their target buyers are in fact Chinese citizens, but they don’t want to admit it.

In case you missed it, I covered this trend of Chinese money with questionable origins chasing U.S. real estate earlier this summer in the post: Chinese Purchases of U.S. Real Estate Jump 72% as The Bank of China Facilitates Money Laundering.

Chinese builders, meanwhile, are venturing abroad in part because of weakness at home. They are dealing with huge gluts of newly built but unoccupied apartments outside of cities like Beijing and Shanghai. Many have cut prices, which has crimped profit margins. And tightened credit standards in China have hampered demand.

To be sure, some U.S. home builders and developers also are targeting Asian buyers. FivePoint Communities, a joint venture of its chief executive, Emile Haddad, and home builder Lennar Corp., requires that builders in its California developments include such amenities as separate grandparent quarters in homes for multigenerational families.

Many of FivePoint’s builders include feng shui design touches, such as prohibiting a home’s sink and stove from directly facing each other in the kitchen, lest the homeowner encounter the negative energy of standing between symbolic fire and water.

So perhaps it’s true that Chinese homebuilders will “function like U.S. homebuilders.” With Americans flat broke, both seem to be focused on the Chinese buyer.

Given that homeownership is now beyond the reach of so many, what are Americans taking out loans to purchase these days?

Cars, it turns out. Not new cars either. Used cars.

We learn from Reuters that:

A record number of U.S. consumers are taking out loans to buy cars, especially those purchasing used vehicles, according to data released on Wednesday.

In the second quarter, 85 percent of new car purchases and 53.8 percent of used car purchases were financed, according to data from Experian Plc, an information provider.

Additionally, the size of auto loan amounts and monthly payments continued to rise, especially for used cars. Since the second quarter of 2013, the average used vehicle loan rose 1.9 percent to $18,258 and the average monthly payment on such vehicles rose 1.1 percent to $355, both all-time highs.

Just another tale from the streets of Neo-feudal America.

In Liberty,
Michael Krieger

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