Will the surge in house demand from Chinese homebuyers be a good thing or upset the U.S. housing market?

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For my readers who are around the same age as I am, during the pandemic, we probably didn't and still don’t know what the economy was like or the economic trends that the pandemic changed in the world. And don’t act like you do, because as kids, we were doing everything BUT focusing on those class Zoom lessons: secretly calling our other friends on the other side, playing video games, or just sleeping. As we played around with our lives, seemingly without a care in the world, the real estate housing market reached an all-time high in demand. The high demand for houses was due to the “record-low interest rates, government stimulus, and the rise of remote work,” according to The Economic Times. The shortage resulted from the supply of houses not being able to keep up with the record-high surge in demand for homes. With the supply not keeping up, house prices led to a 40% spike within 2 years. Eventually, the high demand cooled down as more people had to head back into the office. Workplaces had reduced the number of remote workdays, given that COVID-19 was becoming the new flu.

Times have changed since the pandemic, where in this case, the U.S. housing market is currently witnessing the largest gap between American citizens, foreign buyers like the Chinese, and overall house sellers. With “508,715 more home sellers than buyers,” according to Redfin, a real estate brokerage, the Chinese had made an 83% jump in shares from $7.5 billion last year (The Economic Times). And these Chinese homebuyers aren’t just buying houses; 70% of them are actually paying in cash.

“Anyone paying in cash—whether domestic or international—is at a clear advantage right now," said by Joel Berner, a senior economist, as he's telling the Fox about the fact that they can bypass the upsetting looking mortgage rates that are scaring away traditional buyers.

What makes the present a time to be seen as an investment? Well, to many Chinese homebuyers, homes are seen as a long-term investment for their visas, potentially granting them a path to permanent residency in the U.S., or as a place for their children to live while studying abroad in the near future. Buying a house seems more of a logical trade-off rather than renting, as renting involves extra hassle and costs, as there are some additional legal requirements for overseas tenants, said Su Miao, another real estate broker at Compass (Nikkei Asia).

Although the diversity amongst markets is nice, logistically the surge in home demand by foreign investors had shut Americans with average incomes out of the housing market “by high property values and mortgage rates (Nikkei Asia). In order to counteract this, in some states like Texas, is starting to enforce their law that says “individuals from designated countries without permanent residency or other U.S. affiliation cannot own residential or commercial properties for nonresidential purposes, nor can they lease such properties for more than one year,” according to Greenberg Traurig, a law firm. While this seems plausible, I actually argue that international demand could always reroute to less restricted areas that prioritise lucrative gains. As goes with everything, the stricter the parent is, the more the children will find a way to work around it and do more crazy teenage things. The stricter the school's Wi-Fi is, the more students will use their own data or VPN to sneakily go on prohibited websites or apps. You get the gist.

At the end of the day, the housing markets and the overall economy aren’t so black-and-white; they’re just as unpredictable as our teenage antics—something bad happens, whether the law gets stricter or a new negative outburst happens, people scatter around and reroute to buying more or fewer houses. The U.S. housing market is ultimately a game of cats and dogs, as a house isn’t just a roof over your head; it’s more about leverage and opportunity.