RyanTanaka

Evergrande and the San Francisco Real-Estate Crash (ft. #Crypto)

Long
HKEX:3333   CHINA EVERGRANDE GROUP
So while we wait for the #Evergrande thing to sort itself out, the city to pay attention to for cracks in the housing market here in the US is #SanFrancisco. They have had the highest housing inflation in the country over the last decade -- which is counteracted by the reality that both jobs and people are leaving the city in droves now due to its unaffordability, high taxes, and lower quality of living.

So the part we should be concerned about is the fact that cash purchases of real-estate (the metric used to estimate foreign investment) has been on the rise for a while now, and COVID has more likely than not accelerated those trends. Of the possible 30-40% of homes bought with cash in SF , we know that at least with foreign properties, more than 70% of them are from China. We don't have the exact numbers yet but I think it's safe to say that it's probably enough to have an impact .

While everyday Americans struggle to make ends meet, why does the market keep on going up, at least on paper? The reality is that US markets are being propped up by foreign speculators right now, rather than anything we did on our end. Foreign investors know that Americans are homeownership obsessed and will basically do anything to keep their home values up, no matter what the cost. (Homelessness, crime, rising rents, etc.) They don't live with the consequences since most aren't even here -- all they really care about is getting a return.

Both the NIMBYs and politicians in the US have sold out the American people to see their home values rise for a few % points -- foreign investors are basically trying to #buythedip of our dysfunction and laughing all the way to the bank, really.

Is the sky going to fall? No. But when you see people freak out over changes in 5-10% even in assets like #crypto, a change like that can actually be panic-inducing in traditional markets. Imagine that your investment that has gone up steadily every year for 50 years, now going down.

If you're a renter or a prospective homebuyer, this may be the moment you've been waiting for, though. Something worth keeping tabs on, either way.