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Before we discuss tomorrow’s Irvine City Council vote about a Veterans Cemetery in the Great Park — a vote that, as predicted long ago here and elsewhere, the ad hoc committee has tried to delay until it was defeated — can we get real for a moment and discuss what it’s really about?
THIS is what it’s about.
Nate Silver’s 538.com blog, of all places, covered the story beautifully a week and a half ago. Investors want to get money out of the People’s Republic of China — and the developer Five Point, with the aid of Irvine Mayor Steven Choi, Irvine Councilwoman Christina Shea, and maybe, maybe, “ought to know better” Irvine Councilmember Jeffrey Lalloway — wants to get a huge chunk of that money.
The aspirations of U.S. veterans and their loved ones are getting in the way — and so they must be quashed. Nicely quashed, inadvertently (or so they’d like it to seem) quashed — but quashed real good. Some of that money, after all, will turn into campaign contributions — enough, opponents of a Great Park Veterans Cemetery hope, to overwhelm to shame and disgust at the city’s council choosing filthy lucre over the hopes and dreams of veterans.
It’s such bad politics that you know that the financial benefits to opponents must be huge. Choi and Shea are past their sell-by dates, politically, but Lalloway isn’t — and that’s why he, the guy who PROMISED last March that he would bring a Veterans Cemetery to the Great Park but is now widely believed to be wavering at best, may still, belatedly, come through.
But that’s tomorrow’s story; for now, let’s stick to today’s. Here’s how 538.com puts it: Chinese nationals are investing in the U.S. because of (1) a favorable exchange rate between the yuan and the dollar, (2) easily access to credit, and (3) demand for secure investments — although anyone who was reading the Irvine Housing Blog around 2008-2009, when Irvine was the epicenter of the upscale market housing bust, may need to lie down for a while after reading that until their eyes stop rolling.
According to the National Realtors Association (NAR) survey, the Chinese spent $22 billion on U.S. housing in the 12 months through March — 72 percent more than they spent the year before. Among foreign buyers, Canadians ranked highest in the share of transactions, at 19 percent, but the Chinese bought by far the most expensive homes, with a median price of over half a million dollars. That’s compared to the $213,000 spent by the average Canadian buyer of U.S. real estate, $141,000 spent by the average Mexican, and about $200,000 spent by the average American.
More than any other foreign nationals tracked by the real estate website Trulia, Chinese buyers prefer homes in cities to vacation homes. Where? The West Coast, mostly: Seattle, Palo Alto, San Jose, Los Angeles — and Orange County.
But why buy here at all?
They’re looking for a safe investment. When NAR surveyed more than 3,500 realtors about their international clients, it asked about the most important factor influencing purchases. Most cited were statements like “the U.S. is viewed as a good” or “profitable” investment. But the idea that U.S. real estate is a “secure investment” had risen the most — to 25 percent in 2014, up from 20 percent in 2009.
According to a report by JPMorgan cited in an April Bloomberg story, China’s ratio of household credit to GDP has risen enormously — to 187 percent in 2012 from 105 percent in 2000. Overall credit extended to the private sector as a percentage of GDP rose to 134 percent in 2012 from 113 percent in 2005, according to World Bank data.
They’re benefiting from a stronger yuan. Exchange rate movements over the last several years have made U.S. assets more appealing to Chinese buyers. As the U.S. dollar has depreciated against the yuan — giving the Chinese more buying power — China’s rise in U.S. real estate purchases has moved in lockstep. Seventy-five percent of realtors surveyed by NAR said the exchange rate was an important factor in their clients’ decision to buy.They’re dealing with a possible housing bubble at home. After years of strong gains, by several measures China’s housing market appears to be cooling. The possibly overvalued market at home — along with increasing regulatory constraints on real estate purchases — might be encouraging the Chinese to buy overseas.
So, they are pricing Americans out of the upper end of housing markets — like, say, the housing in the Great Park. But hey, that’s capitalism! Other would-be buyers will buy a little less expensive homes, and the people they supplant will buy homes a little less expensive than that, and so on down the line, through buyers, through renters, until some people can’t find housing at all. But that’s OK, because Irvine doesn’t mind if those people sleep in the streets — so long as it’s in Victorville.
Here’s what strikes me about this story: if it’s true — and there’s every indication that it is true — then these buyers will buy these homes anyway, regardless of feng shui, because the homes are good investments and the buyers want to get their money out of China, which is experiencing a housing bubble!
So, if that’s true — if the whole Five Point story about spooking investors with the proximity to U.S. military fallen is just made up — then what is the reason that Five Point (and Choi, and Shea, and maybe Lalloway) don’t want the honor of a Veterans Cemetery putting the “Great” in “Great Park”?
Maybe there’s something else that they want to go there — like luxury hotels catering to foreign tourists. And if that’s true, then my feeling is: to hell with them. How about you — especially you Irvine voters?
Irvine’s Council meeting, where this will all get hashed out, takes place tomorrow, July 22. Festivities (and I mean that literally in this case; veterans and OCEA are going to entertain and feed you) begin at 5:00. Parking may be a tad scarce, so plan accordingly.