The Lawhead Team recently came across an interesting article from the San Diego Daily Transcript about Chinese buyers being attracted to homes in California. Here is what it said:

Chinese investors seek California homes.

By DEAN CALBREATH, The Daily Transcript — Thursday, June 19, 2014

With China’s real estate bubble showing signs of bursting, a growing number of wealthy Chinese are targeting California as a place to buy homes and businesses, according to a report released Thursday by the UCLA Anderson Forecast.

Last year, Chinese individuals and enterprises invested $12.5 billion in the United States, including $2.2 billion in real estate, with California being the “preferred investment location,” wrote William Yu, a Taiwan-born economist at UCLA.

“We have seen many smart Chinese investors bring in cash to buy properties in Los Angeles over the past two years…,” Yu said. “For Chinese investors, West Coast cities (including) Los Angeles, San Francisco and Seattle are ideal locations because of their geographic advantage, for example, direct flights, mild weather and large Asian communities.”

Yu’s charts also suggested that San Diego could be an attractive target because of its relatively low multifamily housing vacancy rates, which “might predict higher growth for rents in the future.”

The reason for the recent influx of Chinese investments — which totaled just $3.5 billion two years ago, including $900 million in real estate — is that China currently has a real estate bubble that rivals Japan in 1990 and the U.S. in 2007.

Its ratio between home prices and income levels is three times wider than in the U.S., resulting in growing vacancy rates.

Because of Chinese prices are still at bubble levels, it’s far cheaper to buy property in California than in a Chinese urban center such as Shanghai. And because California has a higher median income than Chinese cities, it’s easier to charge high rents on the property.

As an example, Yu cited a 1,248-square-foot condominium that sold for $995,184 in Shanghai in March, or $797 per square foot. Yet a 2,116-square-foot condominium sold in Los Angeles for $800,000, or $392 per square foot. In other words, the L.A. flat was 41 percent bigger but 19 percent cheaper.

Because Los Angeles has a higher median income, it would be possible for the buyer of the condominium to rent it out at $3,000 per month, more than twice as high as the $1,400 monthly rent it would bring in China.

Click here to read the rest of the article from the San Diego Daily Transcript “Chinese investors seek California homes.”

The Lawhead Team would like to share below an article from Forbes about the top overpriced cities in America. Is it any surprise California contains almost half of them?

Excerpts from “America’s Most Overpriced Cities” can be found at Forbe’s website.

To find the Most Overpriced cities, we started with America’s 100 largest Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions (MDs), all with populations of 600,000 or more. MSAs and MDs are cities and their surrounding suburbs as defined by the Office of Management and Budget.

Not surprisingly, California has the greatest number of overpriced cities on our list (nine), with San Jose the highest-ranking Golden State metro area (No. 4). In the San Jose-Sunnyvale-Santa Clara MSA, according to NAHB figures, only 26% of homes are affordable to families bringing home the median income of $101,300. (The median home sales price was $625,000 in Q4 2013.) “In areas in California where salaries are high, demand is high, and building activity is restricted, prices are high,” says Cynthia Kroll, chief economist for the Bay Area Association of Governments.

Housing affordability is even worse in San Jose’s northern neighbor, San Francisco, where the median family making $101,200 can afford only 14.1% of local homes (median sales price for Q14 2013: $800,000) according to NAHB data. In fact, that ranks San Francisco dead last in terms of housing affordability among the cities we evaluated for this list. The only reason San Francisco comes out less overpriced than Silicon Valley is that greater San Jose’s lower home prices were offset with higher costs for daily expenses. Groceries are 20% above the national average (compared to SF’s 16.2%), utilities 24.2% (compared to 7.6% lower than the national average in San Francisco); Silicon Valley also has a slight advantages in transportation and health care costs. But we’ll admit that the difference in our scores for these places is fairly minimal.

Read entire article on America’s Most Overpriced Cities by clicking on the link.