Blanca Torres
Reporter- San Francisco Business Times

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Chinese money has flooded the Bay Area real estate market — and you can expect more, way more.

Investors in Asia have plenty of reasons to put their capital in the United States and with our economy still recovering from the 2008 recession, domestic capital for projects is still relatively hard to come by.

On Wednesday, developers of Oak to Ninth in Oakland’s Brooklyn Basin announced a $1.5 billion commitment from a Chinese investor making it the second, large-scale, master planned development project to secure funding from the far east after developers for Treasure Island announced a similar agreement late last year.

Tishman Speyer also brought in significant Chinese bucks into two condo towers of 42 and 37 stories at 201 Folsom St. in San Francisco.

Other examples include a Chinese biotech firm buying the former Berlix factory in Richmond and the San Francisco Regional Center funneling Asian money into Oakland deals to buy office and industrial buildings.

Those deals are just a sampling, or a harbinger of what’s to come.

In the case of Oak to Ninth, the investor, Zarsion Holding Co. is an expansive owner developer and owner of real estate in China and the Oakland investment is their first in the United States.

Anton Qiu, a veteran broker with TRI Commercial, told me that this kind of deal is appealing to more Chinese companies and investors for a variety of reasons.

At the macro level, China holds more than $1 trillion of U.S. debt, but the dollar has been weak since the recession, so investing in assets is much more attractive. In the last few years, the Chinese government has made it easier for investors to borrow money from the government to invest in foreign countries. In the U.S., the motivation is clear — the better our economy, the more the dollar and thus, the value of China’s holdings go up.

Blanca Torres covers East Bay real estate for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/blog/real-estate/2013/04/why-chinese-money-is-flooding-bay-area.html

Their story is getting ever more common, as total student loan balances nearly tripled between 2004 and 2012, according to a new survey from the Federal Reserve Bank of New York. Now $1 trillion in collective student loan debt is directly affecting the housing recovery.

“Short term, you see a decrease in the number of first-time home buyers,” said Brian Coester of Coester Valuation Management. “You’re going to see somebody who would have been able to afford a more expensive house maybe go for the lower version or the downgraded version.”

First-time home buyers usually make up over 40 percent of the home buying population, but their share has hovered at or below 30 percent during this recovery, according to the National Association of Realtors. The student debt burden has kept many potential buyers out of the market, either forced to rent or to move back in with their parents, like Sophia Chaale.

“Without the student loan debt, a year and a half, two years earlier would have been the time I could have afforded to buy a house, and probably something a little bit bigger,” Chaale said.

(Read More: Surging Student-Loan Debt Is Crushing the System

Chaale is facing $60,000 in student loans from graduate and undergraduate schools. She is paying $320 a month on a 30-year loan. Only after living at home for two years was she able to apply for a mortgage and put a down payment on a home. She is scheduled to close at the end of April.

“I consider myself lucky that I had a place where I could save, but what about other people who aren’t originally from this area, who have to pay an extra $1500 a month in rent, and that rent money is not going to savings. How are they going to be able to save up or even to make that transition from renting to owning, in addition to all the student loan debt?” Chaale wondered.

Article source: http://www.cnbc.com/id/100624148

Refinances are surging this year, not just because interest rates are hitting new record lows but because the government is making severely underwater loans eligible for refinance. (Read More: Is Housing Recovering as Much as Everyone Thinks?)

The Home Affordable Refinance Program, which involves loans backed by Fannie Mae and Freddie Mac, used to cap negative equity, but this year that cap was removed, putting thousands more loans into the refi machine. So far more than half a million loans were refinanced through HARP since the beginning of this year.

Politicians and housing advocates claim that all the savings from these record low interest rates and the ensuing refinances is going back into the economy, but that does not appear to be the case. (Read More: Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates)

Given the research from Freddie Mac, a quick, non-scientific survey of small lenders and brokers, produced similar findings:

Craig Strent/Apex Home Loans, Maryland: Homeowners, particularly older ones that have already met their financial planning goals, are taking the savings and just putting it back in the loan, meaning they are lowering their rates, but continuing to pay the same amount on the new loan that they were paying on the previous loan. This accelerates their payoff and decreases the interest they pay, though arguably with an opportunity cost given how cheap the money is.

Dan Green/Waterstone Mortgage, Ohio: Not all households are choosing to reduce payments. Many are choosing to reduce term. At today’s rates, the first payment of a 15-year mortgage is comprised of 67 percent principal. To get that point on a 30-year mortgage would take 18 years. More homeowners are asking about amortization schedules, and the benefits of paying extra principal each month. There’s more talk of saving than spending.

Julian Hebron/RPM Mortgage, California: Refi to lower payment, but keep making previous payment to pay loan down faster. Example: If you use our average loan of $550,000 and super-conforming rates of 3.5 percent now vs. 4.5 percent a year ago, a borrower’s payment drops from $2,787 to $2,429 (this factors in the paydown of $550,000 to $541,000 over 12 months). If a borrower keeps making old payment on new loan, thereby paying loan down by an extra $358 per month, they cut 6 years (or 20 percent) off a 30-year term.

(Read More: Is Housing Risen From Ashes?)

Suffice it to say, when it comes to home equity, we have fast become the anti-ATM society, by will or by force (we don’t have a whole lot of home equity anymore).

After trillions of dollars in lost home equity, Americans now appear to want it back so badly that they’re willing to pay it in themselves. They also want less debt for a shorter period of time.

This sounds like responsible, conservative fiscal planning, but it also means that savings from rock-bottom interest rates do not get paid back into the economy the way so many politicians and analysts have suggested.

-By CNBC’s Diana Olick
@Diana_Olick

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