When this article about Asian buyers making cash offers on million plus dollar Bay Area homes circulated on the internal 8asians mailing list, one of our writers lamented that Chinese investors making cash offers were frustrating her home purchase efforts, even at lower price ranges. Another said that the same phenomenon was also happening in Southern California. I showed this article to my Brother-In-Law (BIL), a Bay Area real estate agent in a firm that caters to Asians and Asians Americans. He merely sighed and said that this was old news, adding that the situation was changing in some ways.
“Compared to Asian prices, Palo Alto is considered pretty dirt cheap,”
– Kenny Weng Kong Lo, general manager of Intero Real Estate Services’ Hong Kong office.
BIL and I have talked about this situation many times. Like my fellow writer, he has been sometimes frustrated when his local clients are competing for a home against overseas Asian buyers or buyers funded with overseas Asian money who come in making cash offers. I recently spent some time with some colleagues from China, and one of them confirmed that yes, US$1 million IS cheap compared to some areas there.
The most sought after Bay Area cities are known for excellent school districts, like Palo Alto and Cupertino. The article says that on some tours with Chinese buyers, as the tour goes by local schools, someone calls out the schools’ API (Academic Performance Index) test scores. Many ethnic Asian buyers (not just Chinese) make local school APIs a key factor in looking for a home.
While one real estate agent in the article says that the buying seems to be heating up, BIL says that it is slowing down a bit. He points out that in my neighborhood, which is also popular with Asian buyers, there are a number of houses that have been on the market for a while. He does caution that the areas with excellent schools have markets are still extremely competitive. In those situations, BIL says that buyers need to bid over the asking price. That may lead to loan issues regarding appraisal values, but that is what potential buyers must do in order to have a chance.
BIL also points out a hidden cost to winning these bidding wars. He and some of his fellow agents, particularly those doing a lot of business in areas like Cupertino, say that some Asian parents who get there end up spending little time with their families. They have almost no spare time once they get into these expensive houses – they need to concentrate on working to pay high mortgages and property taxes.