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Trouble with globalization

Original post made by terry, Leland Manor/Garland Drive, on May 3, 2013

We just bought a house and I am scared we paid too much.
I have been told that a lot of recent purchasers borrowed money in China at the very low rates their government offered to stimulate their economy and that these low rates cannot be continued because they have a bubble (see 60 minutes) which will pop and that when that happens the Chinese who bought in California will be forced to sell and real estate prices will crash.
Does anyone know if all these purchases by Chinese are being made with borrowed money? If its capital they own I am not worried. If its borrowed money I am worried.

Comments (20)

Posted by Chandler A
a resident of Community Center
on May 3, 2013 at 11:40 am

The money you borrowed is at historically low (or near low) rates. Anyone complaining about that?

What is your rate?

Posted by Private Parent
a resident of Fairmeadow
on May 3, 2013 at 12:14 pm

Let's assume several things:

1. You bought your house both A) to live in and B) as an investment.
2. Because of 1A above, you intend 1B to be a long term investment.
3. You have a reliable income, well able to support what you paid for your house
4. You have an adequate emergency fund in case the the income in 3 drops.
5. Your mortgage is a fixed-rate mortgage, or at least an adjustable mortgage with a long initial term (seven years or more).

If the above is true, then you have very little to worry about, regardless of the source of other people's money.

Long-term, the price of Palo Alto housing is likely to be higher than it is today. That isn't to say that there won't be fluctuations along the way, but that over the long haul (and the longer you think, the better your odds get), you should be OK.

Because you intend to hold long term (and if you don't, why did you buy a house?), a crash tomorrow doesn't affect anything but your ability to move relatively soon. You should ignore the month-to-month changes, and even the year to year changes are something to only glance at. A house is an investment with a multi-decade timeline.

Take the near financial apocalypse around 2007 or so. Peak prices nation wide crashed far and fast--particularly in undesirable places. But in even the worst hit areas, today prices are mostly back. Palo Alto took a hit, but not really much of one, because of that much of the financial pain that other areas experienced didn't occur here.

Long term, it is extremely like that Palo Alto continues to be highly desirable, and that will soften the impact of other financial vagaries.

All of this isn't to say that Palo Alto is immune to financial storms--far from it. But it's hard to imagine a safer long-term real estate bet than Palo Alto, both historically and in the future.

Posted by Observer
a resident of another community
on May 3, 2013 at 12:20 pm

[Post removed by Palo Alto Online staff.]

Posted by Jung ren
a resident of Another Palo Alto neighborhood
on May 4, 2013 at 7:26 pm

China is trying to influence and run our governments and schools. So far they are succeeding. They have already ruined most of our mArkets through dumping. We need to fight them, not enable them.

Posted by Not an issue
a resident of Community Center
on May 4, 2013 at 11:54 pm

I see once again we have another thread in which bashing the Chinese is considered to be acceptable. And what is wrong with militias and Cupertino? I for one am not fooled by these real estate red herrings that lead to china bashing. Ankylosing spondylitis is not an excuse for ma
Igning the Chinese

Posted by Jung ren
a resident of Another Palo Alto neighborhood
on May 5, 2013 at 9:09 am

Milpitas is great, Cupertino not so much any more.

Anyone read the articles about China's control of Hollywood and anything that portrays China Ina less than spectacular light in the Chron and WSJ? Apparently the remake of "Red Dawn" changed the invaders from China to North Korea at the request of Beijing. Other current and upcoming movies have been changed to the orders of Beijing.

Where is our artistic freedom? For sale to the highest bidder? Are we a nation of hookers?

Posted by PA Resident
a resident of Charleston Gardens
on May 5, 2013 at 9:07 pm

I don't get it. I see one article after another about the influx of the Chinese and their money.

I live in the furthest South-east corner of Palo Alto and most of the houses in my neighborhood are either bought or rented by East Indians, Pakistanis and Iranians. Do they get their money from China too?

Yes, many Asians are moving into Palo Alto but they are not all Chinese.

Posted by OPar
a resident of Duveneck/St. Francis
on May 5, 2013 at 10:02 pm

Certainly, housing prices here are skyrocketing and, at least according to my real-estate flyers, a bunch of the buyers are Chinese.

That said, there just isn't that much inventory in Palo Alto. Even if recent buyers do a sudden sell-off, it's just not going to be that many properties and there will be a demand for them. So there may be a correction at some point, but long-term, you'll be fine.

Posted by Question, please
a resident of Midtown
on May 6, 2013 at 11:20 am

I have read that Chinese nationals can get zero interst loans for millions of dollars direct from their government, and that is how most buy houses here.

Assuming this is true, if the Chinese national defaults on that loan, can or will the Chinese government foreclose on that house? Does it then become a possession of, and therefore a tiny colony of, China?

What if the Chinese nationals default in large numbers??? Scary.

Posted by Midtown resident
a resident of Midtown
on May 6, 2013 at 12:41 pm

The new Chinese premier has asked rich people to show their sources of income and many of them are scrambling to move their black money out of the country. Palo Alto is one of the "beneficiaries" of this phenomenon.

Posted by Not an issue
a resident of Community Center
on May 6, 2013 at 12:57 pm

Amazing how many unsubstantiated claims used to bash the Chinese are posted on this forum. Very sad, but of course the people doing these postings lack basic decency. No wonder they have ankylosing spondylitis

Posted by Chris Zaharias
a resident of Crescent Park
on May 6, 2013 at 1:06 pm

Not An Issue - Web Link

Midtown Resident has his/her facts straight IMHO.

Posted by Not an issue
a resident of Community Center
on May 6, 2013 at 1:57 pm

Chris-- irrelevant to this discussion

Posted by Midtown resident
a resident of Midtown
on May 6, 2013 at 2:28 pm

Not an Issue - And you seem to lack basic logic. Chris has pointed you to an article that explains exactly what I was talking about. You said they were "unsubstantiated claims". Well if you want me to prove that the money coming in is as a result of this requirement, sorry I cannot. However, I have spoken to several chinese real estate agents who confirmed this. And I don't see what is derogatory here. And what the hell does it have to do with Spondylosis or cancer or whatever? Are u firing on all cylinders today?

Posted by bashing
a resident of Midtown
on May 6, 2013 at 3:05 pm

Midtown resident and Chris fail to provide any proof for their wild claims about the Chinese and Palo alto real estate. But good to know that you are in contact with real estate agents in China. This bashing of Chinese is becoming a regular occurrence on this forum

Posted by bashing
a resident of Midtown
on May 6, 2013 at 3:29 pm

Btw, Chris and midtown resident, Opar has the facts straight in Imho. The ” red scare” tactics well not work

Posted by Midtown resident
a resident of Midtown
on May 6, 2013 at 4:06 pm

bashing - at least have the decency to use the same moniker when posting instead of changing it when I challenge you to explain why you mention spondylosis in your email. Or are u afraid people will understand what a big jerk you are? As far as scare tactics, none is intended. Most residents can make their own judgements.

Posted by bashing
a resident of Midtown
on May 6, 2013 at 7:28 pm

Midtown resident- if I was the same poster as you claim, my post would be deleted. But feel free to resort to insults to bolster your false claims against the Chinese.

Posted by jake
a resident of Community Center
on May 6, 2013 at 8:24 pm

Terry, I know people who bought it from Canada are.

Posted by Not an issue
a resident of Community Center
on May 6, 2013 at 10:38 pm

Only one person will get the ankylosing spondylitis comment and you did, midtown ducatigirl resident

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