Lin-Lin Tsou-Otani is a real estate agent with DeLeon Realty. It’s Saturday morning, and our housing search starts in Cupertino, in a van filled with about 10 other people.
“Raise your hand if you think the housing market is going crazy,” she says. The crowd chuckles.
The van seats are full – so Tsou-Otani stands in front, guiding buyers on a tour conducted half in Chinese, and half in English.
Back when DeLeon started these van tours, they were getting so many requests from Chinese buyers to check out available homes, offering a van service to get them all around efficiently made a lot of sense. But today’s tour is actually filled with local Chinese and Taiwanese-Americans, though that’s notalways the case.
DeLeon International Outreach Director Kim Heng says about 10% of her company’s sales can be attributed to Chinese buyers from the mainland. By the end of the year, the company’s goal is to increase that percentage to 20%.
Many wealthy Chinese people have found a safe investment for their money actually lies in the U.S. – specifically, in American real estate. According to reports, overseas Chinese investment has surged 72% since last year.
Many of these buyers are paying in all cash, sometimes for hundreds of thousands of dollars above the asking price. That’s why some South Bay real estate companies are now catering to mainland Chinese clients with private van tours of homes for sale.
“Chinese people really care about their children’s education, and education environment, and the Bay area has the best,” Heng says. “ The best weather, great culture and great schools.”
And these investments are paying off. Three years ago, the average home price in Palo Alto was $1.2 million. Now it’s around $2.5 million.
“If you bought three years ago,” Heng says, “you’d be a millionaire now, sitting on a pile of gold.”
The battle between local and international buyers
It’s clear the booming housing market is good for DeLeon and for its foreign buyers, but what about the locals?
“It just feels like there’s no way for me to compete with them,” says Qiao Liu, a Chinese-American prospective buyer on DeLeon’s van tour. She says she’s heard that the foreign investors are all-cash buyers.
Liu herself originally came from China about 10 years ago.
“I go to school here, I try to build a home. When I buy a house, I pay a down payment,” she says. “I borrow money and take a loan. Everyone’s doing that, it’s more normal.”
Another frustrated buyer is May Chen. She’s Taiwanese-American and says she’s been looking for a house in Palo Alto for the past few years. She says that often, the housing search feels like a competition.
“It’s a free country,” she says. “But I think the government should really do something. Maybe they should set a rule or something: who lives here, works here, can get a house here.”
Like Liu, Chen came to the United States, earned her degrees, and now works here. She feels like she’s paid her dues.
“And at the end we cannot afford a place we like,” Chen says. “They don’t even live here, or know the value of our American culture.”
Li Wei helps mainland Chinese find housing in the Bay Area. He says the moment he introduced himself and stepped on the bus, he felt tension. He asked somebody sitting beside him, “Where are you from?”
“She responded, ‘Everyone’s from here! We are local people!’”
An affordability crisis for all
If this sounds like rich people battling other rich people for super expensive homes – it is. But, “affordability is simply a measure of how accessible is it for someone with a given income to afford the average house in an area,” says Dr. Christopher Palmer, who researches real estate and housing markets at U.C. Berkeley’s Haas School of Business.
“If someone that makes $140,000 a year cannot afford any house nearby, than that is an affordability problem,” Palmer says.
Palmer says that more people coming into the market does puts pressure on it. And when those people buy over bidding price, it raises the prices for everyone else. But, he says, people coming from abroad – that’s not really the issue at all.
“If we had an influx of buyers or increase from any source, that’s going to create an affordability crisis,” he says. “And it doesn’t matter if they’re coming from China, or Miami, or Boston.”
Buyers are coming fromall around the U.S. – in part because of the Bay Area’s booming tech industry. Palmer says it’s likely the influx of tech workers buying houses is more responsible for higher home prices than an incoming stream of mainland Chinese.
And he says, if you’re a buyer from China – imagine you have all this hard earned money and an unstable stock market. Of course you’d want to keep it safe.
“You feel like, I can’t stuff it under my mattress, because it’s under the wrong currency,” he says. “So I need to put it in some kind of safe asset – my money feels very slippery."
One place that money might stick? It may just be a $1 million house in the South Bay.
