China, Canada Lead US Housing Industry out of Deep Recession

While traditional recovery factors have done little to rekindle a surge in new residential housing, the influx of billions of dollars of investment in America’s ailing new and existing housing sales have recently perked up that market.

With the previously ailing housing comeback starting off on a slow 2012, total yearly sector investments were capping that year with a 27% improvement over 2011. While the resultant revenue total has escalated well above expectations, it still comprises little more than a third of the building permits that existed in regular trends well above one million annually before the recent crash, which began at the end of 2007.

However, the surprising intensity of purchases generating both from America’s northern neighbor and Asia’s middle kingdom looks to be not only long-term, but was actually picking up steam as 2012 ended.

The reasons for this welcome buying influx are motivated by two major considerations:

1) Canada, although representing a limited population of 36 million, has accumulated record revenues from its natural resources (primarily oil and rare metals) and the strength of its dollar, which seems to be holding above its American counterpart. A flood of a winter influx of Canadians into the more receptive U.S. winter climates in California, Arizona, Nevada and the Southwest in general has brought literally hundreds of thousands of Canadian “snowbirds” into the U.S. in record numbers recently. Also, the record low prices of existing residential establishments, and the rapidly improving prices of new permits have stimulated Ottawa’s traditional U.S. directed investment dollars. As 2012 ended, 2013 looks for an acceleration of this investment direction.

2) China’s intense interest in U.S. existing and new housing starts seems to be the more surprising. China’s billions of export dollars, previously contained in buying of big chunks of U.S. Treasury debt, has recently been redirected into U.S. fixed assets. Although most of the buying into U.S. companies is related to energy development, an increasing amount has found its way into America’s residential housing market.

This not only reflects value purchases, but is increasingly motivated by China’s increasing wealth class looking for “second” homes outside of China’s mainland. At this juncture, that seems to be a growing trend stimulated by the more than four trillion dollars of China’s reserve surplus, plus those in personal accounts.

Just like the Canadian trend, this latest foreign home-buying influx seems to indicate an ongoing degree of permanence.

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