Existing home sales and home prices declined last month, indicating the market remains in a slump. Now there's a proposal in Congress to try to change that. Sens. Mike Lee, R-Utah, and Charles Schumer, D-N.Y., introduced a bill Thursday that would grant U.S. tourist visas to foreign homebuyers paying with cash.
The hope is that this will encourage more wealthy people abroad to spend their money here. The senators' legislation would expedite tourist visas and grant longer stays to Canadian senior citizens. It would also give those foreign homebuyers a visa to be in the U.S. at least six months out of the year — but only if they buy with cash and not a mortgage.
The proposed legislation is like an invitation addressed to the rest of the world to a very exclusive party. Who's invited?
"If you are a person of means and you can live in the United States for more than six months [out] of the year, and you can write a cash check to a homeowner ... in excess of $500,000, then we certainly welcome that," explains Brian Phillips, Lee's communications director.
The bill requires the buyer to spend at least $250,000 on one home he would live in, while the rest of the $500,000 could be spent on separate properties to rent.
"There are people out there who can't sell their homes [and] there are folks here in the United States who can't purchase a home at that rate," Phillips says. "So we want to try to link up people who would like to sell their homes, who are trying to sell their homes, with folks who can afford it."
Broad Base Of Support
In other words, this invitation is open only to those willing to pay the high price of admission. People who can afford to buy homes with cash also presumably would buy furniture, carpets and other goods while in the U.S.
Phillips notes that under this bill, these homeowners would get tourist visas, not work visas. And there's no possibility of foreclosure because they'd buy the properties outright.
When property values sag and this is a desirable place to live, one of the simplest solutions is just to let more people in so they can buy the homes.
The concept appears to have broad support. Billionaire Warren Buffett endorsed it as an effective way of getting rid of excess housing inventory in an August interview with Charlie Rose.
"If you wanted to change [the] immigration policy so that you let 500,000 families in, but they'd have to have significant net worth and everything, you'd solve things very quickly," Buffett said.
Glenn Kelman, chief executive officer of Redfin, an online brokerage with operations all around the country, also supports the plan. "When property values sag and this is a desirable place to live, one of the simplest solutions is just to let more people in so they can buy the homes," he says.
Attractive To Foreign Buyers
Kelman lives in Seattle. He says that just 140 miles north of him, Vancouver, British Columbia, is almost like his hometown's mirror image. The difference is that buyers from India and China are fueling a housing boom there. Meanwhile, building is at a standstill in Seattle.
"You just drive across that bridge into Vancouver and you feel like you've entered the twilight zone. ... The place is just hopping; it's like 2006 all over again and it's never stopped," he says.
Foreign buyers have been snapping up lots of properties in the U.S., too. According to the National Association of Realtors, foreign buyers made up 3 percent of national sales in September. They tend to buy pricier homes — more than 40 percent above the average national sales price.
Walter Molony, a spokesman for the Realtors group, says buyers come from all over the world; their top places of origin are Canada, China, Mexico, the U.K. and India, he says.
Molony says U.S. homes are attractive because they're relatively inexpensive, especially in high foreclosure states like Florida and Arizona. There are also few legal obstacles to transferring titles.
Visas can pose problems for some would-be buyers, Molony says, so it's possible that the house-for-visa trade would make a difference for some. But how many buyers will take the U.S. up on this deal, if it comes to pass, is not knowable, he says.