2) Instability Overseas 3) Potential Interest Rate Upticks
It would take a total American economic collapse or WW III for foreign capital to be discouraged from investing in US real estate, says Atlanta-based The Creations Group's Cherie Ong, who helps funnel Asian money into the US. There would have to be so much instability in the US that Asian investors would feel safer keeping their money in China, where they face lots of corruption, she tells us. Instability in the Middle East is also encouraging Israeli investment here, according to Marcus & Millichap regional head Mike Fasano, who's also out of Atlanta. Canadian money is following due to lack of yield in the land of maple leaves.
The big question mark for all investors—both foreign and domestic—is interest rates, Mike says. If they rise by half a percentage point, we're fine, he says. But if it ticks up more than 100 bps, then underwriting will be affected. He says any indication that rates will climb that high would unleash a rush of investors trying to close before year's end. Last week, The New York Times reported that some of the wealthiest US investors are pushing for a rate hike, like financier Stanley Druckenmiller. (There's always one kid in class pushing for an essay instead of multiple choice.)
