The government may turn to foreigners to shore up the weak housing market.
A bill co-authored by Senators Charles Schumer (D-N.Y.) and Mike Lee (R-Utah) aims to use the appeal of U.S. residence visas to entice foreigners to buy American homes, according to The Wall Street Journal. If passed, the bill would offer a U.S. residence visa to any foreigner who makes a cash investment of at least $500,000 in U.S. residential real estate.
"This is a way to create more demand without costing the federal government a nickel," Schumer told the WSJ.
Foreign demand for American homes has been growing as prospective American buyers remain skittish. Foreign purchases of U.S. residential real estate rose 24 percent to $82 billion in the year ending in March 2011 compared to the year before, according to the National Association of Realtors.
Both low housing prices and a weak U.S. dollar have made American real estate an enticing bargain for foreign investors, according to a Capital Economics report cited by DSNews.com. For example, American homes now are more affordable for Canadians than at any time in the past 35 years.
Total foreign sales of U.S. homes were split between recent immigrants and people living outside the U.S., according to the National Association of Realtors, indicating that many foreign homeowners buy with the intent of moving to the U.S. As many as 60 percent of China's wealthy have emigrated or are considering doing so, according to a recent Bain study cited by The Financial Times.
In an increasingly uncertain investing environment, some foreign buyers have found a safe home for their money in the U.S.' best-known streets, such as Fifth Avenue and Pennsylvania Avenue, said Jay Koster, president of Americas Capital Markets for Jones Lang LaSalle, in an interview with Reuters.
"They can work here, be close to the city, be close to their corporations and still feel like they're on vacation. I think that's really what grabbed everybody," said Mary Pat Spekhardt, a New Jersey real estate agent at Coldwell Banker, in an interview with CNBC.com.
Meanwhile concerns about the job market and declines in household wealth may be keeping prospective American homebuyers from entering the housing market. In addition, declining home values are keeping current homeowners from buying a new house because they would need to take a large loss to sell their current home. Housing prices have fallen 32 percent since the peak of the housing boom in 2006, according to the S&P/Case-Shiller Home Price Indices.
At the same time, the number of foreclosure notices has grown, and one major U.S. bank has given up on finding buyers for all of its foreclosed homes. Bank of America recently decided to give up 100 of its Cleveland-area homes to be bulldozed; the bank has similar plans in Detroit and Chicago, according to Bloomberg News.