Scott and Erica Rothenberg thought the years of scrimping and saving had finally paid off. The three-bedroom house outside of Elk Grove—an upper-middle-class suburb of Sacramento—checked all of the boxes: quiet neighborhood, quality school district, ample space to start a family.
But the couple knew competition for the house—like most houses in desirable California neighborhoods—would be cut-throat. Their agent warned they’d be bidding against not only a glut of young Sacramento-area families vying for a starter home, but also wealthier Bay Area residents fleeing astronomical prices. Even wealthy foreign investors from China, sensing an opportunity to park their cash and make steady returns, were getting in on the action.
“I was like, ‘Are you serious?’ In Elk Grove?,’” said Scott. “It’s really hard to deal with because it’s like, how do I compete with this? How do I compete with all this money? It really kind of blew me away.”
The Rothenbergs offered $10,000 above asking price, in the low $300,000s, and wrote the owners to explain who they were and how they loved the house. Days went by. Then their agent broke the news. The bid wasn’t too low—it was actually the highest offer the seller received, the realtor told them. But another buyer offered cash—meaning a cleaner, quicker sale.
“We were pretty upset, we figured it was just some investor who was going to rent it out,” said Scott. “If we would have lost out to a person who was going to occupy, we wouldn’t have been as upset.”
Their hunch was right. The property ended up being rented out, to another California family hoping to own a house someday, maybe when the market cools a little.
Which made Scott wonder: How much are foreign buyers and investment firms—two of the most common sources of all-cash transactions—impacting the average California family’s ability to buy a home? He reached out to CALmatters to help answer that question. So we tried—starting with foreign buyers. Here’s what we learned.
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