The trade dispute between the U.S. and China reached a fever point in recent days, as Washington and Beijing have gone tit for tat in imposing higher tariffs on imports.
Concerns that the two countries would not resolve the dispute sent the Dow Jones Industrial Average DJIA, +0.95% and the S&P 500 SPX, +1.10% reeling Monday, before staging modest rebounds Tuesday and Wednesday.
Chinese investors have been the biggest purchasers of U.S. residential real estate for six consecutive years, but President Trump’s trade war, and China’s efforts to reduce its national debt and boost economic growth, could change that.
And if the impasse continues, the effects could be even more far-reaching. “The Chinese government could place stricter capital controls about taking money out of China and buying in America,” said Lawrence Yun, chief economist at the National Association of Realtors. China’s government has already put pressure on Chinese nationals to reduce their commercial real-estate investments.
Meanwhile, the U.S.-China trade dispute has sent the Chinese yuan USDCNH, +0.3360% to new lows relative to the dollar. “It’s already making U.S. real estate more expensive” for Chinese buyers, said Michael Fratantoni, chief economist at the Mortgage Bankers Association.
The trade war also adds to U.S. economic uncertainty at a time when real-estate demand is weakening even in some of the country’s hottest housing markets.
China has become the largest foreign buyer of U.S. residential real estate
In 2014, China supplanted Canada as the source of the largest share of foreign buyers of U.S. residential real estate, according to data from the National Association of Realtors.
In 2018 dollars, Chinese buyers accounted for roughly 25% of total foreign investment in U.S. residential real estate. Canada was No.