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Thursday, October 20, 2011

Using Foreign Visas To Prop Up Housing

Congress will soon consider a proposal by two U.S. Senators to offer permanent resident visas to foreign homebuyers in its latest misguided attempt to prop up the housing market.

Not any shack will do; the foreigner must invest at least $500,000 worth -- that means equity, not using mortgages -- in residential real estate and use at least some of it (it could be multiple properties) for at least six months of every year.ay to prop 

This sounds like bad policy.  This could be just another dangerous means of artificially propping up prices in a selected slice of the real estate market -- and delaying the needed treatments and cures (namely, the removal of price supports that will allow for true value to be established and then augmented) that must be endured for the housing sector to recover, become self-sustaining and strengthen.  Even worse, because it would only prop up the high end, pulling prices in the $300,000-plus range up but doing nothing for houses below that range, this could divert the interest of many among the very few people willing to buy real estate away from low and mid-range priced homes and concentrate it towards the high-end.  This effect cannot help residential real estate in the sub-$300,000 range (unless an investor wanted multiple properties) and likely will reduce already-low demand for nonqualifying housing stock. 

Eric Dixon is a New York lawyer, strategic analyst and entrepreneur.

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