Fear rippled throughout the global markets today as Chinese real estate conglomerate, Evergrande’s debt crisis comes to a head. Investors worldwide are panicked as the company is failing to manage their $300 billion in debt, and not only did they fail to pay their interest payments on its bank loans due today, they’ll miss their massive interest payment on its bonds (worth over $100 million) this Thursday.
Although the White House has emphasized that Evergrande’s business is “overwhelmingly in China,” a dip in one part of the global market is typically paid for by another area of the market. When America’s housing market crashed in 2008, the global market was universally impacted.
Even Bitcoin dipped roughly 9% today as investors retracted to safer waters.
Simultaneously, the market is stressed as worries loom that the U.S. Treasury could run out of cash by November if the debt ceiling is not raised.
Combine Evergrande with Treasury fears and seasonality (October tends to be the worst month of the year for stock markets), and investors are tense.
Experts indicate that Evergrande could undergo a restructure, and their physical assets could wipe some of their slate clean, but none of that happens overnight, and requires the Chinese communist government’s involvement. Meanwhile, investors fear a default on their billions of dollars of debt, and are reacting accordingly.
What does this mean for residential real estate in America? How does this impact your real estate practice?
Honestly, you won’t feel it in your daily life, but consumers are reading about the “Chines real estate bubble” and worrying that the market here will crash again, just like in 2008. Most adults in the market were around for that, even if they’re younger consumers, so the wound is still fresh.
You’ll be impacted because many consumers won’t read further than the headlines and will have questions for you about how today’s stock market plunge will impact housing here.
The answer is that Evergrande is a major real estate developer in China that is struggling and international investors got spooked, but the American housing market remains strong with the lingering challenges being tight inventory levels and insufficient housing starts. Not China.