Foreign Purchases of U.S. Homes Slump
Sales were down 14% but fell at a slower rate than overall purchases
Foreign buying of U.S. homes fell for a sixth straight year, sinking to the lowest level on record, though some signs of turnaround are starting to emerge. International buyers purchased 84,600 U.S. homes in the year ended in March, down 14% from the prior year, according to a report released Tuesday by the National Association of Realtors.
The dollar volume of residential real estate purchased by these buyers fell 9.6% to $53.3 billion, also a record low since NAR began collecting the data in 2011.
Foreign buyers pulled back for some of the same reasons that Americans did, including housing prices that have been close to record highs and limited inventory for sale.
Foreigners also were deterred by the stronger dollar. “With home prices having risen in the U.S. in the 2020-2021 period so substantially… people are just priced out,” said Lawrence Yun, NAR’s chief economist. Still, the decline in international purchases was less than the 23% decline that U.S. existing- home sales posted over the same period.
Foreign buyers are more likely to pay with cash, making them less responsive to steeper mortgage rates compared with domestic buyers.
Foreigners also were bigger spenders. The median purchase price for foreign buyers in the year ended in March was $396,400, NAR said, compared with $384,200 for all U.S. sales of previously owned homes in the same period. And some brokers say that foreigners are finally showing signs of renewed interest, thanks to a drop in worldwide Covid-19 restrictions, especially in previously strict countries like China. Chinese buyers were the most active during the period with $13.6 billion in purchases, the country’s highest level since 2018.
Foreigners have always represented a small slice of the overall U.S. housing market and made up less than 2% of existing-home sales during the year ended in March. But their purchases tend to be concentrated in a limited number of states, such as Florida, California and Texas, which were the most popular destinations for foreign buyers during the period.
In the Tampa, Fla., area, demand for luxury properties from Latin American buyers is robust because it is more affordable than Miami, historically a major destination for foreign buyers, said Corey Smith, a real-estate agent with Charles Rutenberg Realty.
Florida passed a law this year that limits how residents of seven countries, including China, can purchase properties in the state. Smith said the law hasn’t deterred buyers from other countries.
In New York City, foreign investors are showing more interest in the market because high rents make it attractive to purchase rental properties, said Rashi Malhotra, a real-estate agent with Coldwell Banker Warburg. “They’re looking for a good deal,” she said. “There is a little bit of hesitation there, too. It’s not a quick decision.”
About 51% of foreign buyers in the year ended in March were recent immigrants or foreigners who live in the U.S. Nonresidents tend to buy U.S. homes as rental properties or vacation homes, according to NAR.
Source: Wallstreet Journal