Are foreign home buyers turning their back on US?

Foreign buyers purchased $74 billion worth of U.S. existing homes from April 2019 through March 2020, a five percent decrease from the previous 12-month period and the second consecutive annual decline in foreign investment in U.S. residential real estate, according to a new survey from the National Association of Realtors.

Foreign buyers purchased 154,000 properties, down 16 percent
from the prior year.

NAR’s 2020 Profile of International Transactions in U.S.
Residential Real Estate surveyed members about transactions with international
clients who purchased and sold U.S. residential property from April 2019
through March 2020.

Foreign buyers who resided in the U.S. as recent immigrants
or who were holding visas that allowed them to live in the U.S. purchased $41
billion worth of U.S. existing homes, an eight percent decrease from the prior
year and 61 percent of the dollar volume of purchases.

Foreign buyers who lived abroad purchased $33 billion worth of existing homes, down one percent from the previous 12 months and accounting for 39 percent of the dollar volume. International buyers accounted for four percentof the $1.7 trillion in existing-home sales during that time period.

“Foreign buyers and recent immigrants have become less of a force in the U.S. housing market over the last couple of years,” said NAR Chief Economist Lawrence Yun.

“A lack of housing inventory – the primary factor hindering
domestic buyers – is also holding back some foreign buyers. Additionally, less
cross-border travel, falling international trade and fewer foreign students
attending American universities are impacting foreign homebuyers.”

China and Canada remained first and second in U.S.
residential sales dollar volume at $11.5 billion and $9.5 billion,
respectively, continuing a trend going back to 2013. Mexico at $5.8 billion,
India at $5.4 billion, and Colombia at $1.3 billion rounded out the top five.

China was the only country among the top five to see a
decline in dollar volume from the previous year ($11.5 billion from $13.4
billion). Colombia replaced the United Kingdom as the fifth largest country of
origin by dollar volume of foreign buyers.

The median existing-home sales price among international
buyers was $314,600, 15 percent more than the median price of $274,600 for all
existing-homes sold in the U.S. The price difference reflects the location and
type of properties desired by foreign buyers. At $449,500, Chinese buyers had
the highest median purchase price, with nearly half of them purchasing property
in California and New York.

“In the upcoming year, better opportunities may become
available for foreign buyers in large U.S. cities like New York and San
Francisco,” said Yun. “New patterns of domestic migration are trending away
from expensive cities to more affordable suburbs and small communities because
of the pandemic and greater work-from-home possibilities.”

Nearly half of foreign buyers – 48 percent – purchased a
home in the suburbs and 29 percent bought a home in an urban area, a figure
that’s held steady over the last five years. Seven percent of international
buyers bought property in a resort area, down from 15 percent in 2009.

The decline in the share of foreign purchases in resort areas reflects, in part, fewer buyers from the United Kingdom and Canada, who tend to buy vacation homes.

For the 12th straight year, Florida remained the top
destination for foreign buyers, with 22 percent of all international purchases
happening in the Sunshine State. California ranked second as the destination of
15 percent of foreign buyers. Texas at nine percent, New York at five percent,
and New Jersey at four percent completed the top five U.S. destinations for
international buyers.

“While we’ve seen a recent softening of demand, interest in
U.S. real estate from international buyers remains strong overall, especially
in the most affordable metropolitan areas,” said NAR President Vince Malta,
broker at Malta & Co., Inc., in San Francisco, California.

All-cash sales accounted for almost two out of five – 39
prcent – international buyer transactions, with a higher percentage among
non-resident compared to resident foreign buyers at 59 and 27 percent,
respectively.

Nearly two-thirds of Canadian buyers – 66 percent – made
all-cash purchases, the highest share among foreign buyers. Asian Indian buyers
were the least likely to pay all-cash at just eight percent, but the most
likely among international buyers to obtain a mortgage at 87 percent.
Forty-percent of Chinese buyers made an all-cash purchase.

Half of foreign buyers purchased the property for primary
residence use and three in four – 74 percent – purchased detached single-family
homes and townhouses.

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