Have foreign buyers lost interest in purchasing homes in the U.S.? Slightly.
It appears foreign buyers purchased $74 billion worth of U.S. existing homes from April 2019 through March 2020, a 5% 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% 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 8% decrease from the prior year and 61% of the dollar volume of purchases, according to an NAR news release. Foreign buyers who lived abroad purchased $33 billion worth of existing homes, down 1% from the previous 12 months and accounting for 39% of the dollar volume. International buyers accounted for 4% of 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 in the news release. “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.
Median Existing-home Sales
The median existing-home sales price among international buyers was $314,600, 15% 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 a 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,” Yun said in the release. “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% – purchased a home in the suburbs and 29% 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% 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.
Florida Top of Charts
For the 12th straight year, Florida remained the top destination for foreign buyers, with 22% of all international purchases happening in the Sunshine State. California ranked second as the destination of 15% of foreign buyers. Texas at 9%, New York at 5%, and New Jersey at 4% 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.
All-cash sales accounted for almost two out of five – 39% – international buyer transactions, with a higher percentage among non-resident compared to resident foreign buyers at 59% and 27%, respectively. Nearly two-thirds of Canadian buyers – 66% – made all-cash purchases, the highest share among foreign buyers. Asian Indian buyers were the least likely to pay all-cash at just 8%, but the most likely among international buyers to obtain a mortgage at 87%. 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% – purchased detached single-family homes and townhouses.
“Driving economic development through diverse and inclusive communities continues to be a top priority for NAR,” said Katie Johnson, NAR’s general counsel and chief member experience officer in the news release. “NAR collaborates with associations across the country to educate foreign buyers on the opportunities in U.S. real estate and maximize the global business potential in our local markets. NAR and the Realtor brand – built on professionalism – has grown to a network of 104 real estate associations across 85 countries, ensuring stable, accessible markets that allow our members to make direct connections with global real estate professionals and sources of foreign investment.”
View the full 2020 Profile of International Transactions in U.S. Residential Real Estate here.