Rising home prices and low inventory led to a decline in foreign home purchases in the United States. Total international sales totaled $121 billion during April 2017 to March 2018, a 21 percent decline from the previous 12-month period, according to an annual survey from the National Association of Realtors® (NAR).
NAR’s 2018 Profile of International Transactions in U.S. Residential Real Estate found that foreign buyers and recent immigrants accounted for 8 percent of the $1.6 trillion existing home sales, a decrease from 10 percent during the 12-month period that ended March 2017.
“After a surge in 2017, we saw a decrease in foreign activity in the housing market in the latest year, bringing us closer to the levels seen in 2016,” says Lawrence Yun, NAR chief economist. “Inventory shortages continue to drive up prices, and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same limited-supply of homes.”
China continues to lead in purchases
Five countries accounted for nearly half (49 percent) of the dollar volume of purchases by foreign buyers: China, Canada, India, Mexico and the United Kingdom. For the sixth consecutive year, China exceeded all other countries in dollar volume of purchases, buying an estimated $30.4 billion worth of residential property, though that’s a decrease of 4 percent from last year.
Buyers from Canada came in second with $10.5 billion worth of property, showing a more significant decline of 45 percent year-to-year, followed by the U.K., $7.3 billion, India, $7.2 billion and Mexico, $4.2 billion.
“All real estate is local, but that does not mean that all buyers are,” says NAR President Elizabeth Mendenhall. “Even in this current global environment of political uncertainty, the U.S. real estate market continues to be seen as a safe, secure and profitable place to invest in property.”
The survey once again showed that foreign buying activity is mostly limited to three states: Florida (19 percent), California (14 percent) and Texas (9 percent) remained the top three destinations for foreign buyers to purchase, followed by Arizona and New York (both 5 percent).
The number of units purchased by international buyers saw a slight decrease, from 284,000 in the previous 12-month period to 266,800. China, once again, purchased the greatest number of units at 40,400. Canada comes next with 27,400 units, followed by Mexico (20,200), India (13,100) and the U.K. (9,000).
International buyers want fewer, less expensive properties
The median price paid by a foreign buyer was $292,400, compared to the median price for all existing homes ($249,300). Chinese buyers continue to purchase the most expensive properties, with a median price of $439,100.
Foreign buyers are more likely to purchase a home with all cash than a domestic buyer: 47 percent of all international transactions were all cash compared to 21 percent of existing-home sales. Buyers from India are most likely to finance their home purchase through a U.S. mortgage (78 percent). Buyers from Canada are the most likely to pay cash (78 percent).
Foreign buyers are most likely to purchase a detached, single-family home (66 percent), followed by a condominium (14 percent) and then a townhouse (13 percent). Only 3 percent of international buyers purchase residential land with the intent to build a home.
International buyers purchase property for a variety of reasons, the most frequent (52 percent) being a primary residence. Indian buyers were most likely to purchase property as a primary residence (86 percent), while Canadian buyers were most likely to purchase property as a vacation home (40 percent).
Among the top five purchasing countries, Chinese buyers were most likely to purchase a property for student housing.
Realtors uncertain about the international outlook
One in four (23 percent) of NAR members who participated in the survey said that they worked with an international client in the last year, a decline from 29 percent in the previous year.
When asked about the 12-month outlook for international residential buyer activity, 44 percent of respondents said that they “don’t know.” Meanwhile, 25 percent think activity will either decrease or remain the same; only 5 percent believe it will increase.
Yun attributes Realtors’ uncertainty about future conditions to confusion and ambiguity surrounding policy changes related to international trade and immigration.
Realtors also worked with international clients looking to lease property in the U.S.: 11percent of respondents said they helped a foreign client lease residential property, with the most frequent country of origin being Canada (4 percent).
© 2018 Florida Realtor®