By Dale King, Realty News Report – International home buying activity is down five percent in the U.S. and the coronavirus pandemic could dampen sales to foreign buyers in the months ahead amid a tight inventory.
International buyers purchased $74 billion worth of existing homes in the United States in the 12-month period ending in March 2020, a 5% decline from a year earlier, says a report by the National Association of Realtors.
It’s also the second consecutive yearly drop in foreign purchases of U.S. housing stock, says the NAR survey.
Texas ranks third among the top destinations chosen by overseas purchasers, behind No. 1 Florida and California.
“Texas still remains among the top three most popular states for international home buying,” said Cindi Bulla, 2020 chairman of Texas Realtors. “And future activity could be determined by how fast homes go up in suburban areas of our major cities.”
Bulla said tight inventory is biggest contributor to the decrease in international home buying activity, an observation articulated on the national level by NAR.
Less Travel, Less Trade, Fewer Students
“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.”
The ongoing coronavirus pandemic has added its own obstacles to overseas interest in U.S. properties.
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 during the 12 months ending in March. Foreign buyers who lived in the United States as recent immigrants or who were holding visas that allowed them to live the U.S. purchased $41 billion worth of existing American homes, an 8% decrease from the prior year.
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.
China-Related Sales Down 14 Percent
Buyers from 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.
The survey found that 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% 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 securing property in California and New York.
With grim news recorded this past year, what prognostication does the future suggest?
Wharton Professor: The COVID Question
Wharton Real Estate Professor Benjamin Keys cited his own study, noting it is timely now because “there’s a big question about how the housing market will come back after COVID-19.” He noted that several housing markets in the U.S. have seen “huge inflows of foreign investment” over the last 10 years. “If that dries up, it would represent an opportunity for domestic buyers and put downward pressure on prices, but that may be a bad thing for existing home owners.”
If the pandemic persists, foreign investments in U.S. homes would continue their decline, and cause home prices to fall, Keys predicted. In that setting, “clearly, there would be an advantage for domestic homebuyers,” said Keys. “[Also], a decline in foreign investment may relax some of the affordability constraints to a modest degree in cities where the jobs are more plentiful than the housing in them.”
Yun adds his own perspective. In the upcoming year, he said, better opportunities may become available for foreign buyers in large U.S. cities like New York and San Francisco. “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 acquire vacation homes.
The Top State for International Sales
For the 12th straight year, Florida remained the top destination for foreign buyers, with 22% of all international purchases taking place in the Sunshine State. California ranked second as the destination of 15% of foreign buyers.
Then came Texas with 9% of purchases, New York at 5% and New Jersey at 4%.
Texas is the favored locale for 30% of buyers from Asia and Oceania (greater Australia region) as well as 42% of the buyers from Latin America and the Caribbean.
“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.
Half of foreign buyers purchased the property for primary residence use and three in four – 74% – purchased detached single-family homes and townhouses, the NAR report concluded.
The EB-5 Immigrant Investor program is still operational. The residency-by-investment program, created by Congress in 1990, allows foreign investors spending $900,000 to $1.8 million, to obtain visas if the investment contributes to job creation, including economic activity such as construction of high-end condos
Sept. 8, 2020 Realty News Report Copyright 2020
File: Foreign Home Buyers: Sales