They are back! Wealthy foreign buyers are slowly returning to the US housing market

Anyone who’s bought a home — or tried to — knows it’s been a roaring competition in the past two years, with bidding wars and all-cash deals. But it could actually be worse. When the pandemic hit, one group disappeared from the market: foreign buyers with mega-millions. But now, foreign real estate investment is slowly pulling back, according to a new study from the National Association of Realtors.

The survey of nearly 9,400 realtors, conducted from April 11, 2021 to May 9, 2022, provides the most direct evidence of a housing market on steroids. International buyers bought 98,600 homes last year, for a total of $59 billion.

“For the second year in a row, restrictions on international travel and general precautions have slowed home purchases by wealthy foreign buyers,” said Lawrence Yun, chief economist at NAR. “However, domestic home buying demand has been exceptional and, therefore, has boosted home sales nationally.”

Foreign investors have historically viewed US real estate as an attractive and stable investment. They bought $59 billion worth of U.S. homes from April 2021 to March 2022, an 8.5% increase over the previous 12-month period, ending a three-year slide in foreign investment in U.S. residential real estate.

Foreign buyers purchased 98,600 properties, down 7.9% from last year and the fewest number of homes purchased since 2009, when NAR began tracking this data. Overall in the US, existing home sales will reach 6.12 million in 2021 – the highest annual level since 2006.

“For the second year in a row, restrictions on international travel and general precautions have slowed home purchases by wealthy foreign buyers during the outbreak,” Yun said. “However, domestic home buying demand has been exceptional and, therefore, has boosted home sales nationally.”

NAAR’s 2022 Global Transactions Profile in US Residential Real Estate surveyed members about transactions with international clients who bought and sold US residential real estate from April 2021 to March 2022.

Foreign buyers of recent immigrants who lived in the U.S. or held visas allowing them to live here bought $34.1 billion worth of existing homes, a 5.2% increase from last year and representing 58% of the dollar purchase volume.

Foreign buyers living abroad bought $24.9 billion worth of existing homes, up 13.2% from 12 months ago and accounting for 42% of the dollar amount. International buyers accounted for 2.6 percent of the $2.3 trillion in home sales during that period.

The average ($598,200) and median ($366,100) home sales prices among international buyers were the highest ever recorded by NAR – and were up 17.7% and 4.1%, respectively, from last year.

Existing home sales rose 10 percent year-over-year to a monthly average of $374,300, with the increase in foreign buyer prices partly reflecting rising U.S. home prices. At just over $1 million, Chinese buyers had the highest average purchase price, and one-third, or 31%, bought property in California.

According to Yun, “Affordability challenges associated with the inability to find the right property were the main reasons prospective international buyers showed interest but ultimately did not purchase a home in the United States.

China and Canada remain first and second in US residential sales volume at $6.1 billion and $5.5 billion, respectively, continuing a trend back to 2013. India ($3.6 billion), Mexico ($2.9 billion) and Brazil ($1.6 billion) round out the top five.

For the 14th consecutive year, Florida remains the top destination for foreign buyers, accounting for 24 percent of all international purchases. California is second (11%), Texas (8%), Arizona (7%) and New York and North Carolina, tied at 4%.

All-cash sales accounted for 44% of international buyer transactions, double that of all existing home buyers (24%). Non-resident foreign buyers (60%) are twice as likely to make an all-cash purchase compared to resident foreign buyers (30%). Nearly 7 in 10 Canadian shoppers (69%) make all cash purchases, the highest proportion among foreign shoppers. Asian Indian buyers were least likely to submit all-cash bids at just 9 percent. Six in 10 Chinese shoppers (58%) and a quarter of Mexican (27%) and Brazilian shoppers (26%) make all cash purchases.

“With interest rates rising, overall home sales will decrease in the US,” Yun said. “Foreign buyers, on the other hand, will increase purchases, because they provide the entire money supply, which is immune to changes in interest rates.” In addition, international flights have increased in recent months as travel restrictions related to the pandemic have been lifted.

Forty-four percent of foreign buyers are being scammed by using their property as a vacation home, rental property, or both. Two-thirds of international buyers (64%) purchased single-family homes and townhomes. About half of international buyers (46%) bought a house in the suburbs, 29% bought a house in the city. Both figures have remained constant over the past five years. Five percent of foreign buyers bought property in resort areas, down from 17 percent in 2012.

“Fostering economic development through our work to foster diverse and inclusive communities is a top priority for NAR,” said Katie Johnson, NR General Counsel and Chief Member Experience Officer.

She added, “Our association works with groups across the country to help our members open up and better understand the opportunities in American real estate for foreign buyers, which maximizes international business potential in domestic markets. NAR and the Realtor brand have grown into a global network of over 100 real estate associations in 76 countries, ensuring stable and accessible markets for our members to connect directly with global real estate professionals and foreign investment sources.

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