By Dale King, Realty News Report – International home buying activity in the United States declined by five percent in the 12 months ending March 2020, and the coronavirus pandemic may further dampen purchases by foreign buyers amid an already tight housing inventory.
According to the National Association of Realtors (NAR), international buyers purchased $74 billion worth of existing homes in the U.S. during that period, a 5% drop from the previous year. This marks the second consecutive annual decline in foreign purchases of U.S. residential property.
Florida and California ranked first and second as the top destinations for overseas purchasers, with Texas coming in third.
“Texas still remains among the top three most popular states for international home buying,” said Cindi Bulla, 2020 chair of Texas Realtors. “Future activity could depend on how quickly homes are added in suburban areas around our major cities.”
Bulla and the NAR survey point to tight inventory as the primary reason for the decline in international purchases.
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, reduced cross-border travel, declining international trade and fewer foreign students at American universities are affecting foreign homebuyers.”
The coronavirus pandemic has added further obstacles to overseas interest in U.S. real estate, limiting travel and complicating international transactions.
NAR’s “2020 Profile of International Transactions in U.S. Residential Real Estate” surveyed members about transactions involving international clients who purchased or sold U.S. residential property during the 12 months ending in March. Foreign buyers who were recent immigrants or held visas allowing U.S. residency purchased $41 billion worth of existing homes—an 8% decline from the prior year.
Foreign buyers living abroad bought $33 billion in existing homes, down 1% from the previous 12 months, accounting for 39% of the total dollar volume. Overall, international buyers represented 4% of the $1.7 trillion in existing-home sales during that period.
China-Related Sales Decline 14 Percent
Buyers from China and Canada remained the top two sources of dollar volume for U.S. residential sales, at $11.5 billion and $9.5 billion respectively—a trend that has continued since 2013. Mexico ($5.8 billion), India ($5.4 billion) and Colombia ($1.3 billion) rounded out the top five countries.
The survey showed China was the only country among the top five to see a significant year-over-year decline in dollar volume, falling from $13.4 billion to $11.5 billion. Colombia replaced the United Kingdom as the fifth-largest country of origin by dollar volume.
The median sales price among international buyers was $314,600, 15% higher than the national existing-home median of $274,600. This premium reflects the locations and types of properties favored by foreign buyers. Chinese buyers posted the highest median purchase price at $449,500, with nearly half of their purchases concentrated in California and New York.
Outlook: How COVID May Shape Demand
Wharton Real Estate Professor Benjamin Keys pointed to his research to illustrate the broader question of how the housing market will recover after COVID-19. He noted that several U.S. markets experienced substantial foreign investment over the past decade. If that inflow diminishes, domestic buyers could find new opportunities and downward pressure on prices might follow—a mixed outcome that could disadvantage current homeowners.
Keys predicted that if the pandemic persists, foreign investment in U.S. housing could continue to decline and contribute to falling prices, which would advantage domestic buyers. He added that reduced foreign investment might slightly ease affordability constraints in cities where job growth outpaces housing supply.
Yun offered a complementary view: foreign buyers may find better opportunities in large U.S. cities such as New York and San Francisco in the coming year. He noted a domestic migration trend away from expensive urban centers toward more affordable suburbs and smaller communities, driven by the pandemic and increased remote work options.
Nearly half of foreign buyers (48%) purchased homes in suburban areas, while 29% bought in urban locations—a share that has remained steady over five years. Seven percent of international buyers purchased in resort areas, down from 15% in 2009. The decline in resort-area purchases partly reflects fewer buyers from the U.K. and Canada, who historically bought vacation properties.
Top States and Buyer Preferences
For the 12th consecutive year, Florida was the top destination for foreign buyers, accounting for 22% of all international purchases. California followed with 15% of international buyer activity. Texas accounted for 9% of purchases, New York 5%, and New Jersey 4%.
Texas is particularly popular with buyers from Asia and Oceania—30% of those buyers favor Texas—and with buyers from Latin America and the Caribbean, for whom Texas accounts for 42% of purchases.
“While we’ve seen a recent softening of demand, interest in U.S. real estate from international buyers remains strong overall, especially in more affordable metropolitan areas,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco.
Half of foreign buyers purchased properties for use as a primary residence, and 74% bought detached single-family homes or townhouses, according to the NAR report.
The EB-5 Immigrant Investor Program remains in operation. Established by Congress in 1990, the program allows foreign investors who invest between $900,000 and $1.8 million to obtain visas if their investments create jobs—investments that can include development projects such as high-end condominium construction.
Sept. 8, 2020 Realty News Report Copyright 2020
File: Foreign Home Buyers: Sales
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