Housing Inventory Shortages Stymie Foreign Buyers, Too | Realtor Magazine
Foreign buyers purchased 16% fewer homes in the U.S. from April 2019 through March 2020 compared to the previous year, according to the National Association of REALTORS®’ newly released 2020 Profile of International Transactions in U.S. Residential Real Estate.
One of the main reasons for the decrease in foreign spending in the U.S. is a familiar one to domestic buyers: the lack of inventory. The issue of fewer homes for sale has become more pressing since the COVID-19 outbreak, as sellers started pulling their homes off the market or delaying listing their homes, leaving buyers with fewer choices.
Indeed, “a lack of housing inventory—the primary factor hindering domestic buyers—is also holding back some foreign buyers,” says Lawrence Yun, NAR’s chief economist. “Additionally, less cross-border travel, falling international trade, and fewer foreign students attending American universities are impacting foreign home buyers.”
As such, “foreign buyers and recent immigrants have become less of a force in the U.S. housing market over the last couple of years,” Yun says.
NAR surveyed REALTORS® about their transactions with international clients who purchased and sold U.S. residential property from April 2019 through March 2020.
In that time frame, recent immigrants or those holding visas spent $41 billion on U.S. existing homes, an 8% decrease from the year prior. Foreign buyers who lived abroad purchased $33 billion worth of existing homes in that period, down 1% from the previous 12 months, according to NAR.
Overall, international buyers accounted for 4% of existing-home sales from April 2019 through March 2020.
Where International Buyers Are Still Coming From
China and Canada remain the top foreign buyers of U.S. residential real estate at $11.5 billion and $9.5 billion, respectively. Rounding out the top five were Mexico at $5.8 billion, India at $5.4 billion, and Colombia at $1.3 billion. Colombia replaced the United Kingdom as the fifth largest country of origin by dollar volume of international buyers in the U.S., NAR reports.
China was the only country among the top five to see a decline in dollar volume compared to the previous year—$11.5 billion versus $13.4 billion the year prior.
Meanwhile, Florida remained the top destination for foreign buyers. The state accounts for 22% of all international purchases in the U.S. California ranked second at 15%, followed by Texas at 9%, New York at 5%, and New Jersey at 4%.
Here are some additional findings from NAR’s latest international buying report:
- Home prices: 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. Chinese buyers had the highest median purchase price at $449,500.
- All-cash transactions: Nearly two out of five international buyer transactions are all-cash. Canadian buyers are the most likely to make an all-cash purchase in the U.S. (at 66%), whereas Asian Indian buyers were the least likely to pay all cash, at just 8%. Asian Indians were the most likely international buyer segment to obtain a mortgage (at 87%). Forty percent of Chinese buyers made all-cash home purchases.
- Why they’re buying: Half of international home purchases in the U.S. were for a primary residence. Seventy-four percent of foreign buyers purchased a detached single-family home or townhome.
- Where they’re buying: Nearly half of foreign buyers—48%—purchased a home in the suburbs and 29% bought a home in an urban area. Those figures have remained mostly steady over the last five years, NAR notes. Seven percent of international buyers purchased property in a resort area, down from 15% in 2009. NAR notes in its report that the decline in the share of foreign purchases in resort areas may partially reflect the fact that there are fewer buyers from the United Kingdom and Canada, who tend to buy vacation homes.
“In the upcoming year, better opportunities may become available for foreign buyers in large U.S. cities like New York and San Francisco,” Yun says. “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.”