Austin Business Journal reports, "International buyers bought fewer U.S. homes in the past year but are paying more for residential real estate than ever before.
Foreign homebuyers purchased $42 billion in U.S. residential properties between April 2023 and March 2024, a 21.2% decline from the prior 12-month period, according to the National Association of Realtors. The approximately 54,300 existing homes sold to international buyers marks the lowest 12-month total on record since the NAR began tracking such transactions in 2009.
At the same time, both the average and median home-purchase prices paid by foreign buyers — $783,300 and $475,000, respectively — were the highest ever recorded by NAR.
International or foreign homebuyers as tracked by the NAR include both non-U.S. citizens with permanent residences outside the U.S. and non-citizens who are recent immigrants or non-immigrant visa holders who reside for more than six months in the U.S.
The strong U.S. dollar is likely a primary reason for the pullback in foreign investment, but the same issues plaguing domestic buyers — high prices and low inventory — are driving down the number of transactions by international buyers, said Matt Christopherson, director of business and consumer research at the NAR.
"Homes are priced at points higher than [international buyers] are willing to pay, especially since for a lot of them, it's not their primary residence," Christopherson said. "They’re also not finding homes available even if they’re able and willing to pay."
While mortgage rates don't affect international homebuyers as much as they impact domestic buyers, the strength of the U.S. dollar compared to other currencies right now is making homes here even more expensive to purchase for many prospective purchasers.
As of March, about 9.4% more Chinese yuan, 3.7% more Euros and 3.6% more Canadian dollars were needed to purchase a U.S. dollar compared to one year ago, according to the NAR. Conversely, 4.6% fewer Mexican pesos were needed to purchase a U.S. dollar.
Foreign buying activity, which makes up only about 2% of the U.S. for-sale housing market's dollar volume and 1.3% of existing-home sales, generally has little impact on the national scale. In specific housing markets, however, those buyers can exert more influence.
South Florida and Texas, for example, continue to be popular with international homebuyers. Florida remains the top housing market for foreign buyers, with 20% of all international home purchases in NAR's analysis occurring in that state.
Similar to domestic buyers, Texas' profile among foreign buyers has been rising, Christopherson said, largely led by buyers from Mexico. It was the No. 2 state among foreign buyers in the past year, with a 13% share. The state is also the No. 2 destination for Indian buyers, a growing share of whom are buying primary residences, especially detached single-family homes.
"I think it’s [because of] affordability but also a strong job market," Christopherson said.
International homebuying still stagnant from pandemic
Foreign investment in U.S. housing hasn't quite fully recovered since the Covid-19 pandemic.
During the height of the pandemic, buyers from other countries pulled back from purchasing homes here because of travel restrictions and an inability to tour properties. Also during the pandemic, rock-bottom mortgage rates helped propel a surge of buying activity from domestic households, leading to intense competition, reduced inventory and record home-price appreciation. That environment made it tough for international buyers to compete, too, although about half make all-cash offers, Christopherson said.
Since then, mortgage rates have risen and inventory remains stymied on top of the U.S. dollar strengthening.
If and when the Federal Reserve decides to reduce interest rates, and mortgage rates also slip, that could spur foreign investment back into the U.S. housing market, although those buyers likely will be contending with an uptick in prospective U.S. homebuyers, too.
"It will be interesting to see who wins this competition when more inventory comes out," Christopherson said. "Domestic buyers are here, are more motivated and there are more cash buyers among domestic buyers, but the amount of international buyers paying all cash is much higher. I would expect that their purchases could increase but I don’t necessarily expect their share of total home sales to increase given that there’s so much pent-up demand form domestic buyers.""
Source: Austin Business Journal
Written by: Ashley Fahey
Published: July 22, 2024
Posted by Grossman & Jones Group on
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