International buyers are showing less interest in U.S. real estate due to the global recession and severe ongoing credit crunch, according to a statement released today by the National Association of Realtors (NAR).
The 2009 NAR Profile of International Buying Activity reported that foreign buyers who use Realtor services make up a smaller share of real estate activity than in previous years, but that nearly half of those paid in all cash – skipping the mortgage process altogether.
From May 2008 through May 2009, 23% of NAR respondents said they’ve served at least one international client during that one-year period, when an estimated 154,000 homes were sold to foreign nationals. This is down from 26% of respondents in the preceding year, when approximately 170,000 international transactions took place.
The median home price paid by foreign buyers for the 12-month period ending May 2009 was $247,000 – higher than the overall national price of $198,000. 45.8% of these homes were paid for in all cash, partly due to the difficulty – compared to previous years – in obtaining a mortgage.
Lawrence Yun, NAR chief economist, said recent improvements in the credit market will help reverse the slide in foreign buyers. “Stock market gains and improving bank balance sheets will permit a greater amount of lending for second home purchases,” he said. “In addition, expanding foreign economies for international buyers and favorable exchange rates give them more purchasing power, particularly in a period of record high affordability conditions in the United States. Property investment here generally builds wealth over the long term.”
The laws in the U.S. don’t restrict or scrutinize most real estate purchases by foreign nationals. There are few barriers to owning property here, unlike transactions in many other countries, although immigration laws prohibit foreigner from remaining in the country for more than six months without a special visa. International investors are also given the same property rights as those enjoyed by U.S. citizens.
Of the top five countries of origin for foreign buyers, Canada leads with 17.6%, buyers from the United Kingdom accounted for 10.5%, buyers from Mexico made up 9.8%, 8.5% of buyers were from India, and buyers from China accounted for 5.4% of transactions.
The percentage of buyers from Canada, the U.K., and China has declined from the previous year’s study, and the percentage from Mexico and India has increased. Most foreign buyers of U.S. real estate originated from North America, Europe, and Asia, but a number of buyers were also from Latin America, Africa, and Oceania.
There was foreign buying activity in every state and the District of Colombia. Florida was the most popular state for foreign buyers, making up 23% of purchases, 13% of purchases were in California, 10.7% in Texas, and 7.1% in Arizona. These states tend to attract international buyers because they are major gateways into the U.S. and they have relatively mild climates.
California saw a notable rise in foreign interest as affordability conditions improved markedly in the state last year. “Florida is the most popular state for European and Latin American buyers, while Asian buyers are drawn to California,” Yun said.
The NAR study shows that 69% of international purchases were single-family homes, while condos accounted for 18%, townhomes made up 8%, and commercial property accounted for 4% of transactions.
Almost half of the properties purchased by foreign buyers were in suburban areas and one-fourth were in urban environments, the rest were split evenly between resort areas and small towns or rural areas.
Of the survey respondents, 33.9% of foreign buyers said they plan to use their U.S. property as a vacation home, 23.5% said they plan to use it for both investment and vacations, and 21.8% of buyers said they plan to use the purchase property strictly as an investment. (Some respondents did not give a planned use for the property, so the numbers don’t add up to 100%.)
Source:
National Association of Realtors
