Overseas investment in US homes falls to the lowest level in a decade

Overseas buyers purchased US$54.4 billion worth of existing homes in the United States from April 2020 through March 2021, a 27 per cent decrease from the previous 12-month period.

This was the fourth consecutive annual decline in overseas investment in US residential real estate, according to a new report from the National Association of Realtors (NAR).

Foreign buyers purchased 107,000 properties, down 31 per cent from the prior year, as the COVID-19 pandemic led to a strong decline in international tourist and business arrivals.

The US dollar and sales volumes are the lowest since 2011, when those figures were US$66.4 billion and 210,800 properties, respectively. 

NAR’s 2021 Profile of International Transactions in US Residential Real Estate surveyed members about transactions with international clients who purchased and sold US residential property from April 2020 through March 2021.

Across the country, $32.4 billion worth of existing homes were purchased by recent immigrants and expats.

This was a 21 per cent decrease from the prior year and represented 60 per cent of the dollar volume of purchases.

Foreign buyers who lived abroad purchased $22 billion worth of existing homes, down 33 per cent from the 12 months prior and accounting for 40 per cent of the dollar volume.

International buyers accounted for 2.8 per cent of the $5.8 trillion in existing home sales during that time period.

NAR chief economist Lawrence Yun said he was not surprised by the results.

“The big decline in foreign purchases of homes in the US in the past year is no surprise, given the pandemic-induced lockdowns and international travel restrictions,” Mr Yun said.

“Yet, even with the absence of foreign buyers, the US housing market strengthened solidly.”

Total US existing-home sales plunged to a seasonally adjusted annual rate of 4.01 million in May 2020. Sales fully recovered by July, eventually reaching a peak of 6.73 million in October.

China and Canada remained first and second in US residential sales dollar volume at $4.5 billion and $4.2 billion, respectively, continuing a trend going back to 2013.

India ($3.1 billion), Mexico ($2.9 billion), and the United Kingdom ($2.7 billion) rounded out the top five. The United Kingdom was the only country among the top five to see an increase in dollar volume from the previous year ($1.4 billion to $2.7 billion) and it replaced Colombia as the fifth largest country of origin by dollar volume of foreign buyers. 

The annual dollar volume dropped by at least 50 per cent for foreign buyers from China ($4.5 billion from $11.5 billion), Canada ($4.2 billion from $9.5 billion) and Mexico ($2.9 billion from $5.8 billion).

“As travel restrictions loosen and foreign students return to US colleges in the upcoming year, there is likely to be some growth in foreign buying of US real estate,” Mr Yun said.

“High home prices and the ongoing lack of inventory could, however, pose a challenge for buyers.”

The median existing home sales price among international buyers was $351,800, 15 per cent more than the $305,500 median price for all existing homes sold in the US.

The price difference primarily reflects the locations and type of properties desired by foreign buyers.

At $476,500, Chinese buyers had the highest median purchase price, and more than a third (34 per cent) purchased property in California.

For the 13th straight year, Florida remained the top destination for foreign buyers, accounting for 21 per cent of all international purchases. California ranked second (16 per cent), followed by Texas (9 per cent) and Arizona (5 per cent), with New Jersey and New York tied at 4 per cent.  

All-cash sales accounted for almost two out of five (39 per cent) of international buyer transactions.

There was a higher percentage among non-resident compared to resident foreign buyers at 61 per cent and 24 per cent respectively.

More than four out of five buyers from the United Kingdom (82 per cent) made all-cash purchases, the highest share among foreign buyers.

Asian-Indian buyers were the least likely to pay all-cash at just 8 per cent. Two-thirds of Canadian buyers (66 per cent), two out of five of Chinese buyers (40 per cent), and a third of Mexican buyers (33 per cent) made an all-cash purchase.

Forty-three percent of foreign buyers purchased the property for primary residence use and 65 per cent purchased detached single-family homes and townhouses.

Nearly half of international buyers (49 per cent) purchased a home in the suburbs and 28 per cent bought a home in an urban area, a figure that’s held steady over the last six years.

Seven percent of foreign buyers bought property in a resort area, down from 17 per cent in 2012.

NAR chief member experience officer, Katie Johnson said their highest priority was to drive economic development by fostering diverse and inclusive communities.

“Our association collaborates with groups across the country to educate foreign buyers on the opportunities in US real estate and to maximise the global business potential in our local markets,” Ms Johnson said.

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