Here’s Why International Buyers Are Pulling Back from the U.S. Housing Market
International buyers are stepping back from the U.S. housing market, facing many of the same challenges as domestic buyers. High prices and a tight supply are significant hurdles, but international buyers are also contending with a strong U.S. dollar, making American properties even more expensive. This shift has led to a notable decrease in foreign investment in U.S. residential real estate.
From April 2023 to March 2024, international buyers purchased 54,300 existing homes, marking a 36% drop from the previous year, according to the National Association of Realtors (NAR). This is the lowest level of international investment since the NAR began tracking it in 2009. The dollar volume of these purchases was $42 billion, down 21% from the previous year.
Both the average ($780,300) and median ($475,000) purchase prices for foreign buyers reached record highs. The top buyers came from Canada, China, Mexico, and India, with the most properties bought in Florida, Texas, California, and Arizona. Chinese buyers, in particular, spent the most money, often purchasing higher-priced homes.
Challenges for International Buyers
Several factors contribute to the pullback of international buyers. The strong U.S. dollar is a significant barrier. “The strong U.S. dollar makes international travel cheaper for Americans but makes U.S. homes much more expensive for foreigners,” said Lawrence Yun, chief economist for the NAR. This currency challenge makes U.S. properties less attractive to foreign investors.
In addition to currency issues, foreign buyers face unique obstacles. “We don’t have a credit score, we have a weird name, we have a different passport,” said Yuval Golan, CEO of Waltz, a company that facilitates foreign purchases of U.S. real estate. The process of wiring money across countries, dealing with foreign currency exchanges, and navigating unfamiliar terms like title companies and mortgage brokers add to the complexity and delay.
Waltz aims to simplify this process by providing a seamless, remote experience for foreign investors to buy U.S. real estate within 30 days. The company underwrites buyers in their home countries, helps set up an LLC, opens a U.S. FDIC-insured bank account, and facilitates foreign currency exchanges quickly. Waltz also acts as a mortgage lender, although at higher than market rates.
Current Market Conditions
International buyers currently make up just 1.3% of all U.S. home sales annually, with half of these purchases being all-cash deals, compared to 28% of total existing-home sales. Although more supply is entering the U.S. market, it remains historically low, and prices are still high.
Political Uncertainty
The upcoming presidential election also adds to the hesitation of international buyers. Historically, foreign buyers tend to pull back during times of political uncertainty. Unless economic and political conditions improve, it is unlikely that sales from foreign buyers will increase in the coming year.
Impact on Luxury Real Estate Investors
For luxury real estate investors, this shift could have mixed effects. Higher taxes and tight regulations might increase costs for luxury properties. However, policies promoting economic stability and reducing income inequality could strengthen the overall market, potentially benefiting high-end real estate in the long run. Efforts to address housing shortages and improve urban environments might make luxury properties more attractive to investors.
Understanding these trends and challenges can help investors navigate the changing landscape of the U.S. housing market.
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