Decline in International Homebuyers in the US: Preferred Alternatives Revealed

Foreign Buyers of US Homes Decrease to Lowest Levels Since 2009

According to a recent report by the National Association of Realtors, the number of existing homes purchased by international buyers from April 2022 to March 2023 has declined significantly. The total value of U.S. residential properties bought by foreign buyers during this period reached $53.3 billion, representing a 9.6% decrease compared to the previous year. Additionally, the number of existing homes sold to international buyers dropped by 14%.

Several factors contributed to this decline, as highlighted by Lawrence Yun, the chief economist at NAR. The U.S. housing market faced challenges due to lower inventory levels, higher borrowing costs worldwide, and the strength of the dollar. Yun emphasized that potential buyers expressed interest, but many couldn’t proceed with the purchase due to limited housing choices and the high cost associated with a strong dollar.

The scarcity of available homes has also driven prices higher, further impacting the housing market. Single-family inventory, in particular, reached its lowest point since 1982, standing at 960,000 units, creating an additional hurdle for international buyers looking to invest in the U.S. real estate market.

Decline in Foreign Buyers of U.S. Existing Homes

A recent report from the National Association of Realtors reveals a significant decrease in foreign buyers of U.S. existing homes. Those currently residing in the U.S. as visa holders or recent immigrants, within two years or less, purchased $23.4 billion worth of existing homes, marking a 31% drop from the previous year. These purchases accounted for 44% of the total dollar volume.

On the other hand, foreign buyers living abroad purchased $30 billion worth of existing homes during the same period, showing a 20% increase from the previous 12 months. These buyers represented 56% of the total dollar volume.

Combined, international buyers accounted for 2.3% of the $2.3 trillion in existing-home sales during the specified period. The data suggests that while foreign buyers residing in the U.S. experienced a decline in purchases, those from abroad showed a notable increase in their investment in U.S. real estate.

Rising Home Prices and Foreign Buyer Trends

The housing market in the United States saw an increase in both average ($639,900) and median ($396,400) existing-home sales prices among international buyers, reaching the highest levels ever recorded by the National Association of Realtors (NAR). These prices marked a 7% and 8.3% rise, respectively, compared to the previous year.

The surge in home prices for foreign buyers mirrors the overall increase in U.S. home prices, with the median sales price for all existing homes reaching $384,200. Among foreign buyers, Chinese buyers had the highest median purchase price at $723,200, and approximately 33% of them invested in properties located in California. During the period from April 2022 to March 2023, 15% of international buyers purchased properties valued at over $1 million.

China and Canada continued to dominate as the top two countries in terms of U.S. residential sales dollar volume, with figures reaching $13.6 billion and $6.6 billion, respectively, a trend that has been observed since 2013. Mexico ranked third with $4.2 billion, followed by India with $3.4 billion, and Colombia with $900 million, completing the top five.

According to Lawrence Yun, the chief economist of NAR, home purchases from Chinese buyers increased after China relaxed its strict pandemic lockdown policy. Similarly, buyers from India benefited from the country’s strong GDP growth, while a stronger Mexican peso against the U.S. dollar likely contributed to the rise in sales from Mexican buyers. The data points to significant shifts in the preferences and behaviors of foreign buyers in response to economic and geopolitical developments both in the U.S. and abroad.

Top Destinations for Foreign Homebuyers in the U.S.

For the 15th consecutive year, Florida retained its position as the top destination for foreign homebuyers, accounting for 23% of all international purchases. Following closely behind were California and Texas, tied for second place at 12% each, with North Carolina, Arizona, and Illinois each comprising 4% of the foreign buyer market.

Despite the hot weather conditions in the summer and the significant rise in home prices over the past few years, Florida, Texas, and Arizona have maintained their allure for foreign buyers, according to Lawrence Yun, NAR’s chief economist.

In Florida, the main buyers were from Latin America, constituting 46% of the foreign buyer share, and Canada, making up 24%. The state was particularly favored among Canadian and Colombian buyers.

California boasted the second-largest share of foreign buyers, also at 12%, slightly higher than in the previous period. The majority, 61% of California’s foreign buyers, hailed from Asia/Oceania, and the state ranked as the top destination among Chinese and Asian Indian buyers.

The data indicates that Florida, California, and Texas continue to be highly sought-after by international buyers, showcasing their enduring appeal despite various challenges, including weather conditions and price increases. The preferences of foreign buyers vary significantly based on their home countries, with certain states capturing the attention of specific nationalities more prominently.

International Homebuyers: Financing Trends

When it comes to financing their purchases, international homebuyers exhibit notable differences compared to domestic buyers. A significant portion of foreign buyers, 42%, made all-cash purchases, which is considerably higher than the 26% among all buyers of existing homes.

Interestingly, foreign buyers who reside abroad are more inclined towards all-cash purchases compared to their counterparts residing in the U.S. Among nonresident foreign buyers, a substantial 52% opted for all-cash transactions, whereas only 32% of foreign buyers residing in the U.S. made similar choices. Chief economist Lawrence Yun attributed the decline in the share of houses bought by foreign buyers living in the U.S. by 20% to the impact of elevated mortgage rates.

These financing trends highlight the preferences and financial capacities of international homebuyers. The significant proportion of all-cash purchases suggests that many foreign buyers have the means to acquire properties outright, while others may choose to avoid the complexities and costs associated with mortgage loans. The contrasting trends between foreign buyers living abroad and those residing in the U.S. emphasize the distinct factors influencing their decisions in the real estate market.