International Real Estate Sales Continue to Climb in U.S. Market

Thanks to low housing prices and the relative weakness of the United States dollar, international buyers continue to choose American real estate as a profitable and desirable investment. For the year ending in March 2012, total residential international sales in the U.S. amounted to $82.5 billion. This is up from $66.4 billion in 2011, according to the National Association of Realtors® (NAR). Total international sales were equally split between recent immigrants and non-resident foreigners. NAR’s survey reported that 27% percent of Realtors® worked with international clients this year. The same number, twenty-seven percent, also reported that international sales comprised over 10% of their total transactions, while 52% percent reported that foreign sales accounted for up to ten percent of total transactions. According to NAR President Moe Veissi, “Advantageous market conditions have drawn more and more foreign buyers to the U.S. in recent years, signaling how desirable and profitable owning property in this country can be. Low housing prices, a good inventory condition and increased buying power—with today’s exchange rates—help attract international clients.” International buyers bought properties throughout the nation, but four states accounted for 51% of purchases – Texas, Arizona, California, and Florida. With 26 percent of foreign purchases, Florida has been the fastest growing destination. California came in second with 11%, while Arizona and Texas tied with 7 percent. For prospective foreign buyers, five considerations topped the list when it came to purchasing homes: climate, location, the presence of relatives and friends, the convenience of air transportation, and proximity to home country. Of these considerations, proximity to home country accounted for regional buying trends. Texas remains popular for Mexican buyers. Asian buyers tend to purchase on the West Coast, California in particular. The East Coast generally attracts European clients. Florida, on the other hand, attracts a variety of international buyers including Canadians, South Americans, and Europeans. While international buyers came from all over the world, Canada and China stood out as the fastest-growing home countries. Canada accounted for 24% of sales while China (The People’s Republic of China, including Hong Kong) accounted for 11%. Mexico came in third with eight percent of sales. The U.K. and India tied with six percent. When it came to international sales, specialization on the part of the buyer’s Realtor®–foreign language capability, cultural affinity or orientation with the prospective buyer, and experience in explaining the U.S. real estate market–was a major component of success. The average price paid by an international buyer was $400,000, compared to the overall U.S. average of $212,000, and 55% of international purchases were over $250,000. The survey revealed two major reasons for why the average international home price is higher: one, the average international buyer is typically wealthier than the average domestic buyer; and two, that foreign buyers typically search for more expensive specialized niche properties. For example, the international client may be seeking a home suitable for multi-generational living. Over half of international buyers preferred to buy in a suburban area, while a little less than a quarter bought in a city center or urban area. While homes purchased by foreign buyers were often used as a primary residence, rental and vacation use also were major reasons for purchase. Sixty-six percent of survey respondents reported that international clients purchased detached single-family homes. International clients still experience many financing challenges when purchasing a U.S. home. In fact, among transactions that failed, Realtors® reported 26% of cases attributed the reason to financing issues. When trying to obtain a mortgage, the difficulties faced by foreign buyers include lack of U.S.-based credit history, hurdles in meeting mortgage requirements, taxes/price/insurance, and immigration laws. The survey concluded that 62% of international purchases were in cash, which has increased from 2007. “Foreign buyers recognize that owning a home in the U.S. has many benefits, both financial and social,” concluded Veissi. “Many purchase property as an investment, vacation home, or to diversify their portfolio. In addition, many recent immigrants view homeownership as an important accomplishment. They believe that being a homeowner is one of many ways they become established in the U.S. and attain stability, security, and a sense of community.”