Affordability, inventory issues also block foreign investors

Deteriorating housing affordability and ongoing inventory shortages are not only pushing more Americans out of the real estate market, but also preventing many foreign investors from buying homes in the United States, according to the National Association of REALTORS® recently published. 2022 Profile of International Transactions in Residential Real Estate in the United States.

The annual number of U.S. home purchases by foreign buyers was the lowest on record in the 12 months from April 2021 to March 2022, according to the report. International buyers bought 98,600 U.S. homes during this period, marking a 7.9% drop from a year earlier and the lowest number since NAR began tracking this data in 2009. It s This is the second straight year of sharp declines in foreign investment in the United States since COVID. -19 pandemic has begun. NAR chief economist Lawrence Yun notes that “restrictions and general caution on international travel during the pandemic” continue to hamper demand from overseas. However, he adds, affordability and inventory issues were the top issues cited by international buyers who decided against buying a home in the United States.

Despite the drop in sales, the overall dollar value of home purchases by foreigners in the United States has soared due to record home prices. Foreign investors bought $59 billion worth of real estate in the United States from April 2021 to March 2022, an increase of 8.5% over the previous year, according to the NAR report. Average and median purchase prices for international buyers rose 17.7% year over year and reached record highs: $598,200 and $366,100, respectively. (During the same period, the overall median price of an existing home jumped 10% to $374,300, according to NAR data.) Chinese buyers paid the highest average purchase price at just over $1 million, according to the NAR report. Nearly a third of Chinese buyers bought property in California.

Foreign investors tend to be more insulated from US market volatility and are likely to return in greater numbers in the future, even if the economy slows here at home, Yun says. “Due to rising interest rates, overall home sales will decline in the United States this year,” he notes. “Overseas buyers, however, are likely to step up their purchases, as those bidding in cash will be sheltered from changes in interest rates. In addition, international flights have increased in recent months with the lifting of pandemic-related travel restrictions.”

An overview of foreign buyers

The largest number of international buyers in the United States from April 2021 to March 2022 were from Canada and Mexico. But Chinese and Canadian shoppers spent the most, according to the NAR report.

  • Canada: 11% of foreign buyers, $5.5 billion in residential sales
  • Mexico: 8%, $2.9 billion
  • China: 6%, $6.1 billion
  • India: 5%, $3.6 billion
  • Brazil: 3%, $1.6 billion
  • Colombia: 3%, $1 billion

Florida was the top US destination for international shoppers for the 14th consecutive year, accounting for 24% of foreign purchases between April 2021 and March 2022, according to the NAR report. Here are the states that recorded the highest shares of foreign purchases during this period:

  • Florida: 24%
  • California: 11%
  • Texas: 8%
  • Arizona: 7%
  • New York: 4%
  • North Carolina: 4%

Additional findings from the NAR report on international transactions:

  • Forty-four percent of foreign home buyers paid cash, nearly double the rate of all existing home buyers (24%). Nearly 70% of Canadian shoppers made all-cash purchases, the highest proportion among overseas shoppers, while Asian Indian shoppers were the least likely to pay in cash (9%).
  • Forty-four percent of foreign buyers bought a property to use as a vacation home, rental or both.
  • The main reasons given by foreign buyers for deciding not to buy a home in the United States were the cost of ownership (65%); the inability to find a property to buy (57%); inability to obtain financing or inability to qualify for a mortgage (24%); and property taxes (21%).
  • Foreign buyers who resided in the United States as recent immigrants or held visas purchased $34.1 billion worth of U.S. real estate, a 5.2% increase from the last year. These buyers accounted for 58% of the dollar volume of purchases.
  • Foreign buyers who lived abroad purchased $24.9 billion worth of US real estate, up 13.2% from a year earlier and accounting for 42% of dollar volume.