By Terry Bremer Allison, J.D., REALTOR®, CHMS, CNE
Manager, Coldwell Banker Brokers of the Valley
Now and then, our listing agents work with sellers who are certain that the perfect buyer for their property is going to come from Hong Kong, or Russia or some other faraway land. That notion prompted me to do some research. I wondered if we know the odds for the perfect foreign buyer’s purchase among all residential sales. Here’s some of what I learned:
Since 2009, the National Association of REALTORS® (NAR) has conducted an annual survey of residential purchases made by international buyers. The most recent report covers the period between April 2016 and March 2017, when foreign buyers and recent immigrants purchased $153.0 billion of residential property, which is a 49 percent jump from 2016 ($102.6 billion) and surpasses 2015 results ($103.9 billion) as the new survey high. Overall, 284,455 U.S. properties were bought by foreign buyers (up 32 percent from 2016), and purchases accounted for 10 percent of the dollar volume of existing-home sales (8 percent in 2016). Survey results revealed that nearly half of all foreign sales occurred in three states: Florida, California and Texas.
NAR Economist Interprets Survey Results
Lawrence Yun, NAR Chief Economist, explained, “The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of U.S. property over the past year. While the strengthening of the U.S. dollar in relation to other currencies and steadfast home-price growth made buying a home more expensive in many areas, foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work, and invest.”
Buyers from China exceeded all countries by dollar volume of sales at #31.7 billion, which was up from last year’s survey ($27.3 billion) and topped 2015 survey results ($28.6 billion) as the new survey high. Chinese buyers also purchased the greatest number of housing units for the third consecutive year, 40,572, up from 29,195 in 2016.
Rounding out the top five countries whose people bought in the U.S.A. during the survey period, the sales dollar volume from Canadian buyers ($19.0 billion), the United Kingdom ($9.5 billion), Mexico ($9.3 billion) and India ($7.8 billion), all increased from their levels measured one year ago.
Where Foreigners Buy US Homes
The latest survey once again revealed that foreign buying activity is mostly confined to three states. Twenty-two percent purchased in Florida, California had 12 percent, and Texas, also had 12 percent. These three states maintained their positions as the top destinations for foreigners, followed by New Jersey and Arizona, each at 4 percent. Florida was the most popular state with Canadian buyers, Chinese buyers mostly chose California, and Texas was the preferred state for buyers from Mexico.
The upswing in foreign investment came from both recent immigrants and non-resident foreign buyers. Sales to foreigners residing in the U.S. reached $78.1 billion (up 32 percent from 2016) and non-resident foreign sales spiked to $74.9 billion (up 72 percent from 2016).
By way of background, the term international or foreign client refers to non-resident foreigners and resident foreigners. Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations or other visits of less than six months to the United States. For purposes of the NAR study, resident foreigners are non-U.S. citizens who are recent immigrants, in the country less than two years at the time of the transaction or temporary visa holders residing for more than six months in the United States for professional, educational or other reasons.
“Although non-resident foreign purchase climbed over the past year, it appears much of the activity occurred during the second half of 2016,” said Yun. “REALTORS® in some markets are reporting that the effect of tighter regulations on capital outflows in China and weaker currencies in Canada and the U.K. have somewhat cooled non-resident foreign buyer interest in early 2107.”
What’s in Store for the Future
Looking ahead, Yun believes that the gradually expanding U.S. and global economies should keep foreign buyer demand at a robust level. However, it remains to be seen if both the shortage of homes for sale and economic and political headwinds end up curbing sales activity to foreigners. “Stricter foreign government regulations and the current uncertainty on policy surrounding U.S. immigration and international trade policy could very well lead to a slowdown in foreign investment,” said Yun.
In the short run, local sellers are well advised to list with experienced REALTORS® who are affiliated with brokerages that are known for their global marketing reach.