International Homebuying Falls From Highest Recent Levels

Despite some hurdles foreign buyers continue to purchase properties in the U.S., accounting for six percent of existing home sales. The National Association of Realtors® (NAR) recently surveyed its members who reported that international sales declined in the 12 months ended in March, but remained at the second highest level in recent years.

According to NAR's 2013 Profile of International Home Buying Activity, interest in U.S. properties remains strong. Sales in the 12 month period totaled $68.2 billion, down approximately $14 billion from the previous 12 month period. Of the total, $34.8 billion or 51 percent of properties were purchased by foreign buyers with permanent residences outside the U.S. And $33.4 billion or 49 percent by buyers who are recent immigrants or temporary visa holders residing in the U.S. for more than six months.

"Foreign buyers are experiencing hurdles not only abroad, but also here in the U.S. when it comes to purchasing property," said NAR President Gary Thomas. "Difficult economic conditions, particularly in Europe, have impacted foreign buyers, but several factors in the U.S. have also affected their purchasing power here. Tight credit standards have made financing challenging for immigrants, and low housing inventories have made finding a house difficult. However, none of these factors appear to be permanent."

Twenty-seven percent of Realtors responding to the survey said they had worked with international clients this year and reported purchases from 68 countries. Five countries have historically accounted for the bulk of purchases; Canada (23 percent), China (12 percent), Mexico (8 percent), India (5 percent) and the United Kingdom (5 percent). These five countries accounted for approximately 53 percent of transactions, with Canada and China the fastest growing sources over the years.

Canadian buyers gravitate toward properties in Florida, Arizona, and California and purchase at a median price of $183,000. Chinese buyers also tend to purchase in California but are higher end buyers at a median price of $425,000. Mexicans buy in California and Texas and spend a median of $156,250.

Thomas said international buyers tend to cluster in specific locations which are based on their countries of origin and other factors. "Many factors influence foreign buyers' decisions on where to purchase in the U.S., but the most important are proximity to home country, presence of relatives and friends, availability of job and education opportunities, and the climate." Some are looking for trophy properties, he said, while others are interested in modest vacation homes.

The Sun Belt states listed above plus New York make up 62 percent of all international purchases. Twenty-three percent of sales are attributed to Florida and 17 percent to California. About half of buyers pick suburban areas while a quarter prefer a central city/urban area. Sixty-three percent of transactions were all-cash and international buyers tended to purchase homes where the mean and median were both higher when compared to purchases of domestic buyers. Nationally the mean purchase price of an international sale was $275,862 compared to $179,867 spent by a domestic buyer.