The Challenges Faced by International Buyers in the U.S. Real Estate Market
Introduction:
International buyers of U.S. residential real estate are encountering numerous obstacles similar to those faced by domestic buyers. These challenges include high prices and limited supply. However, international buyers have an additional hurdle to overcome – the strong U.S. dollar, which further increases the cost of properties. Consequently, international buyers are withdrawing from the market, leading to a significant decline in their purchases.
The Impact of the Strong Dollar:
According to a report from the National Association of Realtors (NAR), international buyers acquired 36% fewer existing homes from April of last year to March of this year compared to the previous year. This represents the lowest level of international investment recorded since 2009 when the NAR began tracking this data. The dollar volume also declined by 21% from the previous year, amounting to $42 billion. These figures indicate a substantial decrease in international buyer activity.
Record High Prices:
The average purchase price for international buyers reached $780,300, while the median purchase price stood at $475,000 – both the highest recorded by the NAR. The top buyers by volume were from Canada, China, Mexico, and India, with the majority of their purchases concentrated in Florida, Texas, California, and Arizona. Notably, Chinese buyers spent the most money, investing in higher-priced homes.
Limitations in Existing Home Sales Data:
It is essential to note that the NAR report solely captures sales of existing homes and does not account for foreign buyers’ significant presence in the new development sector. Therefore, the data underestimates the actual extent of international buyer activity within the U.S. real estate market.
Obstacles Unique to International Buyers:
Apart from the challenges faced by all buyers, such as credit scores and paperwork, international buyers encounter additional hurdles. Yuval Golan, CEO of Waltz, a company that facilitates foreign purchases of U.S. residential real estate, highlights factors like different passports, foreign currency exchange, unfamiliarity with title companies, mortgage brokers, and lenders who may not understand their credit and income history. However, Waltz aims to streamline the buying process for foreign investors by providing a simpler, remote experience that allows them to purchase U.S. real estate within 30 days.
The Role of Political Uncertainty:
Another factor influencing international buyer activity is political uncertainty. The upcoming presidential election adds an element of unpredictability, causing international buyers to hesitate. Unless various economic and political factors improve, it is unlikely that sales from foreign buyers will see significant improvement in the coming year.
Conclusion:
International buyers in the U.S. real estate market face considerable challenges due to high prices, limited supply, and the impact of the strong U.S. dollar. Despite accounting for just 1.3% of all U.S. home sales annually, international buyers contribute significantly to the market, with half of their purchases being all-cash transactions. As more supply enters the market, and if economic and political conditions become more favorable, international buyer activity may experience a revival. However, until then, international buyers will continue to face hurdles in their pursuit of U.S. real estate investments.
