Foreign deals in the state sink 60%
Foreign interest in California homes has plummeted.
My trusty spreadsheet peeked at the National Association of Realtors’ annual report on international homebuyers — both non-U.S. citizens and recent immigrants. The trade group looked at transactions done by its members that involved existing homes bought by international clients during the 12 months that ended in March.
Top line
Let’s start with the fact that declining international interest in American housing is a nationwide trend.
The past year’s 99,000 U.S. home purchases made by foreigners were down by 8,000, or 7%. It was the lowest transaction count since the trade group started tracking this niche in 2009.
International buys were 51% below the 201,300 average buying pace in 201820.
California’s dip was far larger. Its share of these U.S. foreign purchases was 11% in the year ending in March, down from 16% in the year before and 14% averaged in 2018-20.
Even with that falling share, the Golden State was No. 2 for foreign purchases in the most recent 12-month period tracked — behind Florida (24% of all buys) and ahead of Texas (8%) and Arizona (7%).
Details
Let’s extrapolate those numbers into some approximate California patterns.
In the 12 months ending in March, roughly 11,000 purchases statewide were made by foreigners, down 6,000 in a year, or 35%. That’s a decline five times steeper than the overall national slip.
And two years of such drops in California put the most recent international buying 60% below 2018-20’s annual pace of 27,300 sales.
At the same time, California’s housing market moved in the other direction as a feeding frenzy for residences took off.
California had 537,000 home purchases for all of 2021, according to CoreLogic. That was 98,000 more over the year, or a 22% jump. And compared with 2018-20’s 439,300 sales, 2021 purchases also were 22% higher.
Those stats loosely translate to just 2% of the most recent 12 months of California homebuying going to foreign buyers, versus 4% a year earlier, or a 6% average in 2018-20.
The largest group of California’s foreign buyers in the 12 months ending in March were from Asia (38%), then Canada (15%) and Latin America (12%). And Asians have sharply pruned U.S. homebuying in the pandemic era — a period filled with tensions over the Chinese origin of the coronavirus.
In the past two years, the U.S. share of buyers from the People’s Republic of China, Hong Kong, Taiwan and Japan fell to 7% from 14% as purchases from these nations fell by two-thirds to roughly 7,000 homes.
Bottom line
Maybe the drop was strategic. Perhaps foreigners chose not to battle last year’s buying binges in California and across the nation.
Or maybe the dip was a logistical bet. Did pandemic travel restrictions make it difficult for foreigners to come to the U.S. to participate in house hunting?
Or it is fallout from growing U.S. xenophobia that makes the nation — and a state known as a haven for immigrants — a less desirable place for foreigners to live or invest their money?
Some of you may say this is good no matter the reasons because there’s too much competition for housing anyway. But remember, housing has its cycles.
Rising interest rates and high prices have scared off California house hunters of all types — with 11% fewer houses were purchased in the first sixth months of 2022 versus the same period a year earlier.
And the drop in foreign interest only further muddies the outlook for the state’s overall housing market.