International activity in U.S. residential market declines, according to survey

WASHINGTON — Rising home prices and low inventory have led to a decline in foreign home purchases in the U.S. Total international sales totaled $121 billion in April 2017 to March 2018, a 21 percent decline from the previous 12-month period, according to an annual survey of from the National Association of Realtors.

The NAR’s 2018 Profile of International Transactions in U.S. Residential Real Estate found that foreign buyers and recent immigrants accounted for 8 percent of the $1.6 trillion existing-home sales, a decrease from 10 percent during the 12-month period that ended in March 2017.

“After a surge in 2017, we saw a decrease in foreign activity in the housing market in the latest year, bringing us closer to the levels seen in 2016,” said Lawrence Yun, chief economist for the NAR. “Inventory shortages continue to drive up prices, and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same limited supply of homes.”

China continuing to lead in purchases

Five countries accounted for nearly half (49 percent) of the dollar volume of purchases by foreign buyers — China, Canada, India, Mexico and the United Kingdom. For the sixth consecutive year, China exceeded all other countries in dollar volume of purchases, buying an estimated $30.4 billion worth of residential property, a decrease of 4 percent from last year. Buyers from Canada came in second, with $10.5 billion worth of property, showing a more significant decline of 45 percent from the 2017 survey reference period, followed by the U.K., $7.3 billion; India, $7.2 billion; and Mexico, $4.2 billion.

“The saying goes that all real estate is local, but that does not mean that all buyers are,” said NAR President Elizabeth Mendenhall, a sixth-generation Realtor from Columbia, Missouri, and CEO of RE/MAX Boone Realty. “Even in this current global environment of political uncertainty, the U.S. real estate market continues to be seen as a safe, secure and profitable place to invest in property.”

The survey once again showed that foreign buying activity is mostly limited to three states, as Florida (19 percent), California (14 percent) and Texas (9 percent) remained the top three destinations for foreign buyers to purchase, followed by Arizona and New York (both 5 percent).

The number of units purchased by international buyers saw a slight decrease, from 284,000 in the previous 12-month period to 266,800. China, once again, purchased the greatest number of units at 40,400. Canada comes next with 27,400 units, followed by Mexico with 20,200, India with 13,100 and the U.K. with 9,000.

International buyers purchasing less expensive properties

International buyers typically buy more expensive properties than the average existing home. The median price for a foreign buyer was $292,400, compared to the median price for all existing homes ($249,300). Chinese buyers continue to purchase the most expensive properties, with a median price of $439,100.

International buyers purchase property for a variety of reasons, the most frequent (52 percent) being as a primary residence. Indian buyers were the most likely to purchase the

property for primary residence (86 percent), while Canadian buyers were the most likely to purchase the property as a vacation home (40 percent). Among the top five purchasing countries, Chinese buyers were the most likely to purchase a house for student housing.

Realtors uncertain about the outlook of international buying activity

Twenty-three percent of NAR members who participated in the survey reported that they worked with an international client in the past year, a decline from 29 percent in the previous year. Forty-four percent of respondents said they “don’t know” when asked about the 12-month outlook for international residential buyer activity. Twenty-five percent said they think the activity will either decrease or remain the same, and only 5 percent believe it will increase. Yun attributes this uncertainty about future conditions to confusion and ambiguity surrounding policy changes related to international trade and immigration.

The NAR’s 2018 Profile of International Transactions in U.S. Residential Real Estate was conducted April 10-19. The survey presents information about transactions with international clients during the 12-month period from April 2017 and March 2018. A total of 10,303 Realtors responded to the 2018 survey.