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International Home Buying Activity: Acquisitions in the U.S. Decrease

Written by JD Esajian

Recent years have witnessed a significant amount of international investment activity within the U.S. housing sector. Prime rates, in association with record low prices, have witnessed the Chinese acquire approximately $9 billion in property in the past year alone. However, tight restrictions within the industry have served to reduce foreign investment on several levels. According to the National Association of Realtors (NARs), foreign buyers proceeded to purchase fewer homes on U.S. soil than the year before.

A report issued by the NAR, otherwise known as the 2013 Profile of International Home Buying Activity, illustrates a drop in sales by foreign investors. The decrease in international home buying activity is likely the result of an 11.5 percent drop in average sale prices and fewer sales. These factors resulted in a 17.4 percent drop in total sales dollar volume for international sales, to $68.2.

Statistics indicate a slight decrease in international home buying activity. While foreign investors accounted for 8.9 percent of existing-home sales two years ago, last year witnessed foreign transactions drop to 6.3 percent of the $1.8 trillion in home sales throughout the United States.

Gary Thomas, the President of the NAR, announced that foreign investors are experiencing hurdles in their own countries, as well as here in the United States. It is likely that several factors are contributing the recent decrease in international home buying activity. Foreign investors are not only competing with slim inventories, but tight regulations that are aimed at international commerce.

“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.”

Of particular concern to foreign buyers, are tight credit standards that have facilitated increased costs associated with purchasing a property. Nearly 16 percent of the realtors associated with the recent survey said their international clients were unable to close on a deal. Thirty-six percent of those acknowledged that increased costs, taxes and insurance rates were to blame for their lack of acquisitions within U.S. boarders. Approximate 30 percent of their clients “could not find a property to purchase” because of tight inventories. Twenty-six percent could not obtain appropriate financing, even if they were fortunate enough to acquire a property.

The recent International Home Buying Activity Report is the cumulative effort of 3,357 NAR members who took a survey between April 9th and May 10th, 2013. International clients acknowledged by their respective NAR members were then divided into two groups based on their residency status. The groups consisted of foreign buyers with permanent residences outside the U.S. and buyers who are recent immigrants of less than two years or temporary visa holders residing in the U.S. for a duration of longer than six months.

Both of these groups combined to total 192,500 international home sales, or 4 percent of last year’s overall existing-home sales. By comparison, the previous year witnessed 206,192 sales result from these groups.

While the survey reported on international investors from 68 different countries, 53 percent of all international buyers were from just five geographical regions:

  • Canada (23%)
  • China (12%)
  • Mexico (8%)
  • India (5%)
  • United Kingdom (5%)

According to those involved in the survey, 54 percent of their international clients preferred homes that were $250,000 or less. These numbers indicate prices synonymous with 2011 and are up from 45 percent last year. Among the five countries with the highest activity, Chinese buyers trended towards more expensive homes with a median price range of $425,000. Far behind are India ($300,000), the United Kingdom ($250,000), Canada ($183,000) and Mexico ($156,250).