International buyers are dropping out of US housing market
After strong interest for several years from international buyers, the U.S. housing market is now appearing to be sore. .
The dollar volume of U.S. home sales to international buyers between April 2017 and March 2018 dropped 21 percent compared with the year-ago period, according to the National Association of Realtors.
Of the $121 billion in sales to international buyers, those currently living in the U.S purchased $67.9 billion in properties, while nonresident foreigners purchased $53 billion, both marking a drop from the previous year. Foreign buyers accounted for 8 percent of the $1.6 trillion in existing home sales, a drop from 10 percent the previous year.
“The decline is partly coming off high levels of the prior year, but also surely from the strong rhetoric coming out of Washington against foreigners,” said Lawrence Yun, chief economist for the Realtors. “There has been a large drop-off in foreign students attending U.S. universities already. Chinese [buyers], in particular, purchase homes for their kids while attending college.”
China still leads the pack for international buyers, as it has for six straight years, accounting for 15 percent of international sales. Chinese buyers also purchased the most expensive homes, with a median price of $439,100.
Canada comes in second, with a 10 percent share of international sales. “The market here is softer, and I imagine that’s why there are perhaps less Canadian buyers,” said Elli Davis, a real estate agent based in Toronto. “That does surprise me, though, as I still know lots of people buying mostly in Florida!”
Buyers from China, Canada, India, Mexico and the United Kingdom accounted for nearly half of the dollar volume of sales to international buyers. Canadian buyers had been the market leaders by far during the U.S. recession. They dropped back significantly as U.S. home prices recovered, Chinese buying increased and U.S. investor purchases climbed.
“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,” Yun said.
High prices could certainly be a deterrent for buyers in Southern California. For international investors who are looking for condominiums in large cities as an investment, the supply theory doesn’t really hold.
“I don’t think it’s the supply issue because these buyers are buying in the higher end and there is more supply there, particularly in the gateway cities like Miami and New York,” said Sam Khater, chief economist at Freddie Mac. “It could be just that their appetite for U.S. real estate is waning.”