Not So Local Real Estate

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

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 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, NAR chief economist. “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 continues 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 (20,200), India (13,100) and the U.K. (9,000).

International buyers purchasing fewer, 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.

Foreign buyers are more likely to purchase a home with all cash than a domestic buyer. Forty-seven percent of all international transactions were reported as all cash, compared to 21 percent of existing-home sales. Buyers from India are more likely to finance their home purchase through a U.S. mortgage (78 percent). Buyers from Canada are the most likely to purchase a home through an all-cash sale (78 percent).

Foreign buyers are most likely to purchase a detached, single-family home (66 percent), followed by a condominium (14 percent) and then a townhouse (13 percent). Only 3 percent of international buyers purchase residential land with the intent to build a home.

International buyers purchase property for a variety of reason, 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.

Countries Driving Demand in Austin, Texas

Austin, Texas is among the top cities both within the State of Texas and throughout the U.S. receiving global interest from foreign buyers. Austin currently ranks #4 within the State of Texas and #32 of the top 100 cities garnering home sales among foreign buyers.

In Texas, the Top 5 U.S. markets seeing global demand is Houston-The Woodlands-Sugarland #9; Dallas-Fort Worth-Arlington #16; El Paso #28; Austin-Round Rock #32; and Laredo, Texas #39.  Overall, 10 Texas cities made the Top 100 global U.S. markets list including McAllen-Ediburg-Mission #49; Wichita Falls #54; Killean-Temple #60, Brownsville-Harlingen #64 and Waco #85. 

Bottomline

Texas is among the Top 5 U.S. states seeing global demand. Austin, Texas ranks 4th among all the cities within Texas, and #32 within the Top 100 U.S. cities welcoming foreign buyers purchases. And, the top 10 countries driving the Austin market demand are Canada, United Kingdom, Germany, Mexico, Australia, Israel, India, Sweden, Brazil, and France. 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.