International buyers of U.S. residential real estate face the same obstacles as domestic buyers—high prices and limited supply—but they also face a strong U.S. dollar, which makes real estate more expensive for them. As a result, international buyers are pulling out.
According to a new report from the National Association of Realtors, they bought 54,300 existing homes between April of last year and March of this year, a 36% drop from a year earlier. That’s the lowest level of international investment since the National Association of Realtors began tracking it in 2009.
The dollar volume also decreased by 21% compared to the previous year, to reach $42 billion.
This comes as the average purchase price ($780,300) and median price ($475,000) were the highest NAR has ever recorded for foreign buyers.
The largest buyers by volume were from Canada, China, Mexico and India. These buyers bought the most properties in Florida, Texas, California and Arizona. Chinese buyers spent the most money, purchasing higher-priced homes, according to the National Association of Realtors.
The report only counts existing home sales, and foreign buyers are major buyers of new development, which is not reflected in the data.
“The strength of the U.S. dollar makes international travel cheaper for Americans, but makes U.S. homes more expensive for foreigners,” said Lawrence Yun, chief economist at the National Association of Realtors. “So it’s not surprising that we’re seeing a decline in U.S. home sales by foreign buyers.”
But foreign buyers also face additional hurdles.
“We have no credit history, a strange name, a different passport,” says Yuval Golan, CEO of Waltz, a new company that aims to make it easier to buy residential real estate in the United States. “Then we need to transfer money across two countries, and that takes time. There’s extra foreign exchange that we need to deal with, and a bunch of titles that are things we don’t know, like the title company, the mortgage broker and the lender who may not understand our credit history and income.”
Waltz offers foreign investors a simpler, more flexible experience to buy U.S. real estate in 30 days, Golan said.
“We provide them with guarantees in their home countries, help them set up LLCs. Within seconds, we open them an FDIC-insured bank account in the US, collect their money locally, and are able to do foreign exchange transactions within seconds,” Golan added.
Waltz also acts as a mortgage lender, albeit at higher than market rates.
Currently, international buyers account for just 1.3% of total U.S. home sales annually, according to the National Association of Realtors, and half of international buyer sales are all-cash, compared with about 28% of total existing home sales.
Supplies to the US market are increasing, but still historically low, and prices remain stubbornly high.
There is also the upcoming presidential election. International buyers tend to pull back during times of political uncertainty. Foreign buyers’ sales are unlikely to improve next year unless several factors, both economic and political, improve.
