U.S. homes are more valuable than ever before, and foreign buyers have noticed. Purchases of U.S. residential properties by international purchasers are at an all-time high in both number of homes sold and dollar volume.
According data released by the National Association of Realtors, between April 2016 and March 2017, foreign buyers bought $153 billion worth of U.S. real estate. That's nearly a 50% jump from the same period the year prior, and surpasses the previous high-water mark established in 2015. Foreign buyers purchased a total of 284,455 homes, accounting for 10% of all home sales by dollar volume, or 5% by number of properties.
The majority of sales to foreign buyers occurred in states that get their share of sunshine at least in part because international baby boomers are reaching retirement age, with Florida, California, Texas, and Arizona topping the list. New Jersey was also popular, perhaps as a cheaper alternative to New York.
The buyers primarily hail from China, which accounted for $31.7 billion total dollar volume, followed by Canada, the UK, Mexico, and India. Russian buyers accounted for less than 1% of purchases. Chinese buyers spend the most per home, at about $782,000 on average, but Canadians are catching up, spending an average of roughly $560,000, a 69% increase from last year. They have snagged over $19 billion worth of property in total.
The news is somewhat surprising given that the U.S. dollar is currently holding strong relative to many international currencies, making the U.S. housing market even more expensive for foreign buyers, and as the median value of all homes in the U.S. has risen past $200,000 due to a shortage of low-cost housing stock.
But home values in parts of some countries rose at even steeper rates than in the U.S. In Canada, for instance, home values have exploded over the past few years, rising roughly 10% in 2016 compared to 5% in the U.S. (ironically, some of this growth stemmed from Chinese investment in cities like Vancouver and Toronto). This allows existing homeowners to reap riches upon sale and use the free capital to invest in vacation or retirement homes in cheaper locales.
The U.S. housing market may be seen as a safe, valuable investment that is well worth the expense, perhaps a good sign for the American economy overall. Foreign purchases also increase overall home values by pushing prices up, a positive for those who already own homes, if not for first-time buyers.
There are downsides to foreign purchases as well, particularly in metropolitan areas where high-end housing stock is available. Wages rise more slowly than housing prices, so locals may find themselves unable to afford their neighborhoods. And if foreign purchases are intended as investments, not residences, much of the housing may sit empty, negatively impacting local businesses. And while increased activity from international buyers generally has a modest impact on the U.S. housing market compared to domestic factors, it may compound existing problems, such as a slow rate of construction on the lower end of the market.
But the 2016 boom could already show signs of a bust in early 2017. Weaker currencies abroad might slow the pace of investment, as may stricter foreign government regulations in China and slowing pace of growth in Canada. Uncertainty about U.S. policies on immigration and international trade could also discourage foreign buyers in the future.
- http://www.cnbc.com/2017/07/20/us-homes-are-now-more-valuable-than-ever.html
- http://www.worldpropertyjournal.com/real-estate-news/united-states/miami-real-estate-news/foreign-real-estate-investor-report-2017-nar-2017-profile-of-international-activity-in-us-residential-real-estate-china-real-estate-investor-data-international-real-estate-investor-data-2017-10472.php
- http://www.latimes.com/business/la-fi-foreign-buyers-20170718-story.html
