International buyers of US residential real estate face the same obstacles as domestic buyers – namely high prices and limited supply – but they also face a strong US dollar, which makes real estate even more expensive for them. As a result, international buyers are pulling back.
They bought 54,300 existing homes from April of last year to March of this year, a 36% drop from a year earlier, according to a new report from the National Association of Realtors. This is the lowest level of international investment since NAR began tracking it in 2009.
Dollar volume, $42 billion, was also down 21% from the previous year.
This comes as both median purchase prices ($780,300) and median prices ($475,000) were the highest the NAR has ever recorded for foreign buyers.
The top volume buyers 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 homes at higher prices, according to NAR.
The report only measures sales of existing homes, and foreign buyers are big in new development space, which is not reflected in the data.
“The strong U.S. dollar makes international travel cheaper for Americans, but it makes U.S. homes much more expensive for foreigners,” said Lawrence Yun, NAR’s chief economist. “Therefore, it is not surprising to see a decline in US home sales by foreign buyers.”
But foreign buyers also face additional obstacles.
“We don’t have a credit score, we have a weird name, we have a different passport,” said Yuval Golan, CEO of Waltz, a new company that aims to make it easier for foreigners to buy homes in the US. “Then we have to put money in two countries, that takes time. There’s extra currency exchange to deal with, a lot of securities are things we don’t know, like a title company, a mortgage broker and a lender who might not understand the our credit and income history.”
Golan said Waltz provides foreign investors with a simpler, remote experience to buy U.S. real estate in 30 days.
“We pick them up in their home country, help them set up an LLC. Within seconds, we open a US FDIC-insured bank account for them, collect their money locally and can do currency exchanges within seconds,” added Golan .
Waltz also operates as a mortgage lender, albeit at higher than market rates.
As it stands, international buyers account for just 1.3% of all U.S. home sales annually, according to NAR, and half of international buyer sales were all-cash, compared to 28% of total sales of residences.
More supply is coming into the US market, but it is still historically low and prices remain stubbornly high.
And then there’s the upcoming presidential election. International buyers tend to retreat during periods of political uncertainty. Sales from foreign buyers are unlikely to improve next year unless several factors, both economic and political, improve.
