International buyers remain prolific figures in the United States real estate market, as evidenced by the just-released 2014 Profile of International Home Buying Activity Report. Compared to the previous year, sales to foreigners increased both in numbers of transactions and in average price. Favorable exchange rates, affordable home prices and rising affluence abroad continue to drive international buyers to the U.S. to purchase properties and make real estate investments.
The total sales volume to international clients for the period April 2013 to March 2014 is estimated at approximately US$92 billion, a 35 percent increase from the previous period’s level of $68.2 billion. The report leaves no doubt this is a lucrative market to be selling/listing homes in – the mean purchase price of international clients is $US396,000, compared to a mean domestic purchase price of US$247,000.
Which countries are buying in the United States?
International buyers of U.S. properties came from nearly all over the globe, but five countries (Canada, China, Mexico, India, and the United Kingdom) accounted for 54% of the reported transactions. Canada was the top source of international clients in terms of transactions volume, but China accounted for the largest sales dollar volume because of the higher average price of properties purchased by Chinese buyers. NAR estimates that the total international sales from Chinese buyers rose to US$22 billion in the 12 months ending March 2014, up from US$12.8 billion in the prior period. This accounts for about 24 percent of the total international dollar sales.
What are they buying?
Chinese buyers tended to buy properties in higher-priced markets such as California, Washington, and New York, while Canadians bought in lower-priced markets such as Florida and Arizona. Most homes purchased by foreign buyers, about 42 percent, are used as a primary residence. Approximately 65 percent of purchases involved a single-family home, and nearly half of international clients preferred properties in a suburban area.
Where are they buying?
International buyers and recent immigrants purchased homes throughout the country, but four states accounted for 55 percent of the total reported purchases – Florida, California, Arizona, and Texas. Florida remains the destination of choice, claiming a 23 percent share of all foreign purchases. California comes in second with 14 percent, Texas with 12 percent and Arizona with 6 percent. According to realtor.com®, the top five cities searched online by international buyers in 2014 were Los Angeles, Miami, Las Vegas, Orlando and New York City.
European buyers are generally attracted to states with warmer climates such as Florida and Arizona while the West Coast tends to attract Asian purchasers. Indian buyers tend to gravitate towards states that are home to large information technology companies, such as California, New York and North Carolina. Within markets in an individual state, it is not unusual to find concentrations of people grouped by nationality, possibly indicating that word-of-mouth and shared experiences influence purchases.
International buyers are more likely to make all-cash purchases when compared to domestic buyers. In 2014, nearly 60 percent of reported international transactions were all cash, compared to only one-third of domestic purchases. Mortgage financing tends to be a major problem for international clients due to a lack of a U.S. based credit history, lack of a Social Security number, difficulties in documenting mortgage requirements and financial profiles that differ from those normally received by financial institutions from domestic residents.
Because of the difficulties mentioned above, international sales tend to be handled by specialists. “Foreign buyers who choose to work with a Realtor® have a substantial advantage,” said NAR President Steve Brown, co-owner of Irongate, Inc. Realtors® in Dayton, Ohio. “Realtors® who have completed the Certified International Property Specialist designation have received specialized training and are prepared to help clients with the unique difficulties of being an international buyer. CIPS designees understand the challenges buyers face when purchasing property in the U.S., and have the experience and expertise to help them navigate the complex, time-consuming and overwhelming world of international real estate.”
More analysis of the report is on its way from NAR in the coming days. In the meantime, read the full 2014 Profile of International Home Buying Activity.
ABOUT THE REPORT
Released annually by the National Association of REALTORS® since 2007, the survey provides information about the origin, destination, and buying preferences of international clients as well as the challenges and opportunities faced by REALTORS® in the international market. The 2014 Profile of International Home Buying Activity report presents the analysis of data gathered from REALTORS® on purchases of U.S. residential real estate by international clients made during the 12 months ending March 2014.