Foreign homebuyers contributed $68.2 billion in sales in 2013, a number that, though certainly big, actually represents a step back from 2012.
Are foreign homebuyers losing their appetite for U.S. real estate, or are international economic forces prohibiting them from making their purchases?
That’s the question on many people’s minds with the National Association of Realtors’ latest data on international homebuying activity, which found that foreign homebuyers accounted for $68.2 billion in total sales volume from March 2012 to March 2013, a number that, though sizable, actually represents a 17 percent decline from the previous 12-month period.
International Homebuying in Decline?
Other details about international homebuying activity included:
- At $68.2 billion, international clients made up 6.3 percent of total existing-home sales in the U.S., a market that totaled $1.08 trillion for that 12-month period.
- Of that $68.2 billion, 51 percent (or, $34.8 billion) is attributed to “Type A clients,” meaning, non-resident foreign investors, while the remaining 49 percent is for “Type B clients,” meaning foreign residents/recent immigrants.
- Even with the 17 percent drop in foreign sales from 2012 to 2013, NAR’s latest numbers do represent the second-highest total of foreign investment in the U.S. ever recorded.
- Twenty-seven percent of Realtors reported working with foreign homebuyers in the 12-month period ending in March 2013, unchanged from the previous year; similarly, of Realtors working with foreign clients, 74 percent reported a constant or increased level of buying activity, also unchanged from the year before.
The Real Reason Foreign Home Sales Fell in 2013
So what gives? If buyer activity was mostly consistent, how is it that international sales volume fell by 17 percent? The answer, NAR said, is a combination of two factors: international market pressures, and less pricey home sales.
First, with home sales: of the $14.3 billion drop in foreign home purchases from 2012 to 2013, NAR chalks $8.8 billion of that to foreign homebuyers buying less expensive homes. And the association’s numbers are convincing. For instance, nearly 18 percent of sales to international clients in 2013 were for homes less than $100,000, a 29 percent increase from 2012; similarly, just 7 percent of sales were for homes more than $1 million, a 30 percent decline from 2012.
The second reason, international economics, is a bit more complicated. Because so many foreign countries experienced economic woes from 2012 to 2013 (think Spain, Greece and other major members of the Eurozone), many foreign homebuyers were limited in their ability to purchase U.S. properties. Further complicating matters were currency exchanges. Remember, foreign homebuyers have to convert their currency to U.S. dollars to make purchases here, but consumers in Eurozone countries, along with Brazil, India and Mexico, all saw their native currencies fall in value to the dollar, making homes here more expensive. It’s all quite nuanced, but such is the case with international real estate!
Our coverage will continue later this week, when we’ll take a more detailed at the common characteristics of foreign homebuyers.