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Foreign Purchases of U.S. Homes Drop Sharply As Chinese Bolt From Market

July 17, 2019 by Dan McCue
A private home in Princeton, New Jersey. (Photo by Dan McCue)

WASHINGTON – International investment in residential real estate in the United States plunged 36% in the past year as Chinese buyers fled the market, the National Association of Realtors said Wednesday.

The sobering analysis comes via the Realtors’ annual survey of residential purchases from international buyers.

It found that while China continues to exceed all other countries in terms of the dollar volume of purchase — a distinction it has held for seven consecutive years — the value of those purchases came to just $13.4 billion during the survey period of April 2018 through March 2019.

That represents a 56% decline from the previous 12 months, the Realtors said.

The pull-back came amidst an ongoing trade rift between the U.S. and China, and a related slowing of Chinese economic growth, the pace of which declined 6.3% in 2019, compared to 6.9% two years earlier.

Another factor is the Chinese government deciding to tighten the monitoring of dollar outflows since 2016 to better manage its foreign exchange reserves.

As for the relative disinterest of other foreign buyers, the Realtors place the blame mostly on a paucity of available homes to buy and an overall decline in global economic growth, which enjoyed an upswing in 2016 and 2017, but slowed to 36% in 2018, and is now on a pace to taper further, to 3.3% this year.

Despite the readily identifiable confluence of factors, Lawrence Yun, the Realtors’ chief economist, said “the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.”

Market Sees $43.1 Billion Decline in Purchases

Overall for the 12 months ending in March, foreign buyers purchased $77.9 billion worth of U.S. existing homes, down from $121 billion the previous 12 months — a decline of $43.1 billion.

The dollar volume of purchases saw a decline as the number of purchases, as well as the average price, decreased from the previous year.

Foreign buyers were able to buy 183,100 properties at an average price of $426,100.

Following China, the next top foreign buyer for 2019 was Canada at $8 billion. While Chinese investors and Canadian investors tied concerning the number of purchases, on average, Chinese buyers bought properties at a higher price point. Therefore, China ranked ahead of Canada in terms of dollar volume.

The third top international buyer was India at $6.9 billion, the United Kingdom was fourth at $3.8 billion and in fifth was Mexico at $2.3 billion.

Where Are They Buying?

As they collected their data, the Realtors found foreign buyers continue to be smitten with Florida, which attracted 20% of them during the survey period. Canadians accounted for more than 42% of those buyers.

“Many Canadians and other foreigners found Florida so enticing because of its lenient tax laws,” Yun said.

“Additionally, many Florida metro areas have an inventory of cheaper properties, relatively speaking – a combination which makes the state a very popular destination,” he said.

California was the second largest market for foreign investment, accounting for 12% of international purchases.

Texas came in third, with 10 percent of purchases, followed by Arizona and New Jersey.

Purchase Prices

According to the survey, 44% of foreign buyers purchased in a suburban area, with 76% purchasing single detached family homes and townhomes. The median purchase price for foreign buyers was $280,600, slightly higher than the $259,600 average for all U.S. existing homes sold.

Yun attributed the price difference is a reflection of the choice of location and the kinds of properties desired by foreign buyers.

The survey also showed that international buyers are more likely to purchase their homes in cash than all existing homebuyers. Forty-one percent of the reported transactions were all-cash sales, in comparison to 21% for all existing-home purchases during the 2019 assessment reference period.

The survey presents information about transactions with international clients during the 12-month period between April 2018 and March 2019. A total of 11,812 Realtors responded to the 2019 survey.

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