Foreign Buyers of US Homes Are Abandoning the American Housing Market Amid Major Hurdles

Foreign buyers of US homes are facing the same obstacles as domestic buyers. High prices and tight supply dominate the market. Additionally, a strong US dollar makes properties even more expensive for international investors. This double whammy is leading to a noticeable decrease in foreign purchases.

From April of last year to March of this year, foreign buyers of US homes purchased only 54,300 existing homes. This represents a 36% drop from the previous year, the lowest level of international investment since the National Association of Realtors (NAR) began tracking it in 2009.

The dollar volume of these purchases also dropped. It decreased by 21% from the year before, totaling $42 billion. This decline coincides with the highest average ($780,300) and median ($475,000) purchase prices recorded for foreign buyers by the NAR.

Who Are the Top Foreign Buyers of US Homes?

The top buyers of US homes were from Canada, China, Mexico, and India. These buyers primarily focused on properties in Florida, Texas, California, and Arizona. According to the NAR's findings, Chinese buyers spent the most money, targeting higher-priced homes.

Canada

Canadian buyers have long been attracted to US real estate, particularly in warmer states like Florida and Arizona. They are drawn by the favorable climate and relatively lower prices compared to major Canadian cities.

China

Chinese buyers tend to focus on high-value markets such as California and New York. They often seek investment properties and homes for their children studying in the US.

Mexico

Mexican buyers frequently purchase homes in border states like Texas and California. Proximity to their home country and established communities are key factors.

India

Indian buyers are increasingly active in US real estate, particularly in tech hubs like California and Texas. The robust job market and high quality of life are significant draws.

Economic Factors and Unique Challenges

“The strong US dollar makes international travel cheaper for Americans but makes US homes much more expensive for foreigners,” said Lawrence Yun, NAR's chief economist. “Therefore, it's not surprising to see a pullback in US home sales from foreign buyers.”

Foreign buyers of US homes also face unique challenges. Yuval Golan, CEO of Waltz, explained, “We don't have a credit score, we have a weird name, we have a different passport. Then we need to wire money across two countries, that takes time. There's additional foreign currency exchange that we need to deal with, a bunch of titles are things we don't know, like a title company, and a mortgage broker and a lender that might not understand our history of credit and income.”

Waltz aims to facilitate foreign purchases of US homes. It provides foreign investors with a simpler, remote experience to buy US real estate in 30 days. They underwrite buyers in their home country, help them set up an LLC, open a US FDIC-insured bank account, and handle foreign currency exchanges within seconds. Waltz also acts as a mortgage lender, although at higher-than-market rates.

Buyers Are Adopting a Wait-and-See Stance

According to the NAR, foreign buyers of US homes currently make up just 1.3% of all US home sales annually. Notably, half of these sales were all-cash, compared with 28% of total existing home sales. While more homes are arriving on the US market, it remains historically low, and prices are still high. The upcoming presidential election adds another layer of uncertainty. International buyers often pull back during politically uncertain times. It is unlikely that sales from foreign buyers of US homes will improve in the coming year unless several economic and political factors change.

Historically, the American government does not explicitly encourage the sale of US homes to foreign nationals. Instead, it maintains an open and relatively permissive market environment that facilitates such transactions. However, regulatory and security measures are in place to ensure that foreign investment is conducted transparently and does not pose risks to national security. This balance reflects the complex and nuanced approach of the US toward foreign real estate investment.

Do you support the sale of US homes to foreign buyers? Do you foresee them coming back soon once the smoke clears? Let us know what you think!