In recent times, the U.S. housing market has witnessed a significant downturn in sales to foreign buyers, hitting the lowest level since 2009. According to the National Association of Realtors (NAR), only 54,300 previously occupied U.S. homes were purchased by non-U.S. citizens in the 12 months ending in March 2024. This represents a sharp 36% decline compared to the same period the previous year. The total value of these transactions also decreased by 21.2% to $42 billion.
The decline in foreign home purchases can be attributed to several factors, including a strong U.S. dollar and ongoing challenges in the housing market. Lawrence Yun, NAR’s chief economist, highlighted the difficult market conditions faced by both domestic and international buyers, such as low inventory, higher mortgage rates, and low affordability. Additionally, the strength of the U.S. dollar has made homes more expensive for foreign buyers, as it has risen by 3.9% over the past year.
The U.S. housing market has been in a slump since 2022, with existing home sales reaching a nearly 30-year low last year. The average rate on a 30-year mortgage surged to a 23-year high of 7.79%, significantly limiting home shoppers’ purchasing power. Despite a slight increase in the supply of homes for sale in recent months, it remains close to historic lows, contributing to the competitive market and driving home prices to new highs.
Foreign buyers, especially those from countries with weaker currencies, are facing additional cost burdens due to the strong U.S. dollar. Yun noted that while the strong dollar benefits Americans traveling abroad, it makes U.S. homes more expensive for foreign buyers, leading to a pullback in sales.
Interestingly, all-cash sales accounted for half of the international buyer transactions, compared to only 28% of all existing-home buyers, according to NAR. The report defines international buyers as non-U.S. citizens with permanent residences outside the country, immigrants who have been in the U.S. less than two years, and non-immigrants living in the U.S. for more than six months under professional or educational visas, among others.
The peak in international home purchases occurred in the 12 months ending March 2017, with 284,500 properties sold. This surge was partly driven by Chinese nationals buying homes in the U.S. In the 12 months ending March 2024, buyers from China accounted for 11% of purchases, matching Mexico. Home shoppers from Canada topped the list with 13%.
Chinese real estate investors in particular, are facing their own housing market issues with a scandalous downturn due to bad financial decisions by strong and high profile players in the home developers’ industry, a great example is the Evergrande crisis, which is limiting the availability of capital to invest abroad and in the US in particular, depriving housing markets like Austin, San Francisco and Miami; the Florida city was benefiting greatly from the influx of foreign investments, greatly inflating home values for a long time, but with a recent, significant downturn.
Florida emerged as the most popular destination for international home shoppers, accounting for 20% of all sales to foreign buyers. Texas followed with 13%, then California with 11%, and Arizona with 5%. Georgia, New Jersey, New York, and North Carolina each accounted for 4% of sales to foreign buyers, according to NAR.
In conclusion, the decline in U.S. home sales to foreign buyers is a complex issue influenced by various economic factors, including a strong U.S. dollar and ongoing affordability challenges in the housing market at home and abroad. As the real estate market continues to evolve, it remains to be seen how these trends will impact the U.S. housing market and the broader economy.
