International Buyers Retreat From U.S. Housing Market Amid High Prices and Strong Dollar
The American dream of owning a home is becoming increasingly elusive, not just for domestic buyers but also for international investors. A new report from the National Association of Realtors reveals a significant decline in international home purchases in the U.S., driven by a confluence of factors including high prices, tight supply, and a strong U.S. dollar that makes properties even more expensive for foreign buyers. The number of existing homes purchased by international buyers plummeted by 36%, dropping to 54,300 in the year ending March 2024, marking the lowest level since the NAR began tracking this data in 2009. The dollar volume also fell by 21% to $42 billion, despite record-high average and median purchase prices.
Key Takeaways:
- International buyers are significantly pulling back from the U.S. housing market due to high prices, tight supply, and a strong dollar.
- The number of existing homes purchased by foreign buyers dropped 36% year-over-year to the lowest level since 2009.
- The dollar volume of international home purchases also declined by 21% despite record-high average and median purchase prices.
- Top buyers by volume are from Canada, China, Mexico, and India.
- Buyers from China spent the most money, purchasing higher-priced homes.
- The strong dollar makes U.S. homes more expensive for foreigners and adds to the challenges they face.
- The upcoming U.S. presidential election is likely to further deter international buyers.
The Challenges Facing International Buyers
International buyers are facing a perfect storm of obstacles, making the U.S. housing market less attractive. While domestic buyers struggle with rising mortgage rates and affordability concerns, foreign buyers face an additional layer of complexities:
1. Steep Price Increases:
The surge in U.S. home prices has pushed the average purchase price for international buyers to a record high of $780,300, making it increasingly difficult for them to afford entry into the market. The median price also hit a record of $475,000, highlighting the significant affordability challenge.
2. Strong U.S. Dollar:
The appreciation of the U.S. dollar against international currencies has significantly increased the cost of buying U.S. real estate for foreign buyers, making it even more expensive than it already is.
3. Navigating the U.S. Real Estate System:
International buyers face a challenging learning curve when it comes to the U.S. real estate system. The process involves unfamiliar steps like understanding title companies, mortgage brokers, and lenders who might not be accustomed to working with foreign buyers.
4. Financial Hurdles:
International buyers often face obstacles related to accessing financing. They might not have a U.S. credit score, face difficulties in transferring funds across borders, and navigate complex foreign currency exchange processes.
5. Political Uncertainty:
The upcoming U.S. presidential election adds another layer of uncertainty for international buyers. Historically, foreign investment often slows down during periods of political instability, making the current climate unfavorable.
Innovations Emerging: A New Wave of Support
The difficulties faced by international buyers haven’t gone unnoticed. A new breed of companies, like Waltz, are emerging to offer solutions and streamline the buying process for foreign investors.
Waltz: Simplifying Foreign Investment:
Waltz, a new company dedicated to facilitating foreign real estate purchases in the U.S., aims to simplify the entire process. The company provides a streamlined, remote experience for foreign investors, empowering them to buy U.S. properties in as little as 30 days.
Key Features of Waltz’s Solution:
Remote Underwriting: Waltz conducts underwriting in the investor’s home country, simplifying the process for foreign buyers.
LLC Setup: The company assists with setting up a U.S. Limited Liability Company (LLC) to facilitate property ownership.
FDIC-Insured Bank Accounts: Secure U.S. bank accounts are opened for foreign buyers, providing them with a local financial vehicle.
Local Currency Transactions: Waltz handles foreign currency exchange, allowing investors to transfer funds in their local currency.
- Mortgage Lending: Waltz is also stepping into the mortgage lending space, offering loans to foreign buyers, albeit at slightly higher rates than market rates.
Looking Ahead: A Challenging Future?
While the decline in international purchases is a stark indication of the challenges faced by foreign investors, it’s important to note that international buyers still represent a small portion of the overall U.S. real estate market. The NAR reports that they account for only 1.3% of all home sales annually.
To see a rebound in international purchases, several factors need to align. A softening of the U.S. dollar, a cooling of the housing market, and a clearer political landscape could help boost international buyer confidence. However, with the U.S. housing market remaining stubbornly high and political uncertainty looming large, the near future for international investors might continue to be challenging.