July 9, 2014, 7:26 a.m. EDT
View on Marketwatch.com, "Foreign Home Buyers Flock To U.S."
Home sales made to international buyers rose about 35% for the year ending March 2014, as people took advantage of favorable exchange rates and affordable prices, according to a report released by the National Association of Realtors on Tuesday.
Total sales to foreign buyers reached an estimated $92.2 billion from April 2013 through March 2014, up from $68.2 billion the previous year, according to report. That’s about 7% of the total
existing home sales
for the period. U.S.
Four states — Florida, California, Arizona and Texas — accounted for more than half of the total reported purchases to international buyers, the report found. Twenty-three percent of foreign purchases were in
. The top five cities
searched by international buyers: Florida , Los Angeles , Miami , Las Vegas and Orlando , according to data
from Realtor.com. New York
made the largest
share of purchases (19%), while buyers from Canada led in dollar volume,
buying up $22 billion in property (with an average price of $590,826). Other
common places where international buyers hailed from included China , Mexico and the India . United Kingdom
The study is based on a survey of 3,547 NAR members. Those who participated submitted sales prices and quantities sold, which helped researchers make their estimations, said Jed Smith, managing director of quantitative research for the group and one of the study’s co-authors. Both resident and non-resident foreigners are counted as international buyers.
“They see the
as a place of
economic stability, they see value in our market and view it as a positive
place to invest their dollars,” said Danny Hertzberg, sales associate with The
Jills Coldwell Banker, based in U.S. . About 70% of his
buyers are international, coming primarily from Miami , Mexico , Brazil and Venezuela , he said. “In many
places, it’s a hedge against their currency.” Argentina
While international buyers have been increasing over the past few years, Hertzberg has noticed a significant surge in his market during the last 12 months — reflective of the national report.
“Some people are buying trophy properties, some are modest second homes and some people are buying for investment purchases,” said Smith, from NAR. The median price for a home purchase to an international buyer: $268,284, according to the report.
Other buyers have children attending school in the
and seek a place for
them to stay, said Wei Min Tan, a real-estate agent with Rutenberg Realty in U.S. . While shocking
headlines of multimillion-dollar property sales to foreign investors often make
a splash in the media, Tan said there are many foreign buyers looking for more
modestly priced homes. New York City
And some are looking for downright bargains.
More of RealtyTrac’s subscribers are coming from foreign countries, according to the company. RealtyTrac provides listings for all types of properties, including non-distressed homes as well as short sales, auctions and foreclosures. Foreign subscriber activity increased 125% between 2009 and 2013, with the biggest increases coming from the United Arab Emirates, Switzerland and China, said spokeswoman Jennifer von Pohlmann.
Still, the influx of foreign buyers has at least one significant effect on domestic buyers.
“A lot of the foreign buyers [make sales in] all cash,” Tan said. “They are driving up the prices that way. They are getting the edge in terms of the negotiation.”
Indeed, nearly 60% of reported international transactions within the past year were all cash, compared with one-third of domestic purchases, according to the NAR report.
Often, locals will offer the same amount as a foreign buyer — or more, Hertzberg said. But most domestic buyers need a mortgage in order to buy the home, while many foreign buyers don’t. An all-cash offer is often preferable to the seller because they are more certain to close.
Wei Min Tan is a Manhattan, New York condominium specialist focusing on investors interested in portfolio diversification and long term returns through Manhattan apartments. He can be reached at email@example.com