Travel restrictions associated with the coronavirus kept many foreign would-be buyers out of the U.S. last year—and that kept billions of their dollars out of the housing market.
Home purchases by international buyers and recent immigrants plummeted 33% from the previous year, according to a recent National Association of Realtors® report. They closed on about 107,000 of the 5.8 million existing home sales during the height of the pandemic.
“It wasn’t a surprise, because we know that travel practically shut down, and the global economy fell into a short recession,” says Gay Cororaton, NAR’s director of housing and commercial research. “There will still be a lingering impact on foreign buying in 2022.”
International purchasers spent roughly $54.4 billion on U.S. real estate—down considerably from about $74 billion a year earlier—as the number of Chinese buyers slipped. But that doesn’t appear to have hurt the housing market overall. In recent months, prices have risen to record levels, as an influx of buyers have been battling it out over a limited number of properties for sale.
The report only looked at existing homes, and not new construction, including the flashy, amenity-laden real estate popular with wealthy foreigners.
The NAR report is based on a survey of Realtors, nearly 1,100 of whom had sold property to foreign buyers or new recent immigrants, conducted from April 7 through May 21. It measured sales to foreigners living in the United States and abroad, including new immigrants and visa holders. The sales were conducted from April 2020 through March 2021.
About 60% of these buyers live in the U.S. full time, such as students and workers here on visas, with the other 40% living elsewhere.
The largest percentage of international buyers hailed from America’s neighbors, Canada and Mexico. Canadians made up about 8% of foreign buyers, spending about $4.2 billion on U.S. real estate, followed by Mexico, at 7% of buyers, who put down $2.9 billion.
China, which held the top spot last year, only made up 6% of buyers. But these buyers spent the most on U.S. real estate, at $4.5 billion.
Next up was India, at 4% and $3.1 billion in sales, and Britain, at 4%, making up $2.3 billion in sales.
What kinds of homes are foreign buyers purchasing, and where are they located?
Foreign buyers largely avoided the high-rise condos in the biggest cities and chose single-family homes, many in the ‘burbs.
Just under two-thirds of international purchases closed on detached single-family homes or town homes. And roughly half, 49%, bought property in the suburbs.
“They’re not buying glitzy places,” says Cororaton.
She points out that more than half of foreign buyers are living in the U.S. full-time and need a roof over their heads.
“They’re looking for residential properties to live in,” she says.
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However, they tended to spend a little more on housing than most buyers in the U.S. Their median purchase price was about $351,800—about 15% more than the $305,500 national sales price for existing homes, according to NAR data.
They were more likely to pay in all cash, making up about 39% of their offers compared with 19% of all existing home offers. However, those plunking down the cash were more likely to live abroad, says Cororaton.
Nearly half, 42%, planned to use their property as a vacation home or as an income-generating rental—or both.
Their top destination continued to be Florida, making up about 22% of sales. Many foreign buyers, especially those coming from colder climates like Canada, are attracted to vacation homes there. Others are more focused on properties they can rent out.
The median home list price in Florida was $382,450 in June—just shy of the national median of $385,000, according to the most recent Realtor.com® data.
“Florida is popular because prices are relatively cheap,” says Cororaton. “People come there to enjoy the warm weather.”
The Sunshine State was followed by California, at 16%; Texas, at 9%; Arizona, at 5%; New York, at 4%; and New Jersey, at 4%.
The pandemic will likely continue to put a damper on purchases by foreign buyers in the near term. But Cororaton is confident they’ll return to the U.S. real estate market once the crisis has passed.
“We will continue still to see a very low level of foreign buying activity in 2022,” she says. “Once we get over the pandemic, once the travel restrictions are lifted, the United States is always an attractive place for foreign buyers.”