Image Credit: Noe Associates with The Boundary
The substantial increase in sales volume from Canadian buyers, helped foreign investment in U.S. residential real estate skyrocketed, as transactions grew in the top five countries where buyers originated.
According to an annual survey of residential purchases from international buyers released by the National Association of Realtors, also showed nearly half of all foreign sales were in three states: Florida, California, and Texas.
NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate, found between April 2016 and March 2017, foreign buyers and recent immigrants purchased $153.0 billion of residential property. Which is a 49 percent jump from 2016 ($102.6 billion) and surpasses 2015 ($103.9 billion) as the new survey high. Overall, 284,455 U.S. properties were bought by foreign buyers, and purchases accounted for 10 percent of the dollar volume of existing-home sales.
“The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of U.S. property over the past year,” said Lawrence Yun, NAR chief economist. “While the strengthening of the U.S. dollar in relation to other currencies and steadfast home-price growth made buying a home more expensive in many areas, foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work and invest.”
China maintained the top position in sales volume for the fourth straight year, the significant rise in foreign investment in the survey came from a massive hike in activity from Canadian buyers. After dipping in the 2016 survey to $8.9 billion in sales ($11.2 billion in 2015), transactions from Canadians this year totaled $19.0 billion.
Yun attributes this notable rise in activity to Canadians opting to buy property in U.S. markets that are expensive but still more affordable than in their native land. While much of the U.S. continues to see fast price growth, home price gains in Canada have been steeper, especially in Vancouver and Toronto.
“Inventory shortages continue to drive up U.S. home values, but prices in five countries, including Canada, experienced even quicker appreciation,” said Yun. “Some of the acceleration in foreign purchases over the past year appears to come from the combination of more affordable property choices in the U.S. and foreigners deciding to buy now knowing that any further weakening of their local currency against the dollar will make buying more expensive in the future.”
Foreign buyers typically paid $302,290, which was a 9.0 percent increase from the median sales price in the 2016 survey and above the sales price of all existing homes sold during the same period. Approximately 10 percent of foreign buyers paid over $1 million, and 44 percent of transactions were all-cash purchases.
This year’s survey revealed that foreign buying activity is mostly confined to three states, as Florida, California, and Texas maintained their position as the top destinations for foreigners. Florida was the most popular state for Canadian buyers, Chinese buyers mostly chose California, and Texas was the preferred state for Mexican buyers. Sales to resident foreigners and non-residents each reach new peak
The upswing in foreign investment came from both recent immigrants and non-resident foreign buyers. Sales to foreigners residing in the U.S. reached $78.1 billion and non-resident foreign sales spiked to $74.9 billion.
“Although non-resident foreign purchases climbed over the past year, it appears much of the activity occurred during the second half of 2016,” said Yun. “Realtors® in some markets are reporting that the effect of tighter regulations on capital outflows in China and weaker currencies in Canada and the U.K. have somewhat cooled non-resident foreign buyer interest in early 2017.”
Looking ahead, Yun believes the gradually expanding U.S. and global economies should keep foreign buyer demand at a robust level. However, it remains to be seen if both the shortage of homes for sale and economic and political headwinds end up curbing sales activity to foreigners.
Source: Troy McMullen Lawernce Yun, National Association of Realtor, Cheif Economist