Favorable exchange rates, affordable home prices and rising affluence abroad continue to drive international buyers, who snapped up $92.2 billion in U.S. real estate properties and investments between April 2013 and March 2014.
That represents a substantial increase in the previous 2012-2013 level of $68.2 billion, according to the National Association of Realtors.
“We live in an international marketplace; so while all real estate is local, that does not mean that all property buyers are,” said NAR President Steve Brown, co-owner of Irongate, Inc. Realtors in Dayton, Ohio. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability, and an incredible opportunity for investment in their future.”
International buyers and recent immigrants purchased homes throughout the country, but four states accounted for 55% of the total reported purchases – Florida, California, Arizona, and Texas.
Florida remains the destination of choice, claiming a 23% share of all foreign purchases. California comes in second with 14%, Texas with 12% and Arizona with 6%.
The top five cities searched online by international buyers in 2014 were Los Angeles, Miami, Las Vegas, Orlando and New York City.
Foreign buyers take many factors into consideration when deciding where to purchase abroad, such as proximity to their home country, the presence of relatives and friends, job and educational opportunities, and climate and location.
European buyers are generally attracted to states with warmer climates such as Florida and Arizona, while the West Coast tends to attract Asian purchasers. Indian buyers tend to gravitate toward states that are home to large information technology companies, such as California, New York and North Carolina.
Within markets in an individual state, it is not unusual to find concentrations of people grouped by nationality, possibly indicating that word-of-mouth and shared experiences influence purchases.
Twenty-eight percent of Realtors reported working with international clients this year. International sales tend to be handled by specialists and only 4% of those who reported having an international client saw 11 or more international transactions in a year.
Of those who reported having an international client, approximately 54% reported that international transactions accounted for 1% to 10% of their total transactions, a decrease from 2013 but still in line with past years’ levels.
International buyers are more likely to make all-cash purchases when compared to domestic buyers. In 2014, nearly 60% of reported international transactions were all cash, compared to only one-third of domestic purchases.
Mortgage financing tends to be a major problem for international clients due to a lack of a U.S.-based credit history, lack of a Social Security number, difficulties in documenting mortgage requirements and financial profiles that differ from those normally received by financial institutions from domestic residents.
Most homes purchased by foreign buyers, about 42%, are used as a primary residence. Non-resident foreigners are limited to 6-month stays in the U.S., so these buyers largely use the property for vacation or rental purposes or as an investment. Approximately 65% of purchases involved a single-family home. Nearly half of international clients preferred properties in a suburban area, about a quarter preferred a central city or urban area, and about 13% choose to purchase in a resort area.
International buyers come from all over the world, but Canada, China (The People’s Republic of China, Hong Kong and Taiwan), Mexico, India and the U.K. accounted for approximately 54% of all reported international transactions. Canada maintained the largest share of purchases, dropping from 23% in 2013 to 19% in 2014; however, China held the lead in dollar volume, purchasing an estimated $22 billion with an average sale cost of $590,826. China was also the fastest growing source of transactions, now accounting for 16% of all purchases, up 4% from last year. Mexico ranked third with 9% of sales and India and the U.K. both accounted for 5%.