While the global COVID-19 pandemic has squashed sales of U.S. homes to foreign buyers over the last year, local buyers should be prepared for a rebound in competition from other countries in the next 12 months, economists say.
Texas, ranked as the third-most-popular destination for foreign real estate buyers between April 2020 and March 2021, according to a recent report by the National Association of Realtors. Florida and California claim the top two spots, while Arizona, New Jersey and New York follow Texas.
Chinese clients have been the top buyers of U.S. residential homes by sales-dollar-volume for a decade, and continue to rank No. 1 even as sales from April 2020 through March 2021 plunged 70% from the same period a year earlier.
Housing market gets more competitive
The downward trend was reflected across international buyers of all nationalities (China is followed by Canada, India, Mexico and the United Kingdom) who purchased 3%, or $54.4 billion, worth of U.S. existing homes from April 2020 through March 2021, a 27% decrease from the previous 12 months.
The decline in foreign real estate investments last year is hardly surprising given the global pandemic and travel restrictions that came with it. But what will happen when vaccinations pick up pace globally and things begin to get back to normal? Will the pent-up foreign demand put pressure on a U.S. housing market grappling with low housing inventory and soaring prices?
Economists say you should expect to compete with those buyers, especially since a large percentage of foreign buyers tend to make all-cash offers. Those offers, which are preferred by sellers as they provide certainty, accounted for 39% of international buyer transactions from April 2020 to March 2021, according to the National Association of Realtors.
That’s significant since the demand for U.S. homes by foreign investors pushes up home prices, exacerbating concerns over housing affordability, says Benjamin Keys, a professor of real estate in the Wharton School at the University of Pennsylvania.
House prices climbed 8 percentage points more in U.S. ZIP codes with high foreign-born Chinese populations from 2012 to 2018, according to a 2020 paper co-written by Keys.
Even without foreign buyers driving up the market, the median price of existing U.S. homes in June reached $363,300, up 23.4% from June 2020.
Millennials, low interest rates keep the market crowded
“Interest rates are very low. A generation of millennials who have not had the financial wherewithal to buy houses are aging into (their) homebuying years,” he says. “And those whose jobs weathered the pandemic are in a good financial position to purchase a home right now.”
Adding foreign buyers to the mix could mean that home prices in states such as Florida, California, Texas New York and New Jersey (the top 5 most popular states among international buyers), will continue to soar, benefitting homeowners and making it harder for those looking to enter the market.
Vickie Arcuri, a real estate agent in Florida who specializes in properties in Miami, Fort Lauderdale and Palm Beach, says she’s already seeing an uptick in foreign buyer interest. The number of visitors from other countries to her website doubled in 2021 compared with 2020, with visitors from Canada representing 7.5% of the traffic.
Copyright 2021, USATODAY.com, USA TODAY, Swapna Venugopal Ramaswamy
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