Foreigners are falling out of love with American real estate, but that can’t be good for the neighborhood.
A new report from the National Association of Realtors found that foreign purchases of existing US homes fell to a record low in the 12-month period between April 2022 and March 2023. And while international buyers make up a small portion of US home sales, the drop-off is a big indicator of an uncertain market.
No Crash, But Problems Linger
The Fed has raised interest rates 11 times in the last year — and mortgage rates have joined the runup. The average 30-year fixed-rate mortgage is near 7%, up from a record low of 3% just three years earlier. Higher loan rates can often drive housing sales and ultimately prices lower, but not always. According to the NAR, the median price of a single-family home was falling in 2022, but by the start of this year, prices began going back up.
International buyers tend to more often pay for US homes in cash, so they avoid mortgage woes but still face record-high housing costs and a limited inventory:
- The US is short roughly 4.3 million homes, according to Zillow. Plus, the strong dollar means most foreign currencies aren’t going as far as they had been.
- Both the number of homes foreigners purchased and the cumulative dollar volume for the properties sold fell in the past year. Purchases fell 14% to 84,600; their combined costs were $53.3 billion, down nearly 10%.
Could Come Back Around: With China now relaxing its pandemic restrictions, NAR did notice more buyers from that country over the past year. Also, healthy GDP growth in India and a strong Mexican peso will likely result in more buyers from those nations. “Sharply lower housing inventory in the US and higher borrowing costs across the world have dented international buyers for two straight years,” NAR Chief Economist Lawrence Yun said. “However, recovering international travel following the end of the pandemic will bring more foreign transactions in coming months and years.”