Foreign Buyers Now Driving $82 Billion in U.S. Real Estate Sales, a 24% Annual Surge with Florida as Leading Investment Gateway

Foreign Buyers Now Driving $82 Billion in U.S. Real Estate Sales, a 24% Annual Surge with Florida as Leading Investment Gateway

Residential News » Residential Real Estate Edition | By Michael Gerrity | June 24, 2011 8:00 AM ET

Over 62 Percent of International Property Purchases Are All Cash Transactions

(MIAMI, FL) -- A fast growing river of foreign real estate dollars is now flowing into Florida, California, Texas and Arizona.

According to the National Association of Realtors' 2011 Profile of International Home Buying Activity, the U.S. remains a top destination for foreign buyers as international purchases surged by $16 billion this year, representing a 24 percent year-over year increase--one of the highest increases in recent years.

National Association of Realtors (NAR) reports that the total residential international sales in the U.S. for the past year ending March 2011 equaled $82 billion, up from $66 billion in 2010. Total international sales were split evenly between non-resident foreigners and recent immigrants, while combined total domestic and international existing-home sales in the U.S. were $1.07 trillion.  

"The U.S. has always been a desirable place to own property and a profitable investment," said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. "In recent years we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory. In addition to the advantageous market conditions, realtors in this country have a global perspective and experience in working with clients from different cultures and real estate practices, helping them bring value to their international clients."

Historically, foreign buyers have been attracted to property ownership in the U.S. for a number of reasons. U.S. homes are generally less expensive than comparable foreign properties, homes in this country are viewed as a secure investment, and the U.S. market offers rental opportunities and long-term appreciation potential.

More recently, realtors have noticed new factors motivating foreign buyers. Many U.S. colleges and universities have a significant number of international students, and some foreign families are purchasing U.S. properties in college areas so their child has a place to live. Another source of international demand stems from foreign executives temporarily working in the U.S., some of whom prefer to purchase a residence instead of renting.

"Besides the strength of the dollar and the general economic trends in the U.S., international buyers are also recognizing the benefits of home ownership in this country, especially in the case of recent immigrants," said Phipps. "Many foreigners perceive owning a home here as an important accomplishment in their efforts to become established in this country."

Recent international buyers came from 70 different countries, up from 53 countries in 2010. For the fourth consecutive year, Canada was the top country of origin, with 23 percent of sales to foreigners. China was the second most popular country of origin, with nine percent of international sales this year. Tied for third were Mexico, the U.K., and India. Argentina and Brazil combined reported an increase in foreign sales with five percent, up from two percent in 2010. The top five countries of origin accounted for 53 percent of international transactions in 2011.

The average price paid by an international buyer was $315,000 compared to the overall U.S. average of $218,000. However, 45 percent of international purchases were under $200,000. This price segment has grown significantly over the years, most likely due to overall price declines in the U.S. as well as the strengthening of some foreign currencies.

Barbara Lamar of Miami-based One Sotheby's International Realty said, "Besides buying U.S. properties at discounted prices, many foreign buyers are also enjoying favorable exchange rates relative to the U.S. dollar. Effectively, this is giving them a double-discount on their real estate purchase."

NAR further reports that foreign buyers are primarily interested in three factors when deciding where to buy in the U.S.: proximity to their home country, convenience of air transportation, climate and location. Generally, the East Coast attracts European buyers. The West Coast remains popular for Asian purchasers. Mexican buyers are traditionally attracted to the Southwestern markets. Florida is most popular among Latin Americans, Europeans and Canadians.

Similar to last year, 28 percent of realtors in 2011 reported working with an international client. Fifty-five percent served at least one foreign client, while the bulk of international transactions were handled by a small percentage of realtors. Only eight percent of members obtained 50 percent or more of their transactions from international clients.   

Sixty-one percent of foreign buyers purchased a single-family home while 36 percent bought a condo/apartment or townhouse. In addition, 62 percent of international purchases were reported as being all cash. This percentage is significantly higher than all-cash purchases for domestic buyers, mostly due to the differences in international credit reporting standards. Financing challenges continue to be a major hurdle for international buyers, with 32 percent reporting these as their reason for not buying a home. Many realtors reported that their foreign clients faced mortgage financing issues, as well as problems with legal, tax and immigration laws.

Almost every state had at least one international transaction in the past year. The four states with the heaviest concentration of international buyer activity have remained the same over the past five years. Florida had 31 percent of total international transactions this year, the most of any state. California had 12 percent, Texas had nine percent and Arizona rounded out the top four with six percent of international transactions.

There are two regions in Florida that are the main beneficiaries of foreign property buyers: the Orlando-Kissimmee corridor and Miami.

While Miami has a much larger international buyer market, the Orlando-Central Florida market has also seen an increase in off-shore property buyers.

According to Michael Butler of Kissimmee-based Midlan International, there are two categories of international buyers in Central Florida: foreign corporations who are taking advantage of the low prices to acquire large blocks of existing inventory to market in other countries, and individuals who visit Central Florida on vacation and end up buying in ever increasing numbers.

Butler said, "While the Canadians and the British continue to be the leaders, recently the Brazilians have become a very strong buying segment due to the strength of their economy and currency exchange rate against the dollar. Many desire to visit Central Florida with family members on a regular basis because of proximity to Walt Disney World."

In South Florida, foreign buyers have an even more significant impact on the local real estate economy.  The Miami Association of Realtors reports that over 60 percent of all South Florida existing home and condo sales transactions in May 2011 were to international buyers.

Jack Levine, Chairman of the Board of the Miami Association of Realtors told the World Property Channel, "International buyers increasingly play a major role in South Florida, resulting in the local real estate market outperforming the rest of the nation in many respects.  These buyers represent a significant percentage of local sales, which are fueling market strengthening.  Current projections point to sales this year exceeding levels not seen since the height of the real estate boom."

Jed Smith, Managing Director of Quantitative Research for the National Association of Realtors said, "Even though the percentage of all U.S. purchases made by international buyers has stayed relatively the same over the last year, the dollar value of their transactions has surged significantly in the same timeframe with Florida leading the way, by a landslide. While many U.S. cities report international sales activity, given Miami's significant international market size and sheer diversity of buyers from all around the world, Miami has emerged as America's only truly 'global international city' relative to real estate sales."

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