In a surprising twist for the U.S. real estate market, international purchases of existing homes have seen a significant decline over the past year. According to the latest data from the National Association of Realtors (NAR), only 54,300 pre-owned houses, condos, and co-ops were sold to foreign buyers between April 2023 and March 2024. This represents a steep 36% drop from the previous year and marks the lowest number of foreign sales since NAR began tracking this data in 2009.
The financial impact is also notable. International buyers spent just $42 billion on residential properties in the United States during this period, a 21.2% decrease from the prior year. Despite this drop in activity, the median sale price among these buyers surged by nearly 20% to $475,000, the highest figure ever recorded by NAR.
These trends are driven by constrained market conditions. In 2023, existing house sales in the United States fell to their lowest level since 1995. Many homeowners chose to stay put to retain the low mortgage rates secured before and during the COVID-19 pandemic, largely contributing to this decline. This inventory crunch has, in turn, driven home prices to unprecedented heights.
Lawrence Yun, NAR Chief Economist, highlighted additional factors contributing to the decline in foreign purchases. The strength of the U.S. dollar has made American homes more expensive for foreign buyers, even as it makes international travel more affordable for Americans. “The strong U.S. dollar makes international travel cheaper for Americans but makes U.S. homes much more expensive for foreigners,” Yun said. “Therefore, it’s not surprising to see a pullback in U.S. home sales from foreign buyers.”
Moreover, international buyers are grappling with increased scrutiny and restrictions from U.S. lawmakers. Recent legislative measures have targeted foreign ownership of U.S. real estate, particularly near sensitive areas such as military installations. Last week, the Treasury Department proposed a new rule granting federal officials the authority to monitor real estate transactions near 59 additional military facilities. The Treasury Department is currently conducting a 30-day public comment period and anticipates finalizing this proposal next month.
This is part of a broader trend of actions taken by U.S. lawmakers to regulate foreign investment in property. For instance, President Joe Biden recently ordered a group of Chinese nationals to divest from a cryptocurrency mine in Wyoming. Additionally, in 2023, Florida Governor Ron DeSantis signed legislation prohibiting nationals from several countries, including China and Russia, from owning agricultural land or real estate near critical infrastructure and military installations in Florida.
Despite these hurdles, some international buyers have managed to navigate the affordability and legislative challenges. The majority of these buyers came from Canada, China, Mexico, India, and Colombia. They primarily sought properties in suburban areas of states like Florida, Texas, California, Arizona, and Georgia.
Interestingly, half of these foreign buyers paid for their properties in cash, and 45% intended to use their purchases for vacation, rental, or both. This contrasts with U.S. buyers, 28% of whom bought property with all cash, and 16% had similar intentions for their purchases during the same period.
As the U.S. real estate market continues to grapple with high prices, limited inventory, and stringent policy measures, the outlook for international buyers remains uncertain. These factors, coupled with the strong U.S. dollar, suggest that the trend of declining foreign purchases may persist. However, the resilience and adaptability of foreign buyers who have successfully navigated these challenges indicate that international interest in U.S. real estate is far from waning entirely.
The future will likely depend on how these economic and legislative factors evolve and whether new measures can be implemented to balance national security concerns with the attractiveness of U.S. real estate to international investors.