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Coming to America -- to Buy Homes
Highlights from NAR's Profile of International Home Buying Activity
by Keunwon Chung, Statistical Economist
All real estate is local. But not all buyers are local. During the real estate boom, many home
buyers were from countries outside the United States. In some states, foreign buyers
accounted for a significant share of REALTOR® business.
To ascertain the extent of international homebuying activity in the U.S. post-real estate boom,
NAR surveyed REALTORS® across the nation in mid-2007 to determine the extent to which
their business was with foreign home buyers. The results of the survey – published in the
2007 NAR Profile of International Home Buying Activity– show that international home buying
activity in the U.S. is still significant. Below are highlights from that report.
REALTORS® and Foreign Home Buyers
Despite the housing slowdown, international clients still accounted for a significant share of
REALTORS® business in the U.S from April 2006 to April 2007. Almost one third of
REALTORS® reported that they had some business with international clients during that
time period. More than half of those international clients actually purchased a home. Eighty-
six percent of REALTORS® who sold homes to international clients reported that those
home sales accounted for 1-25 percent of their transactions. For seven percent of
REALTORS®, over half of their transactions were with foreign buyers. Eighteen percent of all
REALTORS® who had international clients had successful home sales transactions with
those foreign buyers.
International Home Buyers
Foreign home buyers come from around the world, buy different types of properties at various
prices, and plan on using the U.S. property for different reasons.
Home Buyers from Around the World. Buyers of U.S. residential real estate come from many
different regions and countries around the world. The majority of foreign buyers – 33 percent
– were from Europe. But buyers from Asia and North America (outside the U.S.) were also
very active, accounting for 24 and 23 percent of international clients, respectively. Latin
America was home to 16 percent of foreign buyers, with Africans and those from Oceania
accounting for 2 percent each. Among individual countries, the largest share of foreign
buyers – 13 percent – were from Mexico. Next was the United Kingdom, which accounted for
12 percent of foreign buyers. Canada, India and China rounded out the top five countries of
origin for foreign home buyers in the U.S.
What They Bought. Detached single-family homes or townhomes are the most popular
housing choice among all home buyers in the U.S. The same is true for international home
buyers, but foreign buyers show a stronger preference for condominiums/apartments
compared to home buyers in general. In 2006, condominium/apartment sales accounted for
12 percent of all existing home sales. Between April 2006 and April 2007, more than one fifth
– 22 percent – of homes purchased by foreign buyers were condominiums/ apartments.
Price of Homes Purchased by Foreign Buyers. The median price foreign buyers paid for a
home was $299,500 – significantly greater than the national median sales price for all of
2006 which was $221,900. More than a fifth of international buyers purchased a home that
cost between $200,001 and $300,000. Fourteen percent of foreign home buyers paid more
than $750,000 for their U.S. property.
Financing the Home Purchase. In 2006 more than 90 percent of all home buyers purchased
their home using a mortgage loan. The majority of foreign buyers also used a mortgage loan
to finance their home purchase, but the percentage was much smaller. Sixty-nine percent of
international home buyers used mortgage financing, while 28 percent purchased their home
with cash. Three percent of REALTORS® were not sure or did not know how their foreign
clients financed their home purchase.
The proportion of foreign buyers who paid cash for their home was much greater than that for
the general home buyer population – 28 percent vs. 8 percent. This could be due to the fact
that those international home buyers would be expected to be wealthier households with
ready cash on hand. The tax benefits of mortgage interest deductions may not apply –
depending on the buyer’s home country’s tax code – which lowers the incentive to take out a
mortgage.
Why They Buy. The majority of foreign buyers – because they are not U.S. residents –
purchase homes for other reasons than as a permanent residence. Almost half of them – 47
percent – bought a U.S. home to use as a vacation venue for family and friends. Twenty-two
percent purchased a home as a rental property for investment. Nearly a third – 31 percent –
of foreign buyers purchased a home as both a vacation and rental/investment property.*
U.S. visa rules only allow non-residents (unless under a student or work visa) to remain in
the country for six months. Because foreign buyers are non-residents of the U.S., most of
them plan to spend less than six months in their U.S. home. A small percentage – 6 percent
– spend less than two weeks. Forty-four percent intend on using their U.S. property for one to
six months.
Where They Buy. Foreign home buyers purchase U.S. properties everywhere around the
country, but two regions and several states dominate the list of locations. The South
accounted for the largest proportion of foreign home purchases – 49 percent. The West was
also popular, with 31 percent of foreign buyers purchasing homes in that region. The
Midwest’s share of foreign home buyers was 11 percent, and that for the Northeast 9 percent.
The number one state for foreign home buyers was Florida-- the state accounted for 26
percent of all international purchasers. California was next at 16 percent followed by Texas at
10 percent. The fact that these states were the top three locations for foreign purchasers
should come as no surprise. Each of these states is a major “gateway” for visitors to the U.S.
from other countries.
Challenges for Foreign Home Buyers
While 32 percent of REALTORS® report having had international clients between April 2006
and April 2007, not all of those clients were able to successfully purchase a home in the U.S.
The survey did ask why international clients did not purchase homes. Almost half of
respondents reported that the cost of property was the main reason for an unsuccessful
home sale.
But nearly a third indicated that U.S. visa restrictions were barriers to buying a property in the
U.S. In a previous survey of international home buying activity focused on the Florida market,
U.S. visa rules were a major point of contention among many respondents. They claimed
that the six-month stay restriction is insufficient for some potential foreign buyers –
particularly among those who are no longer working. A retirement visa of some sort that
would permit a longer continuous stay in the U.S. would undoubtedly enlarge the pool of
potential international buyers. The national survey results support this contention: 34 percent
of REALTORS® responding to our survey expect that foreign retirees could be potential
buyers of U.S. real estate.
Conclusion
While U.S. housing markets are no longer performing at record-breaking levels, U.S. real
estate is still considered a prime investment opportunity for foreign buyers and a “safe
haven” in which to put their money. Whether they use their U.S. home as rental/investment
property, as a vacation home or both, non-U.S. residents account for a significant share of
home buying activity. It is likely they will continue to do so. With the weakened U.S. dollar
against foreign currencies, those currencies buy a lot more than in previous years. For
example, the British Pound Sterling was worth $1.44 in 2001; by 2004 it was worth $1.83. As
of mid-year 2007, the pound was worth nearly $2.00. The Euro has also increased in value
against the U.S. dollar. More purchasing power for foreign buyers means they can afford
“more house” – particularly in a stabilizing U.S. housing market.
We live in a global economy where there are virtually no trade borders. The Internet is
accessible from nearly all countries around the world. Web sites display information about U.
S. real estate to any potential home buyers regardless of where they live. And as more and
more people in different nations recognize the value of owning property, the opportunities
and challenges for real estate professionals to broker U.S. property to foreign home buyers
are numerous.
Notes on the Survey
The survey was conducted in May/June of 2007. Results were based on responses from
REALTORS® who had at least one international client during the then recent 12-month time
period; thus, information in the 2007 Profile of International Home Buying Activity refers to
foreign home buying activity between April 2006 and April 2007. For purposes of this survey
of International Home Buying Activity, an international or foreign home buyer is defined as
one who principally resides in another country (outside the U.S.) and who is not classified as
a foreign-born resident of the U.S. International buyers are not U.S. citizens (either
naturalized or native-born and living outside the U.S.), a U.S. immigrant, or a foreign student
or worker on a temporary visa.
Reprinted from Real Estate Insights -- September 2007, ©2007 NATIONAL ASSOCIATION
OF REALTORS®. Used with permission. Reproduction, reprinting, or retransmission of this
article in any form (electronic media included) is prohibited without written permission.
Coming to America -- to Buy Homes
Highlights from NAR's Profile of International Home Buying Activity
by Keunwon Chung, Statistical Economist
All real estate is local. But not all buyers are local. During the real estate boom, many home
buyers were from countries outside the United States. In some states, foreign buyers
accounted for a significant share of REALTOR® business.
To ascertain the extent of international homebuying activity in the U.S. post-real estate boom,
NAR surveyed REALTORS® across the nation in mid-2007 to determine the extent to which
their business was with foreign home buyers. The results of the survey – published in the
2007 NAR Profile of International Home Buying Activity– show that international home buying
activity in the U.S. is still significant. Below are highlights from that report.
REALTORS® and Foreign Home Buyers
Despite the housing slowdown, international clients still accounted for a significant share of
REALTORS® business in the U.S from April 2006 to April 2007. Almost one third of
REALTORS® reported that they had some business with international clients during that
time period. More than half of those international clients actually purchased a home. Eighty-
six percent of REALTORS® who sold homes to international clients reported that those
home sales accounted for 1-25 percent of their transactions. For seven percent of
REALTORS®, over half of their transactions were with foreign buyers. Eighteen percent of all
REALTORS® who had international clients had successful home sales transactions with
those foreign buyers.
International Home Buyers
Foreign home buyers come from around the world, buy different types of properties at various
prices, and plan on using the U.S. property for different reasons.
Home Buyers from Around the World. Buyers of U.S. residential real estate come from many
different regions and countries around the world. The majority of foreign buyers – 33 percent
– were from Europe. But buyers from Asia and North America (outside the U.S.) were also
very active, accounting for 24 and 23 percent of international clients, respectively. Latin
America was home to 16 percent of foreign buyers, with Africans and those from Oceania
accounting for 2 percent each. Among individual countries, the largest share of foreign
buyers – 13 percent – were from Mexico. Next was the United Kingdom, which accounted for
12 percent of foreign buyers. Canada, India and China rounded out the top five countries of
origin for foreign home buyers in the U.S.
What They Bought. Detached single-family homes or townhomes are the most popular
housing choice among all home buyers in the U.S. The same is true for international home
buyers, but foreign buyers show a stronger preference for condominiums/apartments
compared to home buyers in general. In 2006, condominium/apartment sales accounted for
12 percent of all existing home sales. Between April 2006 and April 2007, more than one fifth
– 22 percent – of homes purchased by foreign buyers were condominiums/ apartments.
Price of Homes Purchased by Foreign Buyers. The median price foreign buyers paid for a
home was $299,500 – significantly greater than the national median sales price for all of
2006 which was $221,900. More than a fifth of international buyers purchased a home that
cost between $200,001 and $300,000. Fourteen percent of foreign home buyers paid more
than $750,000 for their U.S. property.
Financing the Home Purchase. In 2006 more than 90 percent of all home buyers purchased
their home using a mortgage loan. The majority of foreign buyers also used a mortgage loan
to finance their home purchase, but the percentage was much smaller. Sixty-nine percent of
international home buyers used mortgage financing, while 28 percent purchased their home
with cash. Three percent of REALTORS® were not sure or did not know how their foreign
clients financed their home purchase.
The proportion of foreign buyers who paid cash for their home was much greater than that for
the general home buyer population – 28 percent vs. 8 percent. This could be due to the fact
that those international home buyers would be expected to be wealthier households with
ready cash on hand. The tax benefits of mortgage interest deductions may not apply –
depending on the buyer’s home country’s tax code – which lowers the incentive to take out a
mortgage.
Why They Buy. The majority of foreign buyers – because they are not U.S. residents –
purchase homes for other reasons than as a permanent residence. Almost half of them – 47
percent – bought a U.S. home to use as a vacation venue for family and friends. Twenty-two
percent purchased a home as a rental property for investment. Nearly a third – 31 percent –
of foreign buyers purchased a home as both a vacation and rental/investment property.*
U.S. visa rules only allow non-residents (unless under a student or work visa) to remain in
the country for six months. Because foreign buyers are non-residents of the U.S., most of
them plan to spend less than six months in their U.S. home. A small percentage – 6 percent
– spend less than two weeks. Forty-four percent intend on using their U.S. property for one to
six months.
Where They Buy. Foreign home buyers purchase U.S. properties everywhere around the
country, but two regions and several states dominate the list of locations. The South
accounted for the largest proportion of foreign home purchases – 49 percent. The West was
also popular, with 31 percent of foreign buyers purchasing homes in that region. The
Midwest’s share of foreign home buyers was 11 percent, and that for the Northeast 9 percent.
The number one state for foreign home buyers was Florida-- the state accounted for 26
percent of all international purchasers. California was next at 16 percent followed by Texas at
10 percent. The fact that these states were the top three locations for foreign purchasers
should come as no surprise. Each of these states is a major “gateway” for visitors to the U.S.
from other countries.
Challenges for Foreign Home Buyers
While 32 percent of REALTORS® report having had international clients between April 2006
and April 2007, not all of those clients were able to successfully purchase a home in the U.S.
The survey did ask why international clients did not purchase homes. Almost half of
respondents reported that the cost of property was the main reason for an unsuccessful
home sale.
But nearly a third indicated that U.S. visa restrictions were barriers to buying a property in the
U.S. In a previous survey of international home buying activity focused on the Florida market,
U.S. visa rules were a major point of contention among many respondents. They claimed
that the six-month stay restriction is insufficient for some potential foreign buyers –
particularly among those who are no longer working. A retirement visa of some sort that
would permit a longer continuous stay in the U.S. would undoubtedly enlarge the pool of
potential international buyers. The national survey results support this contention: 34 percent
of REALTORS® responding to our survey expect that foreign retirees could be potential
buyers of U.S. real estate.
Conclusion
While U.S. housing markets are no longer performing at record-breaking levels, U.S. real
estate is still considered a prime investment opportunity for foreign buyers and a “safe
haven” in which to put their money. Whether they use their U.S. home as rental/investment
property, as a vacation home or both, non-U.S. residents account for a significant share of
home buying activity. It is likely they will continue to do so. With the weakened U.S. dollar
against foreign currencies, those currencies buy a lot more than in previous years. For
example, the British Pound Sterling was worth $1.44 in 2001; by 2004 it was worth $1.83. As
of mid-year 2007, the pound was worth nearly $2.00. The Euro has also increased in value
against the U.S. dollar. More purchasing power for foreign buyers means they can afford
“more house” – particularly in a stabilizing U.S. housing market.
We live in a global economy where there are virtually no trade borders. The Internet is
accessible from nearly all countries around the world. Web sites display information about U.
S. real estate to any potential home buyers regardless of where they live. And as more and
more people in different nations recognize the value of owning property, the opportunities
and challenges for real estate professionals to broker U.S. property to foreign home buyers
are numerous.
Notes on the Survey
The survey was conducted in May/June of 2007. Results were based on responses from
REALTORS® who had at least one international client during the then recent 12-month time
period; thus, information in the 2007 Profile of International Home Buying Activity refers to
foreign home buying activity between April 2006 and April 2007. For purposes of this survey
of International Home Buying Activity, an international or foreign home buyer is defined as
one who principally resides in another country (outside the U.S.) and who is not classified as
a foreign-born resident of the U.S. International buyers are not U.S. citizens (either
naturalized or native-born and living outside the U.S.), a U.S. immigrant, or a foreign student
or worker on a temporary visa.
Reprinted from Real Estate Insights -- September 2007, ©2007 NATIONAL ASSOCIATION
OF REALTORS®. Used with permission. Reproduction, reprinting, or retransmission of this
article in any form (electronic media included) is prohibited without written permission.
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