During the pandemic, travel restrictions prevented foreign buyers from traveling to the United States and purchasing houses.
Foreign purchasers are once again participating in the US real estate market. Everyone who has bought a house in the last few years understands that it has been a very competitive market. Many purchasers were making bids well above the asking amount, as well as making all-cash offers.
Despite the increased competitiveness, foreign purchasers were one group that virtually vanished from the market during the pandemic. But according to a National Association of Realtors poll, foreign real estate investments have begun to rise again.
During the pandemic, travel restrictions prevented foreign consumers from visiting the United States and purchasing houses. However, with the reduction of Covid restrictions and other Covid-related travel demands being lifted, foreign purchasers have begun to return. During the first quarter of 2022, international buyers purchased $59 billion worth of residential property in the United States. According to data released by the National Association of Realtors (NAR), sales rose 8.5% in April from a year earlier, the first increase in three years.
According to the NAR report, a substantial portion of the boost in volume was due to increased purchase prices. Between April 2021 and March 2022, the median price paid by foreign buyers for houses was $366,100. This price was higher than the average $354,165 house cost in the United States.
The cost of a home purchased by a foreign buyer has increased 18% to roughly $600,000. The number of existing homes sold in July was the lowest since 2009, yet the dollar sales volume rose to a record high.
Many international buyers still find US real estate a bargain, despite it becoming increasingly expensive. The average cost per square meter in Hong Kong, London, and Toronto is $28,570, $26,262, and $10,947, respectively. Meanwhile, homes in San Francisco costs $8,250 per square meter, and Miami's prices are closer to $3,170 per square meter.
Despite the fact that the pandemic has driven more individuals to purchase remotely or sight unseen, most customers still prefer to see a home in person. Foreign buyers, especially those looking for a vacation property, frequently could not view properties owing to visa or travel restrictions.
A foreign buyer, according to NAR, is a foreigner with a permanent address outside the United States. The NAR also added that 57% of foreign buyers are recent immigrants who have lived in the US for less than two years, as well as visa holders who reside here but are not citizens.
International purchasers accounted for 24% of all foreign residential transactions in Florida. Florida is followed in popularity by California, Texas, Arizona, New York, and North Carolina.
There may be more competition to purchase in areas where there are a lot of foreign purchasers. Even in popular cities, foreign buyers make up just 3% of purchases. Overall, the NAR's survey discovered that foreign purchasers made up 1.6% of existing property sales across the country.
The majority of foreign buyers were from neighboring Canada and Mexico. 11% of foreign buyer home purchases came from Canada, up from 8% in the previous period. Last year, Mexican buyers purchased 8% of the homes sold in the US, up from 7%. Canadian and Mexican buyers were followed by buyers from China, India, Brazil, Colombia, Germany, the United Kingdom, France, and Japan. Even with rising home prices and increasing mortgage rates, international buyers are expected to boost their share of purchases.
Among non-U.S. purchasers, 44% of foreign buyers paid cash compared to 24% of all purchases. Foreign purchasers are also more likely to purchase the property as a second home. Forty-four percent of foreign buyers planned on using their home purchase as a vacation home, rental, or both. Only 17% of all existing-home buyers planned on using their home purchase in a similar way.
Obtaining a mortgage as a foreigner may be challenging. Not all lenders entertain providing mortgages to non-citizens. Lenders that do offer mortgages to foreigners often do so with additional requirements. Depending on the relationship with the US, additional conditions and limitations may include a higher down payment, higher interest rate, and more reserves.
The housing market in the United States rose dramatically during the pandemic because there was a lack of houses to buy, and low mortgage rates fueled bidding wars across the country. There have been indications lately that the market is cooling as the slowing economy and higher borrowing costs prevent more prospective buyers from entering.