Due to factors including high mortgage rates, rising property prices, a small supply of available properties, and a strong dollar, foreign purchasers are retreating from the U.S. housing market.
Around 84,600 homes were purchased by foreign buyers between April of last year and March of this year; this is the lowest figure since the National Association of Realtors (NAR) started recording such transactions in 2009 and a 14% decrease from the previous year.
In addition, even though they purchased fewer homes, foreign purchasers paid more for them. The homes they bought had the highest median price on record, according to Realtors, at $396,400.
By number of properties purchased, not by dollar volume, China, Mexico, Canada, India, and Colombia were the top five countries of origin for buyers of existing residences. The new building, where international purchasers are also active, must be included in the poll.
Chinese purchasers had the highest average purchase price, at $1.23 million, probably because a third of them made their purchases in California, the state with the highest housing prices. 15% of foreign purchasers purchased more than $1 million properties.
Chinese home purchases soared after China lifted its harshest pandemic lockdown regulation, while buyers in India benefited from that nation’s robust GDP growth. The increase in sales from Mexican customers was probably influenced by the stronger Mexican peso vs. the U.S. dollar.
Overall, overseas sales decreased, but Chinese purchasing increased significantly. According to Juwai IQI, a group located in Asia that specializes in global real estate technology, the total number of Chinese homes purchased in 2023 is the largest since 2018, one of the peak years for Chinese foreign property acquisitions.
Florida (23%) is still the top destination for foreign purchasers, followed by California (12%), Texas (12%), North Carolina (4%), Arizona (4%), and Illinois (4%). California is particularly popular with Chinese purchasers since many of them buy so their kids can attend local schools and institutions.
Yun continued, “Florida, Texas, and Arizona continue to draw international buyers despite the scorching summer weather and the huge increase in housing prices that started a few years ago.
Foreign buyers used cash in about 42% of cases. A vacation home, rental property, or both were the reasons given for half of the purchases, up from 44% the year before.
Since foreign buyers accounted for less than 2% of all buyers, the decline in overall foreign purchases is unlikely to lessen the competitiveness of domestic buyers. However, it might help marginally in some regional marketplaces where foreign buyers are most active.
Read Also: Is the housing market about to crash?
However, mortgage rates, which are now more than twice what they were during the first two years of the pandemic, and the limited number of available properties are of greater worry to today’s domestic buyers.
What the experts think
From 2005 to 2007, the U.S. housing market last appeared bubbly. The decline in housing values back then had terrible repercussions. The world economy saw its worst fall since the Great Depression when the real estate bubble burst. Buyers and homeowners are asking the age-old question: Is the housing market poised to crash? as the housing boom is challenged by rising mortgage rates and a looming recession (Bankrate’s most recent expert survey estimated the probability at 59 percent).
While housing economists concur that prices may drop much more, this time, it won’t be as drastically as it was during the Great Recession. The homeowners’ personal balance sheets today are significantly stronger than they were fifteen years ago, which is one clear contrast between now and then. According to a June Redfin analysis, 82.4 percent of all current homeowners had fixed-rate mortgages below the 5 percent threshold. The typical homeowner with a mortgage has excellent credit, a ton of home equity, and a mortgage locked in at a rate considerably below 5 percent.
Additionally, builders have been cautious about their pace of construction since they all too well recall the Great Recession. As a result, there need to be more houses available for purchase.