By Mike Colpitts
Cash flush foreign real estate buyers are driving the U.S. housing market into a recovery, producing $82.5 billion in sales in the last year alone. International residential sales are gaining momentum and are divided between recent U.S. immigrants and non-resident foreigners who are buying a piece of America at deep discounts.
Low prices on homes and condominiums combined with U.S. dollar weakness offer international buyers an alluring opportunity that hasn’t been seen for decades. International buyers are purchasing homes throughout the country, but four states accounted for 51% of foreign made purchases in the past year – Florida, California, Texas and Arizona, according to a National Association of Realtors survey.
Hard hit Florida reaped the fastest growing destination of choice, accounting for a full 26% of foreign real estate buyers.
“Low housing prices, a good inventory condition and increased buying power with today’s exchange rates help attract international clients,” said NAR President Moe Veissi, a Miami broker. “Today’s advantageous market conditions have drawn more and more foreign buyers to the U.S.”
Almost two out of three foreign made purchases (62%) were made in all cash during the last year. Federal officials suspect that as many as one in three transactions made in some areas of the country, including hotbeds like Miami and parts of Southern California are made with illicit drug money. All cash sales have seen a strong increase since 2007 but don’t go unnoticed by federal authorities, including the IRS, which has a special unit that tracks the home sales with the FBI.
California accounted for the second most sales to foreign buyers with 11% for the year. Texas and Arizona made up 7% each.
The upturn in foreign real estate sales has been developing for five consecutive years, with $66.4 billion in 2011. Weak prices and a “once in a life-time opportunity” have driven many foreign buyers to take the plunge, despite economic troubles elsewhere in the U.S. and world economies.
East coast locations heavily attract European buyers, while Asian purchasers tend to make home purchases more often on the West Coast, according to the NAR survey. Mexicans are attracted equally to both coasts, but more make their purchases in Texas than any other single state, often making buying decisions in the fastest amount of time. The presence of relatives, friends in the local area and a warm climate are major considerations for many perspective purchasers.
International buyers come from all over the globe, but Canada, China (The People’s Republic of China including Hong Kong), Mexico, India, and the United Kingdom accounted for 55% of all international transactions, according to the survey.
Nearly half or 45% of foreign purchases were under $250,000 in the past year, with a trend developing toward purchases in higher price ranges up to $500,000. However, the average price paid for a home by international buyers was $400,000 compared to the U.S. average home price of $212,000.