Foreign buyers bailing from the U.S. housing market

The allure of the U.S. housing market is waning for international buyers due to a combination of factors.

Skyrocketing mortgage rates, exorbitant home prices, limited inventory, and the strength of the dollar have collectively diminished the financial appeal of purchasing properties. From April of the previous year to March of this year, international buyers acquired approximately 84,600 homes, marking the lowest number since the National Association of Realtors began monitoring such transactions in 2009. This represents a 14% decline from the previous year.

Although international buyers bought fewer homes, they paid a higher price for them. The median price of the homes they purchased reached $396,400, the highest ever recorded by the Realtors.

China, Mexico, Canada, India, and Colombia emerged as the top five countries of origin for international buyers of existing homes, based on the number of properties purchased rather than dollar volume. It is worth noting that this survey excludes new construction, where international buyers are also actively involved. Chinese buyers, in particular, had the highest average purchase price, amounting to $1.23 million. This is likely due to the fact that one-third of them acquired properties in California, where home prices are at their peak. In total, 15% of foreign buyers purchased homes valued over $1 million.

Lawrence Yun, NAR's chief economist, highlighted that "home purchases from Chinese buyers increased after China relaxed the world's strictest pandemic lockdown policy, while buyers from India were helped by the country's strong GDP growth." He also mentioned that the rise in sales from Mexican buyers can be attributed to the stronger Mexican peso against the U.S. dollar.

Although foreign sales experienced an overall decline, Chinese purchases demonstrated significant growth. According to Juwai IQI, an Asia-based international real estate technology group, the total number of Chinese home purchases in 2023 is the highest since 2018, which was regarded as one of the peak years for Chinese international property acquisitions.

Kashif Ansari, co-founder and group CEO of Juwai IQI, noted that "only about one in every 10 Chinese buyers is purchasing purely as an investment, which is a big change from the mid-2010s when wealthy Chinese consumers sought to diversify their wealth outside of China." Ansari further emphasized that in 2023, the typical Chinese buyer is no longer an offshore investor, but rather someone on the path to becoming an American resident and citizen.

Foreign buyers continue to gravitate towards the same locations as before, with Florida (23%), California (12%), Texas (12%), North Carolina (4%), Arizona (4%), and Illinois (4%) being the most favored. Chinese buyers, in particular, exhibit a strong preference for California due to the desire to provide their children access to local schools and universities.

Despite the scorching summer weather and the significant surge in home prices over the past few years, foreign buyers remain attracted to Florida, Texas, and Arizona, according to Yun.

Cash transactions accounted for approximately 42% of foreign purchases. As for the reasons behind these acquisitions, half of the buyers obtained the properties for vacation purposes, rental income, or a combination of both, representing an increase from 44% in the previous year.

Although the decline in overall foreign purchases is unlikely to alleviate competition for domestic buyers, as international buyers only constitute slightly over 2% of all buyers, it may provide some relief in certain local markets that are particularly favored by foreign buyers.

However, today's domestic buyers are primarily concerned with the soaring mortgage rates, which are more than double what they were in the first two years of the pandemic, as well as the limited availability of homes for sale.