Foreign buyers see U.S. as good place for home ownership | July 6, 2012 | Pleasanton Weekly | |

Pleasanton Weekly

Real Estate - July 6, 2012

Foreign buyers see U.S. as good place for home ownership

California 2nd only to Florida in attracting foreigners

by Jeb Bing

Due to low prices and the relative weakness of the dollar, international buyers continue to identify the U.S. as a desirable place to own property and make a profitable investment.

According to the National Association of Realtors' 2012 Profile of International Home Buying Activity, total residential international sales in the U.S. for the past year ending March 2012 equaled $82.5 billion, up from $66.4 billion in 2011.

Total international sales were evenly split between non-resident foreigners and recent immigrants.

The survey asked Realtors to report their international business activity within the U.S. for the 12 months ending March 2012.

"Today's advantageous market conditions have drawn more and more foreign buyers to the U.S. in recent years, signaling how desirable and profitable owning property in this country can be," said NAR President Moe Veissi, a broker-owner of Veissi & Associates Inc. in Miami, Fla.

"Low housing prices, a good inventory condition and increased buying power with today's exchange rates help attract international clients," he said. "Foreign buyers also have the advantage of working with Realtors who specialize in serving international clientele. They have a truly global perspective; they know what hurdles foreign buyers face when purchasing property in the U.S., and have the expertise and knowledge that comes from working with clients from different cultures and real estate practices."

International buyers bought homes throughout the country, but four states accounted for 51% of the purchases -- Florida, California, Texas and Arizona. Florida has been the fastest growing destination of choice, accounting for 26% of foreign purchases. California was second with 11% and Texas and Arizona accounted for 7%.

Proximity to the home country, the presence of relatives and friends, the convenience of air transportation, and climate and location are all important considerations to prospective foreign buyers.

Locations on the East Coast generally attract European buyers, while Asian buyers tend to purchase on the West Coast, particularly California. Florida attracts a diverse set of international buyers including South Americans, Europeans and Canadians. Meanwhile, Texas remains popular among Mexican buyers.

Within markets in an individual state, it is not unusual to find concentrations of people grouped by nationality.

"Foreign buyers recognize that owning a home in the U.S. has many benefits, both financial and social," said Veissi. "Many purchase property as an investment, vacation home or to diversify their portfolio."

"In addition," he pointed out, "many recent immigrants view homeownership as an important accomplishment. They believe that being a homeowner is one of many ways they become established in the U.S. and attain stability, security and a sense of community."

International buyers came from all over the globe, but Canada, China (including Hong Kong), Mexico, India and the United Kingdom accounted for 55% of all international transactions, according to the survey. Canada accounted for 24% of international sales while China accounted for 11%, up from 9% in 2011. Mexico was third with 8% of sales, and India and the U.K. both accounted for 6%.

A total of 45% of international purchases were under $250,000. In addition, there appears to be a gradual increasing trend toward purchases in the $250,000 to $500,000 price range. In 2012 this range accounted for 30% of purchases, up from 28% in 2011. The average price paid by an international buyer was $400,000 compared to the overall U.S. average of $212,000.

Several reasons account for why the average international home price is higher than the average overall price. The international client is typically wealthier than the domestic buyer and is looking for a property in a specialized niche, for example, a larger property suitable for multi-generational living, or a property that establishes the individual's presence and standing in the community.

Many homes purchased by foreign buyers are used as a primary residence. Vacation and rental use are also major reasons for a purchase. More than half -- 66% -- of survey respondents reported international buyers purchased detached single-family homes. About half of international buyers, 52%, preferred to buy in a suburban area and about a quarter, 23%, bought in a central city/urban area.

Some 62% of international purchases were all cash, which has increased since 2007. International buyers still experience many financing challenges when purchasing a home in the U.S. In fact, among transactions that failed, Realtors reported that in 26% of the cases financing issues were the problem. The difficulties facing foreign buyers in trying to obtain a mortgage include lack of U.S.-based credit history and hurdles in meeting mortgage requirements.

Other reasons for not purchasing properties were cost/taxes/insurance and immigration laws.

Some 27% of Realtors reported having worked with international clients this year. Of these, 52% of Realtors reported that international transactions accounted for one to 10% of their total transactions, while 27% reported that they made up more than 10% of total transactions.

Realtor specialization on the buyer's side of the market -- such as foreign language capabilities, cultural affinity or orientation with the prospective purchaser and experience in explaining the U.S. real estate -- appear to be important in working with foreign buyers.