Sales of homes to foreign buyers have been strong in the south and southwest for years. The National Association of Realtors®‘ 2012 Profile of International Home Buying Activity☼ showed that those sales equaled $82.4 billion for the past year ending March 2012, up from $66.4 billion in 2011.
Due to low prices and the relative weakness of the dollar in recent years, more and more foreign buyers have purchased homes as an investment in the U.S. In addition, recent immigrants view home ownership as an important accomplishment, and as a result half of the sales in the NAR Report were attributable to those new residents.
However, Trulia reports the number of international buyers conducting home searches for U.S. properties has fallen nearly 10% in the last year. In its International House Hunter Report*, Trulia also noted that the cities where prices have risen the fastest, like Phoenix, are where the interest of foreigners has dropped the most.
So have international buyers lost their taste for U.S. real estate? At this point, I would say it is too early to tell. One difficulty in evaluating Trulia’s study is that it is drawn from a different data set. The NAR asks agents about actual sales, and Trulia is monitoring out of country web real estate web searches. So Trulia’s report would appear to be a leading indicator, as web searches come before purchases.
In addition Trulia’s report is more current than that of NAR (covering the period of April 1, 2011 to June 30, 2012), which again indicates that this trend is newly developing. Because of its newness the possibility exists that it the decline will not sustain itself and web searches could increase again later in the fall
But there can be no doubt that buyer interest lessens when prices rise, and foreign buyers can’t be that much different. So it is logical that if foreigners believe Phoenix has seen prices rise 15% (according to Trulia), or 25% in the last year (according to the Toronto newspaper, The Globe and Mail), international house hunters may look elsewhere. That explains why Phoenix fell out of the top five in areas searched based on the data analyzed by Trulia.
Still, the reasons why foreigners buy in the Phoenix metro area have not changed. Prices are still relatively low. In addition, although inventory is limited in the lower price ranges, the average home price paid by an international buyer was $400,000, and there appears to be a gradual trend toward purchases in the $250,000 to $500,000 price range, where an ample selection continues to be available.
Furthermore today’s exchange rates continue to offer increased buying power for international purchases in the United States. And political stability here is excellent, especially when compared to many international domiciles, such as the formerly stable middle-eastern countries of Libya, Egypt and Syria. So the U.S. remains a desirable place to own property and make a profitable investment.
I don’t think we in Arizona will see a noticeable drop off in sales. Canadians, who account for the most purchases in the U.S. at 24% of all international sales, have always shown a strong preference for our warm winters. And Canadian participation has risen steadily, from 11% of all international sales in 2007.
Mexico was third with 8% percent of sales, and obviously our proximity to that country mean that a high percentage of those sales occurred here. And although it doesn’t sound like much, Arizona accounted for 7% percent of all international buyers according to the NAR Profile. That is a significant percentage when compared to the size of our population.
If you want to take advantage of my international experience, contact me at 480 675-0112 or send an email to firstname.lastname@example.org. My cultural affinity with Canadians is important when working with them, and obtaining the NAR Certified International Property Specialist designation means I have the expertise that comes from working with clients from different cultures and markets. And being an attorney as well as broker is a big advantage and ensures that foreign purchasers will be comfortable with the legal aspects when buying your home. I look forward to hearing from you!
– N. Mark Kramoltz © 2015