Long before our latest market struggles, there has been a history of foreign buyers for U.S. residential and commercial real estate. But figures from the 12-month period ending the first half of last year show that nationally, international investors bought 10 percent fewer homes and condos compared to that same period the year before.

It is my belief that those numbers should turn around, and foreign home purchases will actually increase above historical norms. Why? Because besides the increasing affordability of Arizona homes, foreign buyers have additional reasons to invest in the U.S.

There is no doubt that dramatic drop in home values should be a major encouragement to foreign investment here. For residents of those cities where urban real estate is traditionally highly priced, the bargains in the greater Phoenix area are increasingly attractive. But foreign buyers have other factors to consider that can be just as important as how much a home costs.

For example, our nation’s political and economic stability is better than compared with many other countries. Unstable regimes and economies usually do not encourage investment when opportunities exist elsewhere in more settled countries.

But what could be the biggest positive is the relative value of the U.S. dollar. A favorable exchange rate can make a foreigner’s native currency go farther, and in some instances may determine whether they can buy at all.

Starting primarily in the second quarter of 2009, the U.S. dollar began a descent compared to other major currencies. Since June of 2009, the dollar tumbled by 9 to 11 percent against currencies like the Japanese yen, the European euro and the Canadian dollar, and the Brazilian Real gained 17 percent against the dollar in the last six months of the year.

These exchange differences are especially important to foreign buyers as they pay mostly cash, or supply large down payments – 40 percent or more, because financing is usually unobtainable. For example according to the National Association of Realtors, nearly half of the foreign buyers paid cash in the 12-month period of May 2008 to May 2009.

As a Canadian, I know the difference the exchange rate makes to my fellow countrymen looking to buy in the Phoenix/Scottsdale area. Of course, Canadian buyers looking for second or vacation homes in the U.S. have been familiar to us in Arizona for some time. But I have experienced the increasing activity that results when a strong Canadian dollar makes our homes less expensive.

The strong Canadian dollar and low interest rates should mean that more and more of my fellow Canadians will purchase U.S. vacation properties. But not only will those north of the border buy. Even residents of other nations not contiguous to ours should show increased interest in acquiring properties all over the nation if the dollar continues to weaken. With the dollar hitting a 15-month low in December against the euro, European buyers could buy single-family homes or condos for two-thirds the cost three years ago!

Wondering which state attracts most foreign investment? Florida leads the country in the amount of international buyers, accounting for nearly a quarter of foreign purchases. Arizona generally ranks fourth, behind the other warm climate states of California and Texas.

Comprehensive information on non-U.S. purchases of real estate across our country can be found on the NAR website on their Profile of International Activity page.

Next in Part 2 I will show how my Certified International Property Specialist designation and experience dealing in the international marketplace increases the probability that your Phoenix metropolitan area home will be sold or rented. As always, if you need to reach me, call me at 480 675-0112 or email to mark@simplysoldaz.com.