By Jed Smith Managing Director, Quantitative Research NATIONAL ASSOCIATION OF REALTORS®
Based on the National Association of REALTORS’® survey for the 12 months ending March 2014, the total volume of residential sales to international clients was estimated at approximately $92.2 billion, a 35 percent increase from the previous period’s level of $68.2 billion. The dollar level of international sales was roughly seven percent of the total U.S. Existing Homes Sales (EHS) market of $ 1.2 trillion for the same period. Compared to the previous year, sales to international buyers increased both in numbers of transactions and in average price.
Some Interesting Facts About International Residential Sales in the U.S.
- International clients typically purchase upscale/higher-priced homes, with a mean purchase price of $396,000, compared to $247,000 for domestic purchasers.
- International buying activity appears to have been bolstered by continued rising affluence in China, Canada, India, Mexico, and the United Kingdom.
- International clients frequently pay cash.
- A REALTOR® specialization on the buyer’s side of the market–such as cultural affinity or orientation with the prospective purchaser, foreign language capabilities, and experience in explaining U.S. real estate procedures and requirements to international buyers—appears to be important in bringing an international transaction to successful conclusion.
- international purchasers are interested in U.S. real estate for a variety of reasons: as a place to live for those relocating in the U.S. for a job or for children going to college, for investment and portfolio diversification, and for vacation purposes.
- Proximity to the home country, the presence of relatives, friends and associates, job and education opportunities, and climate and location appear to be important considerations to prospective buyers. For example, Europeans are attracted to states with warmer climates such as Florida and Arizona. The West Coast is attractive to Asian purchasers. Buyers from Mexico favor states in close proximity, such as Texas and Arizona. Florida appears to be attractive to South Americans as well as Europeans and Canadians.
- In some cases REALTORS® had international clients that did not purchase U.S. property: cost/taxes and insurance accounted for 30 percent of the reasons cited, and financing issues took up 19 percent. Immigration issues accounted for 9 percent.
International buyers of U.S. properties came from nearly all over the globe, but five countries (Canada, China, Mexico, India, and the United Kingdom) accounted for 54 percent of the reported transactions in the recent study. Canada was the top source of international clients in terms of transactions volume, but China accounted for the largest sales dollar volume because of the higher average price of properties purchased by Chinese buyers.
There is international activity throughout the country, but the top five states (Florida, California, Arizona, Texas, and New York) accounted for 55 percent of the total reported purchases by international buyers in terms of number of units sold.
Although the market for the sale of homes to international buyers is a relatively specialized segment of the overall U.S. residential market, the market is of significant importance in a number of states and is growing. Rising affluence coupled with increasing buyer sophistication, a desire for asset diversification and investments, and improved international transportation are resulting in increased sales to international buyers. In many cases international buyers are not familiar with U.S. real estate practices, so REALTORS® may need to use additional language and multicultural skills in working with the international client and may need to provide additional education to the client concerning the purchase of property in the U.S. International buyers are an increasing and desirable market opportunity.
Jed Smith is the managing director, Quantitative Research, for the NATIONAL ASSOCIATION OF REALTORS®.