Over the past few months, the American real estate market has experienced a significant plunge in interest from foreign buyers. With stipulations placed on foreign investments in the U.S. housing market and limitations on foreign currency, demand for American homes by foreign investors has steeply decreased. The magnitude of the decline seems to suggest that foreign buyers have less confidence in owning a property in America.
In just ten months, the dollar value of homes purchased by foreign buyers has dropped by 36%. The National Association of Realtors warns that this decline could continue. Further analysis of the data reveals that the drop was due to the decrease in both the number of and average price of purchases. In 2018, foreign buyers bought 266,800 homes with a total value of $121 billion. In the year since foreigners have only bought 183,100 properties with a value of $77.9 billion.
The median price per home for foreign buyers was $280,600. However, during the previous year, the figure was at an all-time high of $290,400. For comparison, the median for all homebuyers has consistently remained at $259,600. For the seventh consecutive year, the Chinese remained the leading buyers as they purchased nearly $13.4 billion worth of property. Despite this large figure, it is nearly a 56% decline from the past twelve months. The decrease in Chinese purchases represents the biggest percentage drop of all foreign buyers. Analysts point out that the Chinese government has increased restrictions on the purchase of foreign property as well as the fact that Chinese economic growth has slowed to 6.3%.
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Experts also believe that the Chinese may be turning away from American property due to the political climate. Described as the “Trump effect” the combination of tariffs, visa processing, and anti-Chinese rhetoric has turned many away from purchasing real estate. Along with Chinese buyers, the top purchasers include: Canadians who spent $8 billion, Asian Indians at $6.9 billion, U.K. buyers who topped $3.8 billion, and finally, Mexican buyers who bought $2.3 billion worth of property. It is important to note that while the Chinese bought almost the same number of homes as Canadians, the Chinese purchased drastically pricier homes. Chinese surged past Canadian buyers in 2018, but they have continued to slow in 2019. Florida has remained one of the top spots for foreign buyers as nearly 42% of Canadian buyers have purchased a home in Florida. California was the second-most popular hub with Texas, Arizona, and New Jersey completing the top five.
The majority of foreign buyers (60%) were either foreigners who lived in the U.S. for work and school or recent immigrants. Many of these individuals were major players in the newly built housing market, and these homes are often listed at steep price premiums. Southern California, Florida, and Texas are hubs for these homes, and they have experienced the most consequences of this decrease in foreign purchases. Home values are gaining less than they were only a year ago, and many major markets have revealed that values are even plummeting.