It’s yet another trend that points to a probable housing bottom - foreign investment increases.
Purchases of homes in the United States by foreign buyers rose by $16 billion, according to the 2011 Profile of International Home Buying Activity, a new report from the National Association of REALTORS® (NAR). From March 2010 to March 2011, foreign homebuyers that include non-residents and recent immigrants purchased $82 billion in residential real estate, up from $66 billion in 2010.
U.S. homes are typically less expensive than comparable homes in other countries, says the NAR, and they offer long-term appreciation potential, rental opportunities, and unprecedented affordability.
Five-year price declines of approximately 30% have made homes more affordable than they’ve been in many years. For most of the country, prices are back where they were before the housing bubble began, wiping out a decade of appreciation for many homeowners. In some areas such as Florida, prices have returned to where they were in the 1980s.
Among the many reasons cited for international interest in American residential real estate, is that many foreign buyers have children attending college in the U.S. There are also international executives who find housing purchase prices are more favorable than renting. For example, Clemson University’s Office of International Affairs reports that in the Fall 2000, there were 864 students enrolled from 77 countries. By Fall 2010, that number had swelled to 1,223 students from 91 countries.
NAR’s report found that this year’s international buyers came from 70 different countries, up from 53 countries in 2010. Among the most frequent countries of origin for home buyers are Canada, China, Mexico, the U.K., and India, accounting for 53% of foreign investment.
Foreign buyers made 53% of their purchases in five Southern and Western states, Florida (31%), California (12%), Texas (9%), and Arizona (6%), which were chosen for fair weather, proximity to their home countries and the convenience of air transportation.
The average price paid by an international buyer was $315,000 compared to the overall U.S. average of $218,000. However, says NAR, 45% of international purchases were under $200,000, largely due to the growth of the under $200,000 price segment because of overall price declines for the past five years, as well as the growing strength of some foreign currencies.
Of special note is that 62% of foreign purchases were made with all cash, compared to 35% of total existing home buyers. More cash buyers tend to negotiate and purchase homes when prices and conditions are perceived to be at rock bottom.
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