International buyers are pulling back from the US housing market as high mortgage rates, skyrocketing home prices, a tight supply of homes for sale and a strong dollar make buying much less financially attractive.
From last April to March, international buyers bought about 84,600 homes; that’s the lowest number since the National Association of Realtors began tracking such purchases in 2009 and down 14% from the previous year.
And while overseas buyers bought fewer homes, they paid more for them. The median price for homes they bought was $396,400, the highest Realtors have ever recorded.
China, Mexico, Canada, India and Colombia were the top five countries of origin for international buyers of existing homes by number of houses, not dollar volume. The survey does not count new construction, where international buyers are also active.
Chinese buyers had the highest average purchase price of $1.23 million, likely because a third of them bought in California, where home prices are the highest. In total, 15% percent of foreign buyers purchased homes valued at more than one million dollars.
“Home purchases by Chinese buyers rose after China eased the world’s strictest pandemic lockdown policy, while buyers from India were helped by the country’s strong GDP growth,” Lawrence Yun, NAR’s chief economist, said in a release. “A stronger Mexican peso against the US dollar likely contributed to the increase in sales from Mexican buyers.”
While foreign sales generally fell, Chinese purchases made significant gains. The total of 2023 Chinese home purchases is the highest since 2018, which was one of the peak years for Chinese international property purchases, according to Juwai IQI, an Asia-based international real estate technology group.
“Only about one in 10 Chinese buyers are buying purely as an investment, which is a big change from the mid-2010s, when wealthy Chinese consumers sought to diversify their wealth out of China,” said Kashif Ansari, Juwai IQI co-founder and CEO. “By 2023, the typical Chinese buyer is no longer an offshore investor, but is on the way to becoming a US resident and citizen.”
Foreign buyers continue to flock to the same locations as they have in the past, namely Florida (23%), California (12%), Texas (12%), North Carolina (4%), Arizona (4%) and Illinois (4 %). Chinese buyers especially like California, as they often buy so their children can attend local schools and universities.
“Florida, Texas and Arizona continue to attract foreign buyers despite the warm weather conditions during the summer and the significant increase in home prices that began a few years ago,” Yun added.
About 42% of foreign buyers used cash. In terms of why they are buying, half bought the properties for use as a holiday home, rental property or both, up from 44% the year before.
The decline in overall foreign purchases is unlikely to ease competition for domestic buyers, as international buyers made up just over 2% of all buyers. But it could help margins in certain local markets, which are most favored by foreign buyers.
However, today’s domestic buyers are more concerned about mortgage rates, which are more than double what they were in the first two years of the pandemic, and the scarce supply of homes for sale.