Lack of Financing Options Inhibits International Homebuyer Demand

by devteam July 9th, 2010 | Share

Internationalrncustomers accounted for about $66 billion or seven percent of residential realrnestate purchases in the U.S. during the calendar year ending March 31.  These figures were released Wednesday by ThernNational Association of Realtors® (NAR) in its 2010 Profile of InternationalrnHome Buying Activity.  </p

NAR surveyedrnrealtors and found that 28 percent of its members who responded have workedrnwith at least one international client during that period.  This is up from 23 percent who reported suchrnassociations in the 2009 survey.  18rnpercent of respondents indicated they had completed at least one sale with arnforeign client, up from 12 percent a year ago. rnThese sales are not concentrated; only 1 percent of Realtors reportedrnthat they obtained 75 percent or more of their sales from this market segmentrnand 3 percent reported it as the source of 51 to 75 percent.</p

NAR saidrnthat several factors contributed to foreign interest in the U.S. market includingrnthe strength of the dollar and the recovering economy.  Association President Vicki Cox Golder saidrn”Perceptions abroad about trends in the U.S. real estate market have ledrnmany international clients to believe purchasing a home in the U.S. is morernaffordable than in their country and holds more value.” </p

Thernsurvey asked Realtors to speak about their experiences with two types ofrninternational clients; </p<ol

  • TypernA:  Foreign clients with permanentrnresidences outside the U.S. but interested in purchasing U.S. property.  This group accounted for $41 billion or 4rnpercent of the residential market;</li
  • TypernB:  Clients who are recent immigrants orrntemporary visa holders in the U.S. and looking for a primary residence.  These customers were responsible for about 3rnpercent or $26 billion in sales.</li</ol

    NARrnfound that international buyers came from 53 different countries.  As was the case for the previous two years,rnCanadians were the most active buyers with 23 percent of the total. Buyers fromrnMexico were second, up from third, with 10 percent of buyers, while the U.K.rnwas dropped to third with 10 percent. Eight percent came from China/Hong King.  Other countries that provided significantrnnumbers of buyers were Germany/France, India, Russia, and Argentina/Brazil.</p

    Realtors in 39 states said theyrnhad worked with international buyers during the survey period but 53 percent ofrnthe buyers were reported in Florida, California, Arizona, and Texas which werernalso the top destinations for the past three years</p

    Where international buyersrnpurchase property appears to be determined by the proximity to their homerncountry and the availability of convenient air transportation.  Florida draws Europeans, Canadians, and SouthrnAmericans; Europeans prefer the East Coast while the West Coast attractsrnAsians.  Mexicans are active purchasers inrnthe Southwestern states. Word of mouthrnappears to also be a factor as concentrations of nationalities are found to bernpurchasing in certain markets.</p

    Buyers find their agents overwhelminglyrnthrough networking.  19 percent werernreferred by friends, 34 percent found their agents through previous contacts orrnclients.  A combination of yard signs,rnwalk-ins, and the Internet accounted for 31 percent of customers. Agents whorndid significant international business tended to have specialized skillsrnincluding strong language capabilities, cultural knowledge, and expertise inrnsolving some of the problems that come along with foreign purchases.</p

    Homes were intended asrnprimary residences in 50 percent of the sales while 22 percent of sales werernfor vacation homes for family and friends.  The remaining 28 percent was split evenlyrnbetween purchases for rental investment and or a combination of vacation andrninvestment. </p

    International buyers paid arnmedian price of $219,000 for their homes, down from $247,100 in 2009.  This was well above the median market pricernwhich was $172,500 in 2009.   16 percent of the purchases were for homesrnpriced over $500,000 and 7 percent for homes over $1 million. Single familyrndetached homes were purchased by 66 percent of the buyers, but they alsornpurchased condos in higher numbers, 223 percent to 7 percent, than the U.S.rnmarket in general.  The median price forrna home intended as a primary residence was $240,000 while it was only $186,100rnfor homes purchased for other purposes. </p

    Thernmajority (55 percent) of international buyers paid cash for their houses, butrnbuyers seeking financing encountered significant hurdles.  In fact, respondents reported that 34 percentrnof their customers were unable to complete a purchase because of financingrnproblems.  The lack of a Social Securityrnnumber appears to be a major reason for credit difficulties.  Realtors reported that, even when financingrnwas finally obtained, there were often significant delays.</p

    Are any lenders buying these loans?</p

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  • About the Author


    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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