U.S. homes attracting interest from foreign buyers
By Steve Brown
The Dallas Morning News, November 21, 2008
Americans have sharply reduced home purchases during the last two years, but there's been an uptick in foreign buyers.
Offshore purchasers are lured to the market by bargains and currency rate advantages.
'We think the international component of our business may be doubling over the next 10 years,' Lawrence Yun, chief economist for the National Association of Realtors, told agents from around the country meeting in Florida recently.
'About 21 percent of Realtors indicate there are more international buyers today than five years ago,' he said.
Almost half the purchases are being made in Southern states, a recent Realtor survey found.
Texas ranks fourth in the country for foreign homebuyers, with about 7 percent of the total, behind Florida, California and Arizona.
The real estate sold to foreign buyers in Texas 'tends to be the more border area purchases from Mexico,' Mr. Yun said. 'The property Mexicans purchase tends to be more of a modest price, and it's more work-related.'
More than 60 percent of the homes purchased here by Mexicans are priced under $200,000.
Texas is second only to Florida as a destination for Latin American home purchasers.
Most of the foreign buyers shopping the U.S. housing market hail from Canada, the U.K. and Mexico, real estate agents say. More than 24 percent of offshore buyers are coming from Canada.
'Canada has suddenly surged,' in part because of recent strength of the Canadian dollar, Mr. Yun said. 'The dollar has strengthened, so it will be somewhat more difficult for foreigners to buy properties in the U.S.'
But growing economies in China, India and Eastern Europe guarantee demand for U.S. homes, he said.
'They want to show off, and nothing shows off like having a property in the U.S.,' Mr. Yun said.
'The growth opportunities for foreign buyers in the U.S. are tremendous.'
Rare but increasing
Almost a quarter of Texas real estate agents say their international business has increased in the last five years. But North Texas agents say interest from foreign buyers is still rare in the local housing market.
'I did receive a call a couple of weeks ago from a relocation-type company saying they had foreign leads,' said Jim Fite, president of Dallas' Century 21 Judge Fite Realtors.
Dallas real estate sales firm founder David Griffin said the number of foreign buyers in the area has so far been small.
'We get a few foreign buyers at Victory Park, but certainly no trend like you're describing,' Mr. Griffin said.
Mark Dotzour, top economist with Texas A&M University's Real Estate Center, said it doesn't surprise him that international buyers are targeting the U.S. home market.
'With all of the threats of socialism and confiscation of personal property, people with money are bringing it to the U.S.,' he said. 'Some are parking it in real estate.'
More than half of the foreign homeowners in the U.S. say they purchased a house for vacation use. And on average, they stay in the property for just under 3 months a year.
Despite America's large housing inventory and recent declines in prices, more than half of foreign buyers say the cost of housing in this country is still too high.
Wait and see
Some offshore purchasers are holding back to see whether home prices go down.
'That is the dominant reason they are delaying a purchase,' Mr. Yun said. 'I'm not saying it's the bottom, but we could be very close to the bottom in home prices.
'In areas of the country foreigners are interested in, price declines are essentially all over,' he said.
Immigration laws are also cited by foreign homebuyers as an impediment to their purchases. And in Texas, high property taxes are a top concern, surveys show.
The recent toughening of home lending standards affects offshore buyers less than U.S. purchasers, Mr. Yun said.
'The mortgage credit crunch is no problem for many foreign buyers,' he said. 'Historically, about a third of foreigners buy with cash.'