Foreign Investors Pulled Back From U.S. Real Estate Amid Global Woes

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Foreign buyers retreated from the U.S. real estate market last year as a strong dollar, rising home prices and slowing overseas economies crimped buying power.
Investors in particular poured dramatically less money into U.S. rental and vacation properties, according to a survey from the National Association of Realtors, slashing their spending by $10 billion to only $35 billion, a three-year low.
The annual NAR survey is one of the industry’s best snapshots of international activity in the U.S. housing market. While global clients account for a small share of overall U.S. home sales, their pullback might be felt in markets popular with foreign buyers, including parts of Florida, California, Texas, Arizona and New York.
“Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,” said NAR chief economist Lawrence Yun.
The Realtor survey tracked residential purchases between April 2015 and March 2016. For the year, sales to foreign buyers totaled $102.6 billion, down from a survey high of $103.9 billion a year earlier.

So what?

NAR’s survey was taken in April and didn’t capture the aftermath of the U.K. decision to abandon the economic alliance of the European Union. The British exit — Brexit — has crashed the British pound, boosted the U.S. dollar and whipsawed stock markets.
British buyers spent $5.5 billion to purchase 9,150 U.S. properties last year. That’s not even a drop in the bucket of the 5.5 million homes sold in the U.S. each year, and the British accounted for only a small share of foreign buyers. Chinese buyers, by contrast, spent $27.3 billion, more than than the next four countries combined.
But U.K. buyers like warm-weather climes and their purchases are concentrated in places like Miami, Tampa and Orlando. Nearly 40 percent of the homes they bought last year were in Florida.
Brexit housing
Source: National Association of Realtors

“Sales activity from U.K. buyers could very well subside over the next year depending on how severe the economic fallout is,” Yun said. “However, with economic instability and political turmoil outside of the U.S. likely to persist, the world view of American real estate as a safe investment should keep demand firm even as pressures from a stronger dollar continue to weigh down on affordability.”

Translation: The loss of U.K. buyers won’t be a huge blow and we think the housing market can withstand Brexit. Stay tuned.

 

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lorraine-woellertredfin-com

Senior Managing Editor, Research

Lorraine is enjoying her first real job after a career in journalism. She’s based in Washington, D.C., where she writes about housing and the economy. Before joining Redfin, Lorraine was at Bloomberg News reporting on politics, financial mayhem, housing and the economy. Her dream home is a top-floor loft with a pool, friendly neighbors and a terrace for throwing parties. Everyone's invited. Redfin is a full-service real estate brokerage that uses modern technology to make clients smarter and faster. For more information about working with a Redfin real estate agent to buy or sell a home, visit our "Why Redfin?," page.

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