US home buyers from abroad hit lowest level since 2009 – NAR
US home buyers from abroad hit lowest level since 2009 - NAR
The US housing market has defied expectations and remained remarkably resilient in 2023, despite the Federal Reserve’s aggressive interest rate increases. While high interest rates typically deter new buyers, they have also discouraged sellers from giving up their low-rate mortgages. This unique dynamic has helped to maintain stability in the market.
However, the US housing market is not without its challenges. A significant supply shortage has had a profound impact on foreign buyers looking to invest in American homes. According to a report by the National Association of Realtors, the number of homes purchased by foreign buyers has dropped to the lowest level since records began in 2009. From April 2022 to March 2023, there was a 14% decline in the number of existing homes purchased by foreign buyers, totaling around 84,600 properties.
Multiple factors contribute to this decline in foreign buyers. The first is the housing shortage itself, which limits the options available to international investors. Additionally, the strength of the US dollar has made purchasing American homes more expensive for foreign buyers. The report shows that as of March, it was 8.6% more expensive to buy a home with Chinese yuan or British pounds, and 7% more expensive with Canadian dollars. The remarkable rally of the US dollar in 2022 has weakened the purchasing power of international buyers.
To overcome the challenges posed by high mortgage rates and a weakened purchasing power, many foreign buyers have resorted to all-cash financing. According to the report, 42% of international buyers used all-cash financing as a way to work around the burden of enormous mortgage rates. This indicates the extent to which international buyers are adapting to the changing landscape of the US housing market.
Breaking down the demographics of foreign buyers, the report reveals that Asian buyers comprised 38% of all new owners, making them the largest group. Latin Americans were the second largest group, accounting for 31% of international buyers. These figures highlight the continued interest and investment in American homes from these regions.
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Despite the challenges and shifting dynamics, the US housing market has seen median prices near record highs. In June, median home prices reached $426,056, which is just 1.5% below the record median home price of $432,397 in May 2022. This demonstrates the resilience of the market and the continued demand, even in the face of high interest rates.
Overall, the US housing market has shown remarkable resilience in 2023. Despite the Fed’s interest rate increases, a supply shortage, and challenges for foreign buyers, the market has remained strong. The dynamic relationship between high interest rates and the reluctance of sellers to give up their low-rate mortgages has played a significant role in maintaining stability. While there are hurdles to overcome, such as the limited supply and the impact of the US dollar, the housing market continues to attract both domestic and international buyers.