China, Canada Lead Foreign Investment in U.S. Housing

Foreign investment in U.S. housing has dipped to levels unseen in at least a decade, according to a National Association of Realtors (NAR) report. The decrease is evidently related to the coronavirus pandemic, and, economists say, the drop has not hurt the American market.

NAR's researchers deduced that international buyers purchased 107,000 residential properties totaling $54.4 billion from April 2020–March, down 31% and 27%, respectively, from the previous year and the lowest volumes since 2011.

"The big decline in foreign purchases of homes in the U.S. in the past year is no surprise, given the pandemic-induced lockdowns and international travel restrictions," said NAR Chief Economist Lawrence Yun. "Yet, even with the absence of foreign buyers, the U.S. housing market strengthened solidly."

The study showed that China, Canada, India, Mexico, and the United Kingdom were the top five countries in U.S. residential dollar spending. The annual dollar volume for foreign buyers from China, Canada, and Mexico all dropped by at least 50%, the report revealed. The states that saw the most investment from foreign residential property buyers included Florida, California, Texas, Arizona, New Jersey, and New York.

China and Canada have led the list of foreign investment since 2013, NAR reported.

Depending on the trajectory of the coronavirus in the U.S., economists expect to see international investment gradually return to pre-lockdown levels.

"As travel restrictions loosen and foreign students return to U.S. colleges in the upcoming year, there is likely to be some growth in foreign buying of U.S. real estate," Yun added. "High home prices and the ongoing lack of inventory could, however, pose a challenge for buyers."

All-cash sales accounted for almost two out of five or 39% of international buyer transactions, according to NAR, and buyers from Great Britain paid all cash in 82% of transactions.

Those all-cash offers give international investors a decided edge in a highly competitive market in which American investors already are dueling with hopeful homeowners.

Forty-three percent of foreign buyers purchased the property for primary residence use, and 65% purchased detached single-family homes and townhouses, NAR reported. About half of international buyers purchased a home in the suburbs, and 28% bought a home in an urban area—these figures have held steady over the last six years, the researchers say.

NAR's 2021 Profile of International Transactions in U.S. Residential Real Estate surveyed members of its trade association about transactions with international clients who purchased and sold U.S. residential property between April 2020—March 2021. It is available in full at NAR.realtor.