Foreign investors who purchased U.S. real estate at a brisk pace from 2007-09 are now shying away from the American market, Reuters reported Aug. 18.
During the housing crisis, the U.S. market attracted many international investors pursuing low-cost properties, especially in the Sun Belt markets, but that trend is changing. Real estate brokers told Reuters that they have noticed reduced international interest, particularly in the Las Vegas, Miami, Phoenix and San Francisco markets.
Those markets have now stabilized, and the rise of the U.S. dollar against some foreign currency has made the American real estate market less attractive to foreign buyers, particularly investors.
Reuters reported that international sales of U.S. residential real estate dropped by $14 billion to $68.2 billion for the 12 months ending in March, the most recent data available from the National Association of Realtors. Foreign purchases accounted for 6.5 percent of the $1.050 trillion in total existing U.S. home sales.
NAR recorded purchases from buyers from 68 countries, with Canada, China, Mexico, India and the United Kingdom comprising nearly 53 percent of the sales for the year ending in March. Canadian buyers accounted for the biggest share at 23 percent.
Analysts told Reuters that they expect the U.S. dollar to rise in the coming months and years as the economy improves and the Federal Reserve cuts back on its bond buying program. However, interest rate increases will not affect many foreign buyers who pay cash for their properties.
Michelle Meyer, senior U.S. economist at Bank of America/Merrill Lynch in New York, told Reuters that declining demand from foreigners will help moderate home-price appreciation in the coming years. She expects prices to rise 6.5 percent in 2014, following annual price increases of more than 10 percent through May, according to S&P/Case-Shiller.