Many paying cash as dollar falls in value
Wednesday, January 23, 2008
By Tom Kelly
Inman News
Two years ago, while attending a home-builder convention in Orlando,
Fla., a top-producing local real estate agent was bubbling over the
interior design features of a vacation home.
"All of my international buyers are just going to love this," the agent
said. "I can't wait to tell them what's now available."
I was intrigued. How many international buyers did she have?
It turned out that more than 60 percent of the agent's clients were
buyers from overseas. And, she is not the only real estate professional
cultivating the foreign market. According to the National Association of
Realtors, 65 percent of Florida Realtors had at least one international
customer, and the trade group's "Profile of International Home Buying
Activity" indicated that at least 7 percent of home sales in Florida were
to foreign purchasers.
"When you consider how the U.S. dollar has slid in value compared to
other international currencies, you begin to understand why investors are
purchasing real estate in this country," said Mitch Creekmore, senior vice
president of Stewart Title Co. "Real estate prices here are a bargain
compared to many areas in western Europe and Asia."
The currency environment probably played a major role in the proportion
of foreign buyers who paid cash for their homes. The cash group (28
percent) was much greater than that of the general U.S. home buyer
population (8 percent). In addition, international buyers who can afford a
home abroad often are from wealthier households with higher monthly
incomes and cash reserves. Also, the tax benefits of mortgage-interest
deductions may not apply -- depending on the buyer's home country's tax
code -- which lowers the incentive to take out a mortgage.
Buyers come from around the world to buy different types of properties
at various prices. They plan on using the U.S. property for different
reasons. Here are some common factors from NAR:
- The typical international buyer purchased a single-family home or
townhouse. The primary purpose in purchasing the home was as a vacation
venue for family and friends.
- The median sales price paid by the typical foreign buyer was
$299,500, and the purchase was financed through a mortgage loan.
- The typical foreign buyer in the U.S. spends 4.2 months in his or
her U.S. property. U.S. visa rules allow nonresidents (unless under a
student or work visa) to remain in the country for only six months.
Because foreign buyers are nonresidents of the U.S., most of them plan
to spend less than six months in their U.S. home. A small percentage --
6 percent -- spend less than two weeks. Forty-four percent intend on
using their U.S. property for one to six months.
While the top three state destinations for foreign home buyers in the
NAR study were Florida, California and Texas, significant overseas buyers
surfaced in all areas of the country. Dolly Lenz, a New York City
residential specialist who led all salespersons with $748.3 million in
gross sales in 2007, reported that approximately 35 percent of her
customers were second-home buyers and about 50 percent of that group lived
outside the U.S.
The median price foreign buyers paid for a home was $299,500 in 2006 --
significantly greater than the national median sales price of $221,900.
More than 20 percent of international buyers purchased a home that cost
between $200,001 and $300,000. Fourteen percent of foreign home buyers
paid more than $750,000 for their U.S. property, according to the NAR
study.
Among international clients, the top five countries of origin were
Mexico, the United Kingdom, Canada, India and China. Although more than
two-thirds of Realtors report that their international clientele accounts
for about the same level of business during the past five years, fully a
quarter of them indicate that their international business has increased.
Despite the recent slowdown in the U.S. housing market, U.S. real estate
is still a popular option for many people outside of the country.
Foreign buyers from the United Kingdom and China paid the most for
their U.S. property -- a median of $335,000 and $340,000, respectively.
Those from Mexico paid the least -- $227,300. Buyers from Canada were more
likely to have purchased homes priced over $1 million. The median price of
homes purchased by Indian buyers -- $292,000 -- was closest to the overall
median price paid by all foreign home buyers.
The American dream of home ownership is more popular than ever --
especially overseas.
To get even more valuable advice from Tom, visit his
Second Home Center.
***
What's your opinion? Send your Letter to the Editor
to opinion@inman.com.
Copyright 2008 Tom Kelly
BACK TO
www.sellcapecoralflorida.com
