Editor’s note: The second-home or vacation-home market is a booming niche that’s vastly different than the market for primary homes. Many foreign buyers are playing a larger role in second-home purchases in the U.S., while many domestic buyers are crossing the border for their second homes. In this three-part series, we examine the fast evolving second-home market, looking at the trends of foreign buyers coming to the U.S., U.S. buyers looking outside the borders, and how booming second-home markets impact affordability for everyone else. (See Part 2: Priced out of paradise and Part 3: Baby boomers spark second-home surge abroad.)
It’s not exactly correct to say the Miami area is a popular second-home market for international buyers, says Mark Zilbert, president of Zilbert Realty Group in Miami Beach, Fla.
“This isn’t the second house. This is the sixth house. Probably 90 percent of the foreign buyers in Miami are buying a property here to add to their holiday portfolio of homes,” he said.
“Miami has shown up as being the place to have a place. That has definitely fueled the amount of growth we have here.”
The entire state is a popular real estate stomping ground for foreign buyers, with buyers from Europe and Latin America, in particular, participating in the hurricane-resistant real estate frenzy that gripped domestic buyers, too.
In an effort to quantify and understand this population of international buyers, the National Association of Realtors trade group, in cooperation with the Florida Association of Realtors, teamed up to produce a “Profile of International Home Buyers in Florida” report.
This report reflected what real estate agents in the state say they already know: International buyers are playing a significant role in Florida’s real estate market.
Between May 2004 and May 2005, about 15 of every 100 home sales in Florida, went to international buyers, according to the report. This is based on a May 2005 survey of 986 Florida Realtors who closed 1,844 home sales transactions to non-U.S. residents in the previous year.
Europeans accounted for 58 percent of all Florida home purchases by foreign buyers, and buyers from the United Kingdom were responsible for one-third of all international purchases, according to the survey
Following the United Kingdom were Germany, at 7 percent; Canada, 7 percent; Venezuela, 7 percent; Colombia, 5 percent; Brazil, 3 percent; and France, at 3 percent. An assortment of other countries made up the remaining 35 percent of international buyers.
Roughly half of the survey participants said they have seen an increase in the percentage of international home buyers in the past five years.
Zilbert, who specializes in selling Florida condos to international and domestic buyers, said the bulk of real estate investors he works with reside in other countries, and many of the pre-construction condo buyers he works with in Miami are international real estate investors. Zilbert’s company operates Web sites that offer pre-construction condo listings and information on flipping condos.
While the Miami market has historically been a strong market for South American buyers, “that’s changed completely, 180 degrees,” he said. “There is such a strong influx now from Europe. I’m now starting to see India, the Middle East, a little bit of the Far East. There is a tremendous number of younger Russian citizens who have done very well for themselves and are making enormous investments.
“The whole world is discovering it now. It is still relatively well priced. It still makes a lot of sense for Europeans to buy here.”
Lately, Zilbert said he has seen a growing number of buyers from France. “France has been going through some tough times,” he said, which has driven some residents there to look elsewhere for real estate. With his Latin American business, it’s “literally the flavor of the month,” he said. “Argentina was hot for awhile, now it’s quiet. Venezuela tapered, now it’s picking up again. The most prevalent source for luxury buyers, hands down, is Mexico. When I sell a property that is a million dollars, plus, I would say seven and a half out of 10 times it’s somebody from Mexico.”
The survey found that international buyers tend to spend more for their homes than domestic buyers. The median price of a single-family home and townhouses purchased by international buyers in Florida was $299,000, compared to a median price of $196,200 for all existing single-family home buyers in the state.
About 38 percent of foreign buyers purchased the home as a vacation home for family and friends, while 37 percent purchased the home as rental property for investment and 17 percent needed a second home for part-time work in the United States, according to the National Association of Realtors report. About 27 percent of foreign buyers planned to use the property for three to six months each year, while 19 percent planned to use the property for one to two months, 17 percent planned to use the property for two to four weeks, and 10 percent planned to use the property for less than two weeks, with 27 percent undecided, according to the report.
Most of Zilbert’s international clients are looking to buy water-facing high-rise condo units or waterfront homes with docks, he said, though he has witnessed a micro trend in some international vacation-home buyers seeking inland homes as waterfront properties in Florida have escalated in price.
International buyers are “the only consistent year-round buyers we have. Every other base is more seasonal,” Zilbert said. “The overall message is (international business) is growing, if anything. It is by no means slowing down.”
Some international real estate investors will purchase properties virtually by e-mail these days, after conducting research online, Zilbert also said. “My average sales time is three hours” for pre-construction sales, Zilbert said. “My international buyers probably buy twice as quickly as my domestic buyers.”
The Realtors survey found that about 36 percent of international buyers paid cash for a home in Florida, while about 8 percent of all U.S. domestic home buyers paid cash for a home in 2004, according to a separate National Association of Realtors study.
An economics group at Wachovia Corp., a large financial services company, issued a report in September titled, “How Sustainable Are The Forces Driving Florida’s Latest Housing Boom?” that highlights trends in international real estate business in Florida.
International buyers are drawn by the usually sunny weather and historically affordable prices in Florida, according to the Wachovia economic report. “In addition, many Latin American buyers have historically sought homes in South Florida as a refuge from potential political strife in the home countries. This last factor has been particularly important in recent years, which have seen a huge influx of Venezuelan buyers.”
The report also states, “The strong demand for second homes and vacation properties from overseas buyers is…likely to remain strong for some time to come. The euro and British pound remain strong relative to the dollar, while U.S. property prices remain considerably lower than comparable properties in Europe.”
But these good times may not last, according to the analysis. “With economic growth slowing in Europe and the U.S., and housing values rising less rapidly in the U.K., demand may cool off slightly over the next few years.” The second-home market for U.S.-based buyers “will also likely cool off a bit,” the group reported.
Florida is a hotbed for real estate agents who specialize in international business.
The National Association of Realtors offers a Certified International Property Specialist designation for Realtors who focus on international real estate business, for example, and a substantial share of the agents in this group work in Florida. An estimated 1,500 real estate professionals are members of the Certified International Property Specialist Network, and 470 members of this network, or about one-third, are based in Florida. By comparison, there are 166 members of the network in California, and 54 in New York.
Liza Mendez, broker-owner at Pedro Realty, a company that specializes in the Miami and South Florida real estate market, said she specializes in working with many Central American and South American clients who are either buying or selling property in Florida. Mendez is a member of the network for international property specialists.
Her clients typically have roots established in the United States, she said, tend to be highly mobile, and are not looking for luxury properties. “They’re coming and going,” she said, adding that her international business has been fairly steady during her 20 years in the business.
Mendez said high property taxes and rising prices in the state are discouraging to some of the buyers that she works with. “Some of them are finding the prices so high that the returns are just no there,” she said, though inventory has begun to expand, giving buyers “a little bit of breathing room.” And other clients are wondering “whether this is the best time to sell,” she said, given some softening in the market. She has seen recent activity in the real estate market with residents of Costa Rica and Mexico.
While hurricanes during the past two years have wrecked Florida and other Gulf Coast states, Mendez said her clients don’t appear to be phased by the storms. “It’s just par for the course,” she said. “It’s just part of where you live.”
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