The global recession and credit crunch are taking a toll on Realtor deals with foreign buyers, even as competition heats up between a growing segment of agents and brokers who specialize in working with these buyers.
Fewer than one in four Realtors (22.5 percent) surveyed by the National Association of Realtors in the group’s latest annual study reported having at least one international client in the year ending May 2009. That’s down from 32 percent in NAR’s first survey gauging activity by international homebuyers, conducted in 2007, and 26.2 percent in last year’s survey.
An even smaller group of Realtors — 11.8 percent — reported a successful transaction involving a foreign buyer in the last 12 months, down from 18 percent of those surveyed in 2007 and 13.3 percent last year.
While the number of Realtors working with and completing transactions for international buyers has declined in recent years, the percentage of Realtors who say foreign buyers make up more than half of their business is increasing.
In the latest survey, nearly one in 10 Realtors (9.5 percent) said more than half of their transactions in the last 12 months involved international clients, up from 8.2 percent in last year’s survey. And 5.2 percent of Realtors said foreign clients were involved in more than three out of four of their sales, compared with 3.9 percent in last year’s survey.
"Many Realtors on the buy-side of a transaction have told us that they are familiar with the language, customs, culture and needs of the specific nationality of buyers served, frequently having either been born in that country or having parents from the country," NAR researchers said in their report.
The credit crunch had a clear impact on sales to international buyers, with nearly half (46 percent) paying cash for their property — up from 43 percent in last year’s survey and 28 percent in 2007. An estimated 154,000 homes were sold to foreign nationals for the year ending in May, down 9 percent from last year’s survey.
When international clients did not close a deal on a U.S. property, 33.4 percent of the 3,785 Realtors surveyed said the reason the deal fell through was because the buyer could not obtain financing. In California, obtaining financing was the No. 1 impediment to closing a deal with an international buyer.
Creditworthy international homebuyers may have difficulty obtaining a mortgage because their credit profiles don’t correspond with those expected by U.S. lenders, NAR researchers said in their report on the results of the survey, 2009 Profile of International Home Buying Activity.
Nevertheless, many foreign homebuyers — defined as non-citizens who live primarily outside the U.S. and who are not in the country on a temporary student or work visa — may be able to pool family money to purchase property, the report said. …CONTINUED
Foreign buyers tended to pay more for a home than domestic buyers — the median price paid by international clients during the survey’s time frame was $247,100, compared with the national median existing-home price of $198,100 in 2008 and $178,400 as of July 2009.
But international buyers are spending less than they have in the past — the 2007 survey reported the median price paid by foreign buyers as $299,500, and last year’s survey put the number at $297,400.
U.S. immigration law prohibits foreigners from remaining in the country for more than six months at a time unless they are in the country under special student or work visas.
Most international buyers purchased a U.S. home as a vacation home (33.9 percent), or as an investment and vacation home (23.5 percent), while 18.3 percent purchased homes as residential properties for investment, Realtors surveyed by NAR said. Realtors said they did not know the primary purpose of a home purchase by a foreign buyer 20.8 percent of the time.
The proportion of buyers from Europe (30.8 percent), North America (27.5 percent), Latin America (8.9 percent) and Africa (2.9 percent) all registered declines from last year’s survey, but the share of buyers from Asia — 25.2 percent — was up from 2007 (23.8 percent) and 2008 (22.4 percent).
The share of buyers from Oceania (which includes Australia, New Zealand and other island nations in the Pacific Ocean) also increased from 0.7 percent last year to 2.2 percent in the latest survey.
The top five countries of origin for international buyers were Canada (17.6 percent), the United Kingdom (10.5 percent), Mexico (9.8 percent), India (8.5 percent) and China (5.4 percent). Canada, the U.K. and China registered declines from last year’s survey, while the share of buyers coming from Mexico and India increased.
The South was the most popular destination for buyers from Europe and North America — 61.3 percent of Europeans bought in the region — while buyers from Asia were more likely to buy in the West (36.4 percent) than the South (29.1 percent), Midwest (21.8 percent) or Northeast (12.7 percent).
Florida accounted for 23 percent of U.S. property purchased by foreign buyers, followed by California (13 percent), Texas (10.7 percent) and Arizona (7.1 percent). Those states have been the top destinations for internationals buyers in all three years of NAR surveys.
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