'The builder had sold 130 homes the first day': Foreign buyers may add to housing woes, prices

Vickie Arcuri, a Florida real estate agent, is already seeing increasing foreign buyer interest following the 2020 pandemic. The number of visitors to their website from other countries has doubled.
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When real estate agent Nitin Gupta was visiting a new residential development in the Dallas-Fort Worth area with two clients in June, a sales representative for the construction company told him that all of the units had disappeared.
The client had planned to sell 100 houses to investors, and he wanted to build around 1,500 of them. Investors came to the site the day before, the agent told Gupta, and another agent introduced the houses to a group of buyers in China via Zoom.
“He said, 'People said I want one, I want two, I want three. Boom, boom, boom, ”recalls Gupta. "The agent sold around 50 to 60 houses and the developer had sold 130 houses on the first day."
While the global COVID-19 pandemic crushed US home sales to overseas buyers last year, local buyers should be prepared for a rebound in competition from other countries in the next 12 months, economists say.
Texas, the state of Gupta, is the third most popular destination for overseas property buyers between April 2020 and March 2021, according to a recent report by the National Association of Realtors. Florida and California claim the top two spots, while Arizona, New Jersey and New York follow Texas.
Chinese clients have been the top U.S. residential real estate buyers by revenue dollar volume for a decade and remain the No.
The housing market is becoming more competitive
The downward trend was reflected in international buyers of all nationalities (China, followed by Canada, India, Mexico and the United Kingdom) who sold 3% or 54.4 billion US dollars of homes existing in the US from April 2020 to March 2021. Dollars bought, which is 27%. Decrease compared to the last 12 month period.
The decline in foreign real estate investments in the past year is hardly surprising in view of the global pandemic and the associated travel restrictions. But what will happen when vaccinations pick up worldwide and things get back to normal? Will pent-up foreign demand put pressure on the US housing market, which is already struggling with low housing stocks and rising prices?
Economists say you should expect to compete with these buyers, especially since a large percentage of overseas buyers tend to make cash-only offers. These deals, preferred by sellers for providing security, accounted for 39% of international buyer transactions from April 2020 to March 2021, according to NAR.
Dollar value of existing home purchases by foreign buyers
That's significant as demand for U.S. real estate by foreign investors is driving home prices soaring concerns about housing affordability, says Benjamin Keys, professor of real estate at the University of Pennsylvania's Wharton School.
According to a 2020 paper co-authored by Keys, house prices in U.S. zip codes with a high foreign-born Chinese population continued to rise 8 percentage points from 2012 to 2018.
Even without foreign buyers driving the market higher, the median price of existing U.S. homes hit $ 363,300 in June, up 23.4% from June 2020.
Main destination for overseas buyers from Canada
Home prices exceed $ 300K
The average selling price for existing properties from international buyers from April 2020 to March 2021 according to NAR reached $ 351,800, 15% more than the average price of $ 305,500 for all existing properties sold in the US.
The price difference primarily reflects the location and type of real estate desired by foreign buyers. Chinese buyers had the highest average purchase price at $ 476,500, and more than a third bought real estate in California.
The number of homes for sale has improved since June as more construction work begins for higher priced homes and more existing homes come onto the market. Still, there is still a shortage of cheaper homes, says Lawrence Yun, chief economist at NAR.
“Not being so active in a foreign buyer's market last year was a welcome change, especially when we were struggling with a severe housing shortage,” says Yun. "Now that the vaccinations are progressing, it is inevitable that there will be a lot of interest in the next 12 months."
Dr. Lawrence Yun
The housing markets are attracting overseas investors (which peaked at 10% of existing home sales in 2017) looking for healthy returns, vacation homes, safe havens for their money, or a way to bypass tax restrictions and anti-corruption in their home countries, Keys says.
Foreign investment had steadily increased from $ 66 billion in 2009-2010 to $ 153 billion in 2016-2017, but declined thereafter, dropping to $ 54 billion that year.
Experts have blamed the decline on factors such as the Chinese government's capital controls, a weakened Canadian dollar making it more expensive for Canadians to buy homes in America, and increasing anti-immigrant rhetoric.
During the height of the pandemic, it is "impressive" that the number of foreign buyers has remained so high given the restrictions and international bans, Keys says.
Buyer from China
Foreign buyers used virtual tours to view homes and make their purchases remotely.
In the coming months, foreign demand could pick up and worsen the already tight housing market, Keys says.
Millennials, low interest rates keep the market crowded
“The interest rates are very low. A generation of millennials who did not have the financial means to buy houses are aging into (their) years of purchase, ”he says. "And those whose jobs have survived the pandemic are now in a good financial position to buy a home."
The addition of overseas buyers could cause home prices to continue to rise in states like Florida, California, Texas, New York, and New Jersey (the top 5 most popular states among international buyers), benefiting and making things more difficult for current homeowners makes those who want to enter the market.
Brokerage sign advertises that a home for sale is now under contract.
Vickie Arcuri, a real estate agent specializing in Miami, Fort Lauderdale and Palm Beach real estate, says she is already seeing increasing interest from overseas buyers.
The number of visitors to their website from other countries doubled in 2021 compared to 2020, with visitors from Canada accounting for 7.5% of the traffic.
"The overseas buyers I spoke to are planning future trips to South Florida to view properties," says Arcuri, who has previously sold properties to buyers from Canada, Colombia, Venezuela, Italy, Austria and the UK, visited and viewed several properties the real estate with the buyers virtually via FaceTime, Whatsapp and Zoom.
Arcuri says she's also had some building security questions and concerns since the Surfside Miami apartment collapsed.
Do you know your Chinese real estate clients
However, she anticipates stronger demand for condominiums in the next year. Real estate agents in other states said they had not heard of such concerns.
In the most popular state for Chinese buyers, California's Jojo Romeo learned what to avoid when it comes to customers from that country.
In the most popular state for Chinese buyers, California's Jojo Romeo learned what to avoid when it comes to customers from that country.
Romeo, a real estate agent in Irvine, doesn't show a house with the number four in its address. A house at a T-junction (where two streets meet a vertical junction) is another no-go. Ditto if there are stairs leading to the door.
"These are things I do research in advance," says Romeo, who was Feng Shui certified (the ancient Chinese practice that depicts the flow of energy) when Chinese buyers started Irvine about a decade ago for its good schools and his Visit investment potential. "I don't even bother to show properties that don't meet these criteria."
California has long been the number one destination for Chinese investors in US residential real estate. In the 12-month period from April 2019 to March 2020, 35% of China's $ 15 billion in US residential real estate investment went to the Golden State.
Romeo sold a house in Irvine to a family from China in March for just under $ 3 million. All of the viewing was done through FaceTime and the purchase of the property was handled by an authorized friend.
“The clients didn't speak English, so their daughter, who is around 17, was the translator,” she says.
The family wanted their son, who started high school this fall, to get an American education, Romeo says.
Last month, mother and son came to their new home in Irvine, which Romeo had renovated and furnished.
"Education is their top priority and that's why they move here," she says.
Nitin Gupta
Gupta in Texas says he took five calls a day about homes. Its state is a popular destination for Indian buyers.
One of the area's biggest attractions is affordability.
"You can buy something decent for $ 300,000 to $ 400,000 and still make money," he says when you sell later. "There are also a lot of new builds, which Indian buyers like too."
But prices have skyrocketed.
Less than two years ago, Gupta says, new buildings could be bought for $ 250,000. Now the price of admission is closer to $ 400,000.
"Texas is the new California," he says.
Swapna Venugopal Ramaswamy is the real estate and business reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal
This article originally appeared on USA TODAY: Housing Market: Foreign Buyers May Contribute to Delivery Problems and House Prices

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