NAR: International sales to shape future real estate demand
WASHINGTON – May 22, 2017 – U.S. real estate markets are becoming increasingly international. Two trends – changing demographics from immigration and a growing interest from foreigners – are positioned to bolster home sales activity and prices, according to speakers at an international real estate forum organized by Realtor®University’s Richard J. Rosenthal Center for Real Estate Studies at the 2017 Realtors Legislative Meetings & Trade Expo.
NAR’s Danielle Hale, managing director of housing research, was joined by Alex Nowrasteh, immigration policy analyst at the Center for Global Liberty and Prosperity at the Cato Institute, to share insights on the current and future impact of foreign buyers and immigration on the U.S. housing market.
According to Nowrasteh, the rising U.S. population is being bolstered by a growing number of immigrant households, and their presence will continue to transform the housing market. Referring to data from the 2015 American Community Survey, Nowrasteh said of the roughly 321.4 million residents in the U.S., 278.1 million were born here (natives), and the remaining 43.3 million – 20.7 million naturalized citizens and 22.6 million non-citizens – are foreign-born.
“Immigration affects rents and home prices far more than it affects the labor market,” said Nowrasteh. “An expected 1 percent increase in a city’s population produces a 1 percent uptick in rents, while an unexpected increase results in a 3.75 percent rise.”
Nowrasteh, pointing to studies conducted on immigration and housing, said that the effects of immigration on real estate are localized, with most of the impact felt where immigrants tend to reside: low-to-middle-income counties.
Each immigrant adds 11.6 cents to housing value within that county. In 2012, 40 million immigrants added roughly $3.7 trillion to U.S. housing wealth.
Referencing the Legal Arizona Workers Act that went into effect on Jan. 1, 2008, Nowrasteh said a decline in population resulting from that law likely exacerbated the home price drop the state saw during the downturn. Fewer households purchasing or renting property subsequently lead to higher vacancies and lower prices.
“Immigration is the best way to increase population, housing supply and prices,” he said.
Hale referenced NAR’s 2016 Profile of International Activity in U.S. Residential Real Estate released last July. She said foreigners increasingly view the U.S. as a great place to buy and invest in real estate. She noted the upward trend in sales activity from resident and non-resident foreign buyers, in the past seven years, with total foreign buyer transactions increasing from $65.9 billion in 2010 to $102.6 billion in the latest survey.
“A majority of foreign buyers in recent years come from China, which surpassed Canada as the top country by dollar volume of sales in 2013 and total sales in 2015,” said Hale. “Foreign buyers on average purchase more expensive homes than U.S. residents and are more likely to pay in cash.”
Where will future foreign buyers settle?
Hale said that in NAR’s latest survey, roughly over half of all foreign buyers purchased property in Florida (22 percent), California (15 percent), Texas (10 percent), Arizona or New York (each at 4 percent). Latin Americans, Europeans and Canadians – who tend to buy for vacation purposes in warm climates – mostly sought properties in Florida and Arizona. Asian buyers were most attracted to California and New York, while Texas mostly saw sales activity from Latin American, Caribbean and Asian buyers.
NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate survey is scheduled for release this summer. Looking at the past year, Hale said monthly data from the Realtors Confidence Index revealed a rise in responses from Realtors indicating they worked with an international buyer.
“Chinese buyers are once again expected to top all countries in both total dollar volume and overall sales,” said Hale.
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