Challenging conditions in the U.S. housing market, along with tighter currency controls by the Chinese government, caused a stunning drop in foreign demand for American homes. The dollar volume of homes purchased by international buyers from April 2018 through March 2019 dropped 36% from the previous year, according to the National Association of Realtors. The decline was due to a drop in the number and average price of purchases. Foreigners bought 183,100 properties with a total value of about $77.9 billion, down from 266,800 valued at $121 billion in the previous period.
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The Chinese were the leading buyers for the seventh consecutive year, purchasing an estimated $13.4 billion worth of residential property. Yet that was a 56% decline from the previous 12 months and comparatively the most significant percentage drop of all foreign buyers. Chinese economic growth slowed to 6.3% in 2019 compared with 6.9% in 2017, when the previous buyer survey began. The Chinese government also tightened its grip on the outflow of cash to purchase foreign property.
The Chinese may also be souring on U.S. real estate due to the current political climate. Anecdotally, real estate agents in California have seen a pullback in Chinese buyer demand. Southern California had been particularly popular with Chinese parents hoping to send their children to American colleges.
While the Realtors point to the steep run-up in home prices over the past several years, as well as the shortage of existing homes for sale, foreign buyers have long been big players in the newly built housing market, where homes come at a price premium.
There is an ample supply of move-up range new homes for sale, especially in areas where foreign buyers have shown the most interest, such as the Inland Empire of Southern California as well as Texas and Florida. It may just be that foreigners don’t see the U.S. housing market as the most lucrative investment anymore. Home values are already gaining less than they were a year ago, and in some significant markets, values are falling.