HousingWireHousingWire
Just when you think you can anticipate the next trend in real estate, get ready for a new twist.
Home prices increased 5.4% nationally in June when compared with the previous year, according to the S&P CoreLogic Case-Shiller index. Though this is a decrease from the 5.9% pace recorded the previous month, this rate is still very high.
Current home price data shows that affordability remains one of the biggest challenges for buyers today, particularly when coupled with persistently high interest rates.
Meanwhile, sellers who locked in a record-low mortgage rate of 3% or less during the pandemic have been reluctant to sell, limiting supply further and leaving fewer options for would-be buyers.
Despite all the external factors cooling down overall home sales – high interest rates, less spending power among residents, lack of inventory—real estate transactions are still hot in certain key areas.
What, and more importantly, who is behind the growth? Given what is indicated in the National Association of REALTORS report on international transactions, it may not be the buyer you expect.
Florida: an in-demand state despite national low demand trends
Look at Florida, for example. Data points show it’s a microcosm of these market-cooling trends, yet the state remains a real estate growth leader.
In Florida, new housing inventory has not grown significantly: the number of newly listed homes stands at 43,081, an 8.8% increase year-over-year according to Redfin data.
Florida is a top state for new residential construction, yet Florida homebuilders haven’t reported significant strides in new construction sales either. In fact, over the summer, 69% of Florida homebuilders agree that June was slower than expected and is cause for concern, as reported by journalist Lance Lamberts.
Similar trends are happening in other areas across the south and sunbelt in suburban Texas, Arizona and Georgia.
Despite reported stagnated sales and slow growth in inventory, why are these specific Sunbelt areas still considered attractive for buyers? International investment is one answer.
Foreign investors can help fill the buyer gap
Florida remains the top destination for foreign buyers, with 20% of all foreign buyers purchasing in the state, according to the 2024 NAR report.
This is an interesting statistic to watch because foreign investors face different barriers to buying than their domestic counterparts.
Some external factors do impact international investors’ decision making. The slow pace of new construction, amount of attractive inventory, capital controls, short-term rental restrictions, and the impact of high interest rates vs. rental income are all areas of concern for foreign buyers.
But unlike domestic buyers in the current market, foreign buyers have less concern about costs.
The NAR report illustrates this clearly. International buyers who purchased a home in the last year spent record amounts, averaging $780,300 per property and a median of $475,000 home buyers, according to NAR’s report. That’s far above the median spend for all buyers at $392.6K. Higher-end properties are also not off the table for foreign investors – about 18% of international buyers purchased properties worth more than $1 million, the report shows. This doesn’t even take into account the appetite international buyers have for new construction and homes currently under construction, both of which are not accounted for in the NAR report.
What does this mean for the future?
Now that home sales are down for domestic buyers, more inventory is available and foreign buyers can fill this gap, boost home builder activity, local economies and overall housing markets in key states, such as Florida.
The housing market will always have its ups and downs. But even when things are cooling down, sellers, agents and lenders shouldn’t count out international investors. True, these buyers still have plenty of financing, legal and compliance obstacles to navigate in the U.S. homebuying process. But when the buying process goes smoothly, foreign investors remain an essential segment of the residential real estate buyer population.
Yuval Golan is the CEO of Waltz.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: zeb@hwmedia.com
