US property purchases by foreign buyers fell 36% between April 2023 and March 2024 to a 15-year low, according to the National Association of Realtors. Benzinga looks at some of the factors that may have contributed to such a dramatic decline.

It's not hard to imagine that the comparative strength of the US dollar scared a few buyers off. NAR data also indicated totals of 30,300 fewer purchases and $42 billion less money spent than in the previous reporting period. That amounted to a 21.2% decrease in money spent on property purchases. The report showed the top five countries that produced foreign buyers during the reporting period were:  Canada -13%

• China -11%
• Mexico -11%
• India -10%
• Colombia -4%

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The NAR report also illuminated another trend. When foreign buyers invest in American real estate, they go big. They spent an average of $780,300 per purchase, which is 21.2% more than the same period in 2022-2023. According to the NAR, 18% of the purchases were for properties over $1 million. Overall, foreign buyers’ prices were the highest since the NAR began collecting this data in 2009.

Cash was king. NAR data showed that all-cash purchases accounted for almost half of the deals, with 68% of Chinese buyers and 69% of Canadian buyers paying the full price upfront. A little less than half of the purchases by Mexican and Colombian nationals (44% and 42%, respectively) were made in cash. By contrast, NAR data shows that only 28% of purchases by Americans were made in cash.

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The report attempted to account for this disparity by saying, "Due to tight competition among the limited homes on the market, differing currency exchange rates, difficulty in obtaining mortgage financing, and other reasons, foreign buyers tend to make all-cash purchases." That could certainly be the case, but high interest rates are currently keeping lots of prospective American homebuyers on the sidelines.

Despite Americans' relatively easier access to financing, their foreign counterparts flexed significant buying power. Chinese buyers paid an average of $1,255,600, while Canadians paid an average of $834,400. Indian citizens who made deals during the reporting period paid an average of $751,800 for their properties. Those high prices may also be reflective of where many of the purchases were made.

The West Coast has long been a preferred destination for people of Asian descent investing in the U.S., and the report indicated 25% of Chinese buyers chose the Golden State. It's not uncommon for what would be a starter home in other parts of the country to cost upwards of $1 million in the Los Angeles, San Francisco, or San Diego metropolitan areas. 

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There was also a consistent theme in terms of buyer motivation. Just under half (45%) of the buyers planned to use the property as a vacation home or passive income opportunity. So, the purchase pullback could also indicate would-be buyers believe they can get a better return on their investment in other sectors, such as big tech, REIT, or dividend stocks.

Florida was the most popular state with 20% of all purchases. However, Florida's real estate market has been unsettled by a combination of high insurance premiums and falling prices, especially in the condominium sector. Uncertainty in Florida and high prices in California could also help explain the dramatic pullback of foreign investment noted by the NAR report. A larger, still undiscovered trend could be in play if 2025 shows similar declines. 

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