Some real estate experts think so — at least in markets such as Florida, Arizona, Texas and Southern California that foreign buyers have long favored.
Apparent bargains are still available in these states. But from rock bottom in recent years, prices are rising as the housing market recovers. This could give foreign buyers an incentive to buy homes now.
Much of the activity is expected to come from Canadians, long the largest single group of foreign purchasers of U.S. residences.
Canadians accounted for 24% of U.S. home sales to foreigners in the year ended in March, according to a report out last month from the National Association of Realtors. China ranked No. 2 at 11%.
A couple factors might spur Canadians to rev up their buying. First, the Canadian dollar is strong, worth $1.019 U.S. dollars. Second, the difference between home prices in Canada and U.S. this year is at its highest in decades, data from BMO Capital Markets show.
Trade group data show that Canadian homes sold for an average price of $350,192 (Canadian) in August.
The median U.S. home price in August was $187,400, according to NAR.
“As the (U.S.) market bottoms and prices edge up, you’re more likely to see more activity from foreign and Canadian buyers,” said Sherry Cooper, chief economist at BMO Financial Group. “The strength of the Canadian dollar vs. the U.S. dollar has been another big incentive for Canadian buyers.”
Canadians are especially partial to Florida and Arizona, says Jed Smith, a NAR economist.
“They buy for vacation purposes and like to have a place in the sun,” he said.
Florida, Arizona, California and Texas account for more than half of all foreigner home purchases, the NAR says.
Besides Canada and China, large numbers of U.S. homebuyers come from Mexico, India and the U.K. These five nations accounted for 55% of international buying.
Most Chinese buyers purchase on the West Coast, Smith says. Those from India and the U.K. tend to buy on the East Coast. Mexicans buy more homes in Texas than anywhere else.
Canadians split along geographic lines. Those from eastern Canada favor Florida, while those from western Canada buy in Arizona.
In Arizona, activity from Canadian buyers has been heavy for several years, says Diane Olson, a real estate agent with United Brokers Group in the Phoenix area. Just about all of her business comes from Canadians, most of whom hail from western provinces.
Meanwhile, BMO’s Cooper says her real estate contacts in Florida tell her that foreign purchases have “increased sharply” in recent months, and that “Canadians are the No. 1 component of that.”
Cooper also says real estate agents in “sun and sand” states such as Florida, Arizona and Nevada are aggressively targeting Canadians through direct mail, email and newspaper ads.
The push coincides with rising home sales and prices here.
Last week NAR said sales of previously occupied homes rose 7.8% in August from July, to a seasonally adjusted annual rate of 4.82 million — the highest level since May 2010. Meanwhile, the Commerce Department said construction of homes and apartments rose 2.3% to a seasonally adjusted annual rate of 750,000 in August.
Although NAR reported the median home price was down slightly in August from July, it still represented a 9.5% increase from August 2011 — the biggest year-over-year price increase since January 2006.
The S&P/Case-Shiller U.S. National Home Price Index showed all three of its headline indexes ended the second quarter with positive annual growth for the first time since the summer of 2010. The national price index rose 1.2% year over year, while the 10- and 20-city composite indexes in June showed annual growth of 0.1% and 0.5%, respectively.
Cities in Arizona and Florida did particularly well. Phoenix logged a 13.9% year-over-year gain to lead all cities in the 20-city composite. Miami prices rose 4.4%, while Tampa’s increased 3.4%.
Rising prices might create a greater sense of urgency among consumers both in the U.S. and abroad to buy homes, Cooper says.
“As long as they think prices are still falling, they are in no hurry to buy,” she said. “But when they think prices are turning around, they will be in more of a hurry.”
As more foreign buyers gobble up homes, the purchases have a ripple effect on local markets. Phoenix area real estate agent Olson says she has received a growing number of calls from local sellers because they know she does business with Canadian buyers who pay in cash.
Cash Is King
“It makes a big difference when you have people paying cash for homes,” Olson said. “People who had been sitting on the sidelines are now willing to put their homes up on the market.”
But while an increase in international buyers might bolster key markets in sun and sand states, it probably won’t do much to move the needle in the U.S. market as a whole.
Only about 2.5% to 3% of overall buying activity comes from foreign buyers of vacation and investment homes, the NAR’s Smith says. Another 2% to 2.5% comes from foreign buyers who are moving here.
Those percentages don’t change a great deal from year to year, Smith says, although they fluctuate month to month.
NAR data show a general decline in the share of U.S. transactions by nonresident foreigners since March 2011, when the percentage hit a three-year peak of about 3.7% of overall transactions. In August, that percentage was 1.75%. Some observers say purchases by Canadians tend to dry up in the summer.
Smith expects the figure to return to normal levels in coming months.
“As we see the housing market go up, and as foreign currencies go up, we will move back to 2.5% to 3% of the overall U.S. housing market,” he said.
In terms of dollar value, foreign buyers of nonresident vacation or investment homes typically account for about 4% to 5% of the U.S. total. Foreign buyers who are moving here account for another 4% to 5%.
One reason the dollar value is higher as a share of the total is that foreign buyers tend to go after more expensive properties than typical U.S. buyers, Smith says. More than 60% pay in cash.
“We have many multimillionaires moving into southern Florida buying trophy properties,” he said.
NAR estimates the total U.S. home market at $928.2 billion for the 12 months ended in March 2012. International sales during that period are estimated at $82.5 billion, or just under 9%.
Still, that dollar value represented a 24% jump from the $66.4 billion in foreign sales for the 12 months ended in March 2011.
“There was a significant increase in the price of the houses during that time, and (foreign) purchasers went more upscale,” Smith said. The increase “just tells you that more money is being spent.
“I think it shows that during that time frame the foreign currencies had a little more value,” Smith added. “Many international markets were also in turmoil, so the U.S. was a good place to put your money.”
NAR data show that 26% of international home sales in the U.S. are located in Florida. Other leading states are California, at 11% of the international total; Texas, 7%; and Arizona, 7%.
Gradual Growth Seen
Smith doesn’t expect international sales to have a huge impact on the overall housing market, though he does figure the share will grow, if only slightly, in coming years.
“What we will see is a gradual increase of purchases by foreigners in this country,” Smith said. “They buy here for a number of reasons: They want a second home, or to earn a profit and to diversify their assets.
“As foreigners become increasingly wealthy, we will see a little bit more of that. But I don’t think you’ll see it become a major market here.”