Why You Are Priced Out of the Real Estate Market
NEW YORK ( MainStreet) Two words explain why you are priced out of the real estate market, especially in Los Angeles, Miami, Las Vegas, Orlando and New York City.
That's according to a startling report from the National Association of Realtors that charted a huge increase in the volume of foreign money chasing U.S. real estate. In the period April 2013 through March 2014, NAR said foreigners pumped $92.2 billion into U.S. homes . That's sharply up from $68.2 billion in the year before period.
Explained NAR President Steve Brown, co-owner of Irongate, Inc. Realtors in Dayton, Ohio: "Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability and an incredible opportunity for investment in their future."
Foreigners are quite specific about what interests them. Forget Cleveland or Kansas City. The Heartland does not entice them . What does? The most popular state by far for foreign buyers is Florida, which claimed 23% of the international money. California placed second at 14%. Texas was third at 12%. Arizona ranked fourth at 6%.
As for city-specific searching, NAR said that foreigners are focused on these five towns: Los Angeles, Miami, Las Vegas, Orlando and New York City.
This will not be a news flash to many. New Yorkers ferociously grumble about foreigners - usually said to be Chinese or Russians - gobbling up prime Manhattan condominiums. In Miami Beach, if anything, the xenophobia is louder because, complain locals, they are priced out of anywhere they want to live.
That is fact. You do not want to go head-to-head against international buyers, for two reasons. The first is that today's housing prices - healing as they are - still look low compared to cities like Hong Kong or London or Paris.
The second: foreign buyers generally are all cash buyers. Said the NAR: "International buyers are more likely to make all-cash purchases when compared to domestic buyers. In 2014, nearly 60% of reported international transactions were all cash." Partly that's because they frequently cannot qualify for a mortgage here - lacking a U.S. credit history it is close to impossible, just as it would be close to impossible for a U.S. buyer to qualify for a mortgage in Hong Kong. Yet partly it is because they still see U.S. property as a safe harbor for dumping cash.
The foreigners also simply have more money. The mean purchase price for their property is $396,000, per NAR. For domestic buyers, it is $247,000.
Said the NAR in its report: "International buying activity apparently was bolstered by continued rising affluence in China, Canada, India, Mexico, and the United Kingdom. In addition, the appreciation of the Chinese yuan and the British pound also made the purchase of U.S. property increasingly affordable for residents of those countries."