Earlier this year, the National Association of Realtors (NAR) released its annual report on international transactions in U.S. residential real estate. Its findings were surprising — not for what was included, but for what was missing.
The report, which covers April 2023 to March 2024, highlights membership survey data and measures the volume of U.S. residential real estate transactions with international clients. The report is one benchmark on which real estate and mortgage experts rely to understand where the market’s headed and what barriers are keeping foreign buyers from investing.
This year’s report includes some expected and helpful data points around common foreign investor barriers, such as specific hurdles like financing complications and long timelines across time zones. A closer look at the data shows that key indicators for foreign investors are missing. Real estate investors and mortgage lenders and originators need to read between the lines when evaluating this report.
Positive signs
One positive signal from this year’s report is that interest from foreign buyers in the U.S. housing market remains stable. The number of real estate agents who worked with international clients held steady at 15% — only a 1% decrease year-over-year, according to the report.
Even amid a lack of housing stock available on the market, slow pace of new construction and the current high interest rates, foreign buyers are interested in the U.S. market. Why? U.S. real estate is the gold standard for global real estate investing. Even today, the U.S. market remains more secure than others around the world.
It’s great that investors, agents and bankers have the latest statistics about the state of foreign investing. Knowing that interest in the market is strong is only one piece of the real estate puzzle for investors.
Challenges ahead
Another data point that jumps out from this year’s NAR report portends challenges ahead for foreign investors. Financing and currency issues remain barriers for foreign buyers, particularly with respect to mortgage lending. Seventeen percent of foreign investors are unable to secure a mortgage and another 11% face difficulties over currency conversions, according to the report.
It’s no surprise that approximately half of foreign buyers pay for their properties in cash, while the other half are forced to opt out or miss investment opportunities due to unresolved financing issues. These problems shouldn’t be happening at all.
The real estate ecosystem should be friendly to foreign investors, who have long backed the U.S. market. Solutions should be available to more upstart investors who may not have the capital to pay all cash up front.
There are also many ways these issues could be addressed: Streamlined legal and compliance regulations, dedicated financing support teams for foreign investors, greater opportunities through foreign partnerships with banks or internationally friendly mortgage products could all lead to better outcomes. If investing tools were more adaptable for foreign investors, it’s possible fewer potential investors would opt out of the market.
Excluded data
Looking deeper into the NAR report, it’s clear a few data points are missing — statistics that would lead to a more accurate representation of the state of the market. For example, the report is focused only on existing homes sales. It does not include any statistics on homes under construction.
Construction and development is a huge area of opportunity for this category of investor as building management is provided, leading to less hassle for foreigners to handle from afar. Omitting data about the state of planned and under-construction inventory is a missed opportunity.
The report is also missing data on new visas for foreign nationals and doesn’t provide per capita investment for international. Many foreign clients want to visit the property and many lenders, to guarantee financing, want the borrower to hold a U.S. visa. This statistic would be helpful to know, as it can indicate more interest in the market than this report shows.
And it’s impossible to consider the report without looking at the U.S. housing market as a whole. With how few homes are for sale, the slow pace of building new homes and the effect of high interest rates and inflation, it’s difficult to see a truly objective picture of the current market trends for foreign real estate investors.
Overly pessimistic
Real estate agents, bankers and mortgage experts, hear this simple truth: foreign buyers want to invest in the strength and reliability of the U.S. real estate market. What matters to investors, then, is navigating the ups and downs of the market, finding foreign investor-friendly opportunities, leveraging accessible financing solutions and sidestepping the many, many obstacles that get in the way of purchasing their dream property.
It’s true that the NAR report showcases a slice of what kinds of investments and purchases foreign investors are making today. The report reaffirms with current data that, despite the challenges, the U.S. market remains blue-chip for foreign investors. But the report’s outlook on the foreign market could be argued to be more dire than the in-the-field reality. If a few more nuanced data points were included, investors could better see that opportunities abound for them and, with better solutions for financing, currency and compliance, investors will want to remain engaged.
