2 States Where Foreign Investors Are Propping Up the Housing Markets
The American dream of owning one’s own home has been fading, despite the fact that, in many of the nation’s biggest cities, it has become cheaper to own than to rent, as housing prices decline and demand pushes up the value of rental properties. With so much economic uncertainty, 30-year fixed mortgages aren’t quite attractive, and buying a home doesn’t make fiscal sense for someone whose future income is uncertain.
The housing market has been flooded with foreclosures being sold by banks at a fraction of what their previous owners paid for them in blood, sweat, and tears. Property values are declining and now those who invested in homes years ago yearning for a profit are left holding the check. Those lucky enough to sell their homes are a bit wary of buying another, with renting offering decidedly less risk.
But while home-ownership might look like a trap to many Americans, the American dream is still alive — abroad. Foreign sales have been the one point of strength in an otherwise gloomy housing market. In the 12 months ending in March, international sales of U.S. properties totaled $82 billion, up from $66 billion a year earlier, according to the National Association of Realtors. Buyers in Canada (NYSE:EWC) led the way, making up 23% of foreign sales, followed by China (NYSE:FXI), Mexico (NYSE:EWW), the U.K. (NYSE:EWU), India (INF), Argentina, and Brazil (NYSE:EWZ).
Though international sales currently only make up a small amount of total U.S. sales, foreign buyers are having a big impact on some of the nation’s hardest-hit housing markets. In California, 56,193 homes entered into foreclosure proceedings in July — that’s one in every 239 housing units, which gives California the nation’s second-highest foreclosure rate, according to RealtyTrac. In Florida, 22,3777 homes, or one in every 396, entered into foreclosure proceedings last month. Both states come in well above the national average of one foreclosure for every 611 homes. Together, the two states account for over 40% of all international sales, a total of roughly $32.8 billion in the 12 months ending in March 2011.
Cape Coral, Ft. Lauderdale, Miami, Naples, For Myers, Kissimmee, Orlando, and Jacksonville are some of the most popular cities in the U.S. among foreign house hunters, according to Trulia.com. A whopping 20% of all residential sales in Florida are to international buyers, most of whom come from Canada.
The high rate of foreclosures in Florida, one in every 396 homes last month, has driven down prices in the state, which have been made even lower for foreign investors as the U.S. dollar has grown weaker. The Canadian dollar has fared particularly well in comparison to its neighbor south of the border.
So Canadians have been snatching up properties left and right in some of Florida’s most popular cities, but not to live in. The Canadian American Dream is not necessarily to raise a family and grow old in these homes, but to use them as vacation homes or rental properties that will ultimately be profitable, especially when one considers that more and more Americans are renting, driving up rental prices.
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California home prices dropped 59% between 2007 and 2009, but has since improved on the fortunes of Chinese investors. With inflation skyrocketing out of control in China, the government has raised interest rates and tightened lending, pushing up the cost of buying in China and sending wealthy investors abroad for better deals. Los Angeles, San Francisco, Beverly Hills and San Diego have been among their top picks.
San Marino might be the most popular city of all, its population now more than 50% Asian, predominantly Chinese. As Chinese house hunters have been investing in the wealthy, luxurious residential community, the annual median home price has actually been increasing, rising 1.6% last year to a record $1.5 million. San Marino is located in Los Angeles Country, where one in every 297 homes received a foreclosure filing last month. Only one in every 1,584 homes in San Marino, a small, affluent city, were filed for foreclosure last month — that’s a total of 3 homes.