Sales to foreign investors interested in single family rentals are down, largely to a strengthening dollar, but foreign nationals living in the US are participating in the spring boomlet.
The National Association of Realtors reports that the number of U.S. homebuyers who identified as international dropped to 2.0 percent during the first four months of 2015 from 2.5 percent a year earlier, a 19 percent decline. About three-fourths of real estate agents who work with international clients report that changes in foreign exchange rates have a moderate to very significant effect on foreign buying.
A stronger U.S. dollar makes property more expensive for foreign buyers whose currencies have weakened. Consequently, purchases by foreign buyers have dropped, especially for those whose currency was most affected by the foreign exchange swing.
Despite a national decline of 10 percent international sales across the nation in 2014 due to the strengthening of the dollar, sales for foreign nationals In the DC market up and the strong dollar has had only a modest impact, largely because the because bulk of the market’s purchases to foreign nationals are made to residents, not distant investors. Some 46% of DC sales to foreign nationals are for primary residences and only 20% for investment in residential rentals.
The three state Washington DC region is home to only about half a million legal immigrants. Even though many have not lived in the US very long, homeownership rates are nearly as high for legal immigrants in Virginia and Maryland as for native born residents.
Home sales in communities popular with foreign nationals are stronger than their surrounding jurisdictions this spring, according the latest May data from RealEstate Business Intelligence. I internationals buyers frequently pay cash and have typically purchased properties above the market median price.4 In Wheaton, MD, a community popular with Hispanics, year-over-year closed sales are up 30% through May, well above the Montgomery County average sales growth of 10.2%. In Arlington County, where 28% of the population is foreign born and 15.4% Hispanic, May sales are 9.4% above last year, higher than the 2.7% median increase in sales for the DC Metro as a whole. Columbia Heights, DC. 28.1% Hispanic and 3.2% Asian,6 closed sales through May were 47.7% higher than last year at this time.
Tracy Gladstone, a Korean-born broker with Silverline Realty and Investment Group in Vienna reports that the strong dollar has had an impact on sales to Korean nationals in the DC market. “People are able to buy and they have money even though the rising value of the dollar is making it more expensive.
Many Koreans come to the US temporarily on a work assignment and prefer to rent or buy condos or townhouses in close-in locations. However, families and those planning a longer stay look to buy in the suburbs, especially within the best school systems. Many have settled in Vienna and more recently, Centerville, she said.
On the investment side, the rising dollar has had a greater impact in the DC metro among foreign investors than among owner/occupants. Will Stein, principal brokerof Belair Realty in Bowie buys, sells and manages single family rentals, manyin Prince George’s County, which may be still be the strongest market for distress sales in the region. Though foreclosures are down from past years, he’s doing more deals for international investors with REOs and even regular listings.
Stein finds that international investors are still very cash-friendly. He’s able use their cash to their advantage and get better deals than buyers using mortgage financing. Yet business with his international buyers is definitely down due to the dollar. ”International buyers are still active but the market is not as profitable themas it oncewas,” he said.
While the stronger dollar has made an impression on sales to international owners in the DC metro, foreign buyers are a relatively small part of the region’s real state economy. Florida, California, Texas and Arizona are more dependent on international sales7 and they are more likely to feel the impact of changing currency values, economic upheavals like the problems facing Greece and competition from other real estate markets in Central and South America and Europe.