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Key Takeaways:
- Foreign buyers have been retreating from the U.S. housing market, but virtual technology opens new opportunities to engage with clients overseas.
- Follow immigration and trade policy changes to anticipate market shifts for international investors.
- Property trends in other countries can help you target homes in your market that may appeal to a global clientele.
By year's end, Florida real estate broker Christian Bohyn had been stuck in his home country of Belgium for 10 months, unable to return to the United States because of coronavirus-related travel restrictions. His work visa expired during his trip abroad last March, and after the U.S. closed its borders to international travelers, it became impossible to get a new visa for nonemergency purposes.
So, while his two agents—including his son, Yan—have kept the business going stateside, Bohyn, CIPS, PMN, broker-owner of Windmaker Realty in Orlando, Fla., is trying to build connections with fellow Belgians who are interested in investing in U.S. property. His goal is to have a fresh database of prospects he can work with once he’s back in the states. But he hasn’t gotten quite the response he expected.
After giving a presentation in October on U.S. real estate at a trade show in Ghent, Belgium, “I had people coming up to me and saying, ‘Hey, I know someone who has a property in the U.S. Can you sell it?’ ” Bohyn says. He found more people who wanted out of the American housing market than in.
Even before the onset of the pandemic, home purchases in the U.S. by foreign buyers had been declining steadily, dropping 46% between April 2017 and March 2020, according to data from the National Association of REALTORS®. In the 12- month period alone before March 2020, NAR data shows, the volume of those purchases in the U.S. fell 5% to $74 billion.
Tightened Policies
What’s behind the decline? Restrictive immigration and trade policies, coupled with the COVID-19 pandemic, have kept many international buyers at bay, says NAR Chief Economist Lawrence Yun. Although NAR doesn’t yet have data on foreign investment during the pandemic, Yun says 2020 was another down year. “Many foreign buyers would like to use their U.S. property. But with COVID-19 restrictions and the need to just stay at home, there have been limited opportunities to buy a second home in the U.S.,” he says.
Bohyn’s own experiences with foreign buyers mirror that assessment. Five years ago, he was selling one U.S. investment or vacation property a month to his European clients. That pace slowed to about one sale each quarter in 2019. “Now it’s zero,” Bohyn says.
Asian buyers appear to be losing confidence in American real estate, too. Eighty-two percent say they don’t plan to purchase property overseas in the next year, according to a November 2020 survey by Chinese brokerage and investment group CSLA.
Still, the market for foreign investors hasn’t completely evaporated. Foreign buyers, both those who resided in the U.S. and those in other countries, still accounted for 4% of all home sales in the 12-month period ending in March 2020, NAR data shows. By sales volume, China, Canada, Mexico, India, and Colombia were the largest sources of buyers during that period.
Because much real estate business is now virtual, it’s far easier to make connections and build business relationships. You can reach international buyers using the technology tools you’ve become familiar with, such as videoconferencing and virtual showings, and keep them abreast of market shifts. Closings can happen without the need for in-person signatures in many instances. Yun is optimistic that more widespread distribution of coronavirus vaccines will help lift foreign transactions again.
“Moreover, a slide in the dollar will allow for better purchasing power,” he says.
Trends to Watch
Foreign buyers are adjusting their investment strategies to adapt to changing realities. Lately, that means more are buying properties outside the U.S. Here are a few emerging trends that are making U.S. sales more challenging.
- Vacationing within driving distance. Many European buyers are searching for investment property in other parts of Europe given the travel restrictions to the U.S., says Hanne Sagalowsky, ABR, CIPS, with Coldwell Banker Realty in Dallas. Portugal, Spain, and Italy are particular destinations enticing investors. To boot, “people can drive to Spain—they don’t have to fly—so it’s more accessible,” she adds. If you have international clients who are house hunting in other countries, find out what kinds of properties appeal to them. You can get an idea of which homes in your market might fit their criteria and be ready to help them when travel restrictions are lifted.
- Student visa uncertainties. Real estate professionals who work in college towns will want to pay attention to changes in immigration policy, which affects international students and their families—major sources of foreign purchases. It’s a sizable market: There were 1.08 million foreign students in the U.S. as of the 2019–20 academic year, according to the Institute for International Education. That's down slightly from nearly 1.1 million international students in the 2018–2019 academic year, but the numbers may increase once COVID-19 restrictions subside.
- Tougher lending standards. Financing has presented another challenge for foreign investors, whom lenders consider to be a higher risk even in normal times. Veronica Seva-Gonzalez, a sales associate with Compass in Arlington, Va., who works with Spanish-speaking clients, had a deal fall through early in the pandemic. Her South American buyer couldn’t get a loan, despite trying with two different banks, one in late March and the other in mid-April.
Latin Buyers Show Interest
Despite an uneasy environment for foreign investors, buyers from Latin America, many of whom consider the U.S. a safer place to live, are still bullish on American real estate, says Floralba Nuñez, CIPS, a sales associate with Related ISG International Realty in Aventura, Fla. Nuñez is the NAR President’s Liaison to Colombia, her home country.
She says political, social, and economic instability in Colombia has prompted buyers to look outside the country for a primary residence. “They know and they hope that in the U.S., they can always count on dependability as far as the political and economic situation in the short or long term, so they can always feel safe about coming to and investing in the U.S.,” she says.
Nuñez, who serves 100 to 120 Colombian clients annually, saw her business drop about 90% during travel restrictions from March to September 2020. Now that flights between the U.S. and Colombia have resumed, she says, traffic and interest from people returning to America have picked up again by about 95%. Some of the deals she put on hold have restarted. “Although the pandemic isn’t over yet, I know people from Colombia and other Latin American countries with enough buying power who are dying to put their financial resources in a stable country like the U.S. with a solid economy and dollar,” she says.
Think Creatively About Outreach
Many of the tools you’re using to manage relationships remotely during the pandemic can serve you well when working with international buyers. Nuñez has relied on FaceTime to show properties to overseas clients. Since she hasn’t been able to visit Colombia recently, she’s been making appearances on Colombian TV programs via Zoom and other video platforms and has written a Spanish-language book titled Miami al Alcance de Todos, which translates to “Miami Within Everyone’s Reach.”
Leaning more heavily on video marketing, Seva-Gonzalez has used the pandemic as an opportunity to build a library of YouTube videos targeting international real estate investors. “I figured this was the perfect timing to do it,” she says.
Although European buyers continue to have a wait-and-see attitude when it comes to investing in the U.S., Sagalowsky says, they’ll slowly return to the market. “I think stability is what everyone is looking for so they don’t get surprised,” she says.
And if you’re finding that international business is slow, refocus on helping domestic home buyers, who are showing feverish demand for housing. The expertise you have helping foreign buyers relocate across oceans can benefit domestic buyers relocating across the country.
Seva-Gonzalez can attest: She typically closes six foreign investment transactions annually but closed only three in 2020. Still, last year was her best in the business since 2004 because she shifted her attention to helping a surge of people move to her community from other U.S. regions. She hit nearly $21.4 million in sales volume last year, compared to her previous annual record of $19.4 million in 2004. But she’s confident the demand among foreign investors is still there. “People see the U.S. as a country with a lot of opportunities and security, so I do believe we’ll see [international] investors coming back,” she says.
Because much of the real estate business is now operating virtually, it’s far easier to make connections and build business relationships. You can reach international buyers using the technology tools you’ve become familiar with and keep them abreast of market shifts.
