Will A Soft Dollar And Strong Foreign Interest Save The Housing Market?
- Jun 23, 2008
The dollar is weak–it fell against the euro by the biggest amount since March last week due in part to increased credit market issues and oil costs–which means foreigners can get big deals on U.S. products, vacations and property.
In April, the National Association of Realtors said a U.S. home could be bought by a foreigner for an average discount of 30 percent, according to USA Today.
The foreign-buyer trend isn’t exactly a new one:
- The euro been stronger than the dollar lately; but the foreign buyer wave dates back to the housing boom. According to the NAR 2007 Profile of International Home Buying Activity, non-U.S. buyers were heavily interested in the market during the 2000 to 2005 real estate boom.
- Between April 2006 and April 2007, 30 percent of non-U.S. buyers were European, a NAR survey found.
- The results were especially prevalent in vacation areas. In spring 2007, 7.3 percent of all Florida home sales were to foreign buyers, the NAR said.
Yet now, in some areas– such as beach and ski towns, which had previously shown significant second-home buyer appeal–foreign investment isn’t as enthusiastic, according to the New York Times.
They’re looking–according to agents, more overseas buyers have been physically seeing beach and ski properties this year.
But because of the shaky U.S. economy and widely publicized housing slump, they’re not eager to actually buy in pricey places like East Hampton and Beverly Hills.
However, even though there’s no official record of how many people from outside the U.S. bought second homes here, economists feel foreign buyers are helping to give the overall market a boost.
It may not be as big as sellers had hoped for, but it’s a boost nonetheless.
"The circumstantial evidence strongly argues that global investors are indeed supporting these second-home markets," chief Moody’s Economy.com economist Mark Zandi told the Times.
- According to the National Association of Realtors, one-third of the country’s agents worked with one or more international buyers last year.
- Mexico, Britain, Canada, India and China’s residents were the most interested, MSNBC.com reported in early June.
The trend is becoming so prevalent, according to MSNBC, that some agents are setting up satellite offices in places like South Korea and Dubai.
For foreign investors, condos–which are a fairly low-maintenance second home–in American cities seem to have a huge draw.
Perhaps that’s why one Maui-based Keller Williams agent told MSNBC that 90 percent of the crowds at his recent open houses have been Canadian; or why developers of Dallas’ 120-unit Museum Tower luxury condo project plan to "actively market … in Monterrey and Mexico City."
Just look at New York City. For months, some areas escaped the national housing decline–eight-figure apartments are still selling well in Manhattan, according to the Washington Post.
And, not surprisingly, foreign investment is still strong in the city. It has helped keep Manhattan apartment prices at astronomically high levels, according to the Times.
Housing isn’t the only market that is benefiting from overseas intervention in New York.
A sales clerk at the NBA store at 52nd and Fifth in Manhattan recently told the Washington Post that two-thirds to three-quarters of the store’s customers were foreigners. "We’d be dead without them," another store manager confessed.
Like a pair of new, high-tech sneakers, New York real estate is, for some, a pleasure purchase.
A resident from London or France may not need a summer condo in New York–but if they’ve ever wanted it, now is certainly the time to buy. Home prices are down; and the exchange rate is in their favor.
The question is: Aside from setting up an office overseas–which realistically isn’t in every developer or real estate agent’s budget–how do we market to this thriving group of buyers? In this case, word of mouth probably just won’t cut it.
What would you suggest?