Home prices in the U.S. are so sky-high these days, even wealthy foreign buyers aren’t immune to feeling the pinch.

Last year, international buyers snapped up 98,600 residential properties totaling $59 billion, according to a new National Association of Realtors® survey of about 9,400 Realtors conducted from April 11, 2021, through May 9, 2022.

Granted, these foreign purchases account for a slim fraction (just 1.6%) of the 6.06 million total existing-home sales in their data’s time frame. In fact, international buyers made 7.9% fewer property purchases than they did a year earlier. Nonetheless, record-high home prices led them to spend 8.5% more for the privilege of owning property on U.S. soil. (Only existing homes, not new construction, are considered in the data.)

And while $59 billion is undoubtedly a massive infusion of cash into the housing market, it’s a steep fall from 2017. That year, foreign buyers bought a record $153 billion worth of residential real estate in the U.S.

Why foreign homebuyers face a hard road today

Part of the problem is the COVID-19 pandemic, of course. While the U.S. travel ban expired in November 2021, vaccination, testing, and quarantine requirements remained in place in many overseas lands, preventing easy travel around the globe.

“For the second year in a row, restrictions and general caution tied to international travel during the pandemic slowed homebuying by wealthier foreign buyers,” says NAR’s chief economist, Lawrence Yun.

(International buyers are defined in this survey as non-U.S. citizens with permanent residences outside the U.S., recent immigrants who have lived in the U.S. less than two years at the time of the real estate transaction, or non-immigrant visa holders who’ve lived in the U.S. for professional, educational, or other reasons.)

Pandemic aside, several financial factors likely made foreign buyers think twice about planting their money in property in the U.S.

“With the parity of the euro and the dollar, it has become much more expensive for Europeans to enter the U.S. market,” says luxury real estate broker Dolly Lenz, CEO of Dolly Lenz Real Estate, which serves clients all over the country. (While the euro was equal to $1.60 in the past, today, the two currencies are almost equal.)

In addition to regular currency fluctuations, cryptocurrency took a nosedive this year, shedding 70% of its value since its November 2021 peak. International homebuyers often use crypto to buy homes since this currency allows its owners to quickly move assets from international banks and exchanges to secure U.S. investments. But as crypto prices fell, so did the number of crypto homebuyers.

“International crypto buyers who were poised to make a big splash last year in the U.S. have all but disappeared,” says Jenny Lenz, managing director of Dolly Lenz Real Estate.

At the same time that foreign buyers might be feeling less flush, home prices in the U.S. have skyrocketed, placing properties out of reach from all but the wealthiest clients.

“Affordability challenges—along with the inability to find the right property—were the top reasons given for prospective international buyers who showed interest but ultimately did not purchase a home in the United States,” says Yun.

In fact, foreign buyers who did make offers on U.S. soil spent more on each home than ever before, coughing up a median of $366,100—the highest ever recorded by NAR. And nearly half of these real estate deals (44%) were paid in all cash.

Yet despite the pandemic, an overheated real estate market, and currency fluctuations, “we have noticed an uptick in foreign buyers who are coming back to the U.S. for the first time since the beginning of the pandemic,” says Dolly Lenz. “Deals are being made regularly with international clients, which wasn’t the case a year ago.”

Plus, rather than keeping their U.S. home as an occasional crash pad, more than half of foreign home shoppers bought homes in the U.S. to serve as their primary residences.

Where are international buyers getting homes?

Foreign buyers continue to favor Florida. The Sunshine State’s main home shoppers were from Latin America (39%) and Canada (25%), likely drawn to Florida’s beach-friendly climate and lack of state income tax.

California claimed second place, with 11% of the foreign buyer share. The Golden State was the top destination among Chinese and Asian/Indian buyers. However, that figure still is 5% lower than in the prior period. Chalk the slump in Chinese buyers up to the slow travel recovery from Asia and Oceania.

And in third place among the most desirable locations for international buyers is Texas. The Lone Star State was popular with Mexican and Colombian buyers.

The top three areas were followed by Arizona (7% share), with nearly half of the buyers hailing from Canada.

Chinese buyers favored New York and North Carolina, with both states tying for 4% of the total foreign buyers. (New Jersey, Illinois, South Carolina, and Virginia also made the list.)

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What types of homes are foreign home shoppers buying?

International buyers tended to focus on larger, more established real estate markets.

“Unlike U.S. buyers, who were receptive to trying out new or up-and-coming markets, the international clients are focused solely on trophy properties in prime locations,” says Jenny Lenz. “Think Central Park–adjacent in New York City, prime Beverly Hills, Malibu, waterfront Miami/Palm Beach, and other five-star locations.”

Indeed, slightly less than half of foreign buyers purchased a vacation home, rental property, or both.

Almost half of the overseas buyers preferred quiet suburban areas, with the majority (74%) purchasing detached single-family homes and townhomes. And while 10% of foreign buyers dropped $1 million on a property, not all are looking for a luxury pad.

Which foreign buyers are spending the most?

Chinese buyers spent the most on U.S. properties, dropping $6.1 billion in total. They were followed by Canadians, who collectively paid $5.5 billion. Buyers from India followed at $3.6 billion. Then came Mexican buyers, at $2.9 billion, and Brazilians, at $1.6 billion.

However, what they do in the future remains to be seen. Rising mortgage rates, inflation, currency exchange rates, what happens in the financial markets, and the trajectory of the pandemic will likely weigh on their real estate decisions.

“Foreign buyers … are likely to step up purchases, as those making all-cash offers will be immune from changes in interest rates,” says Yun. “In addition, international flights have increased in recent months with the lifting of pandemic-related travel restrictions.”

So while the number of homes international buyers plucked from the available marketplace did not add up to much over the past 12 months, the next year might look quite different.

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