Foreign Real Estate Investors in the US Housing Market Are Adjusting Their Strategies

The US housing market has been on a tear in recent years, with home prices soaring and inventory levels plummeting. This has made it a challenging market for both domestic and foreign buyers, but foreign investors have been particularly hard hit, based on newly revealed research.

International Buyers Activity Hits Rock Bottom

In 2022, the number of homes purchased by international buyers fell to its lowest level in at least 14 years, according to data from the National Association of REALTORS®. This was due to a number of factors, including high home prices, low inventory, and rising interest rates.

In response to these challenges, foreign real estate investors are adjusting their strategies. Some are shifting their focus to less expensive markets, such as the Midwest and South. Others are buying properties in cash, which can help them to overcome the challenges of obtaining financing. And still others are partnering with local real estate agents and developers to gain access to more inventory.

Pivoting for the Future

While it’s true that there’s less investment overall in the domestic real estate market from overseas investors, this doesn’t mean that international buyers have pulled up tent stake completely. There’s still a large amount of real estate investment going on in the US coming in from foreign buyers - what’s different is how these buyers are approaching the currently volatile US housing market.  Here are some specific examples of how foreign real estate investors are adjusting their strategies:

• Shifting to less expensive markets: Chinese investors, who are the largest foreign buyers of US real estate, are increasingly turning to less expensive markets, such as the Midwest and South. For example, the number of Chinese-owned homes in Nashville, Tennessee, has increased by 50% in the past year.
• Buying properties in cash: Foreign investors who are able to pay cash for properties are at an advantage in the current market. This is because they can avoid the challenges of obtaining financing, which has become more difficult in recent months. For example, a group of Chinese investors recently purchased a 100-unit apartment complex in San Francisco for $200 million in cash.
• Partnering with local real estate agents and developers: Foreign investors who are not able to buy properties in cash may partner with local real estate agents and developers. This can help them to gain access to more inventory and to navigate the complex US real estate market. For example, a group of Canadian investors recently partnered with a local developer to build a luxury apartment complex in Miami.

The Jury’s Still Out

Foreign investment in the US housing market has always been big business, and it makes sense that international buyers would attempt to pivot their approaches to remain in the game the way they’re doing. For now, though, it’s still too early to say whether these strategies will be successful in the long run. However, it is clear that foreign real estate investors are facing a number of challenges in the US housing market. They are adjusting their strategies in an attempt to overcome these challenges, but it remains to be seen whether they will be successful.

In addition to the factors mentioned above, foreign real estate investors are also facing other challenges in the US market, such as rising political uncertainty and the potential for new regulations. However, the US housing market remains a desirable investment for many foreign investors, and they are likely to continue to invest in the market in the years to come.