Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a University Professor and Director of Cities at the University of Toronto’s Martin Prosperity Institute, and a Distinguished Fellow at New York University’s Schack Institute of Real Estate.
Despite a public focus on vacant luxury condos, more than half of foreign buyers actually live in the U.S.
With housing prices hitting record highs in some cities, it is not surprising that foreign buyers have become a target. The popular press is filled with accounts of wealthy foreigners buying up luxury condo towers in New York, London, Vancouver and Miami, leaving buildings and entire neighborhoods dark. Vancouver and Toronto have imposed a foreign buyers’ tax in an attempt to cool their skyrocketing housing markets. Pundits complain that old-line gentrification is morphing into a new phase of “plutocratization” or “oligarchification.”
There’s no doubt that foreign real estate buying in America is on the rise: Between April 2016 and March 2017, foreign buyers bought 284,455 homes for a dollar value of $153 billion, a jump of 50 percent over the prior year. And foreign purchases have been tracking consistently up, rising from just $66.6 billion since 2011, the earliest year covered by the survey. In the time span of this survey, foreign buyers made up ten percent of the dollar volume of all residential home sales across the United States last year. And, foreigners accounted for five percent of the number of units purchased, because on average they buy more expensive homes in more expensive areas than the average US buyer.
Many of these buyers, 42 percent, are “non-residents” who may indeed be leaving their properties vacant some or all of the time. But there’s another even larger population of foreign buyers that isn’t getting much attention. The lion’s share of the homes, almost 60 percent, were bought and occupied by people who reside permanently in the United States as either recent immigrants or foreigners on work, student or other visas.
Those are some of the key conclusions of a recent survey of realtors by the National Association of Realtors, which covers the year spanning April 2016 to March 2017. The data from the survey gives broader context to the image of foreign buyers gentrifying, dullifying, and darkening America’s cities. Foreign investment in the U.S. housing market is on the rise, to be sure. But the people who comprise this group aren’t just the owners of the “empty house next door,” according to the self-reported accounts of the realtors surveyed. They’re often our neighbors, too.
Foreign buyers of both types do tend to purchase homes that are more expensive—an average of $537,000 overall compared to the U.S. average of $278,000. But this number is higher for non-resident foreign buyers than it is for immigrants who live permanently in the United States. While non-resident buyers spent an average of $627,000 in the studied period, resident foreign buyers paid $473,500. And despite the image of oligarchs, plutocrats and wealthy foreigners buying up trophy real estate in New York and other superstar cities, roughly ten percent of foreign buyers bought homes worth a million dollars or more.
Another popular image is that of rich foreign buyers in luxury condos in exclusive urban neighborhoods. But, actually, foreign buyers were much more likely to buy in suburbs, small towns and rural areas. This is especially true for resident foreign buyers, 60 percent of whom bought homes in the suburbs. A slew of research shows that new immigrants prefer suburbs, partially because of their perception that they offer good schools for their children. Even among non-resident foreign buyers, 41 percent purchased a home in the suburbs. Another 13 percent, mainly non-resident Canadians and Brits, purchased homes in resort areas, compared to just one percent of resident buyers.
Despite the image of wealthy immigrants living in luxury high-rise towers, just 17 percent of foreigners purchased condominiums. The largest share of condo buyers were not wealthy Chinese, Russian or Middle Eastern buyers, but Canadians scooping up vacation condos in resort destinations. The reality is nearly two-thirds (64 percent) of foreign buyers bought conventional detached homes and another 12 percent bought townhomes.
And only a very small proportion of foreign buyers bought homes for their kids to use while in college— just 4 percent did so.
More than half of foreign buyers do fit the image of all-cash offers, but with demographics that might be surprising. More than three quarters of Canadians bought their U.S. homes in cash, compared to 65 percent of Chinese buyers and just 18 percent of Indian buyers. While roughly half of foreign buyers did make all-cash purchases, this was driven by non-residents—more than seven in ten (72 percent) of whom paid for their property in cash. Fifty-seven percent of foreign residents took out a mortgage for their home.
Chinese buyers spent the most money overall on U.S. homes, spending $31.7 billion between 2016 and 2017, accounting for about 20 percent of all foreign real estate sales. But Canadians came in second, spending $19 billion or 12 percent, followed by buyers from the UK, Mexico and India.
Despite all the talk of foreign buyers in New York City, New York did not make the top five states for foreign buyers. Florida was far and away the leading state for foreign purchases with 22 percent followed by Texas and California, with 12 percent each. The study did not break these numbers out by resident and non-resident buyers. As I wrote in the New Urban Crisis, if you take the 116 some billionaires that live in New York City and combine them with the 3,000 or so multi-millionaires (with over 30 million in net worth), they would not fill the seats in the Radio City Music Hall.
The takeaway here is that while wealthy oligarchs who buy trophy condos in superstar cities do exist in growing numbers, they are in the minority. The lion’s share of foreign buyers are hard-working immigrants who have moved to the U.S. to pursue the American dream—and they, too, are included in the generic term, “foreign buyer.”