There is no easy way to track all foreign buyers in a specific market. The markets in this report were chosen based on the percentage of all homes sold in the area from May 2011 through January 2012 for which a foreign mailing address was listed for the buyer on the property deed.

DataQuick provided this data for 97 of the country's major metropolitan areas. Buyers based in other countries who use a U.S. mailing address are not included in this data set, however, and some real estate professionals contacted by Inman News noted that many foreign buyers in their market areas use a U.S. mailing address.

Inman News also reached out to several real estate data companies and other sources of real estate information and asked them to formulate lists, based on the metrics available to them, of which U.S. real estate markets are popular with foreign homebuyers. These lists appear at the end of this report.

While these third-party companies' findings were not considered in the selection of the 10 markets featured in this report, cities in all 10 markets appeared on at least a couple of the companies' lists.

Among the findings in this report:

  • Population levels in the markets range from about 600,000 in Lakeland-Winter Haven to nearly 5.6 million in Miami-Fort Lauderdale-Pompano Beach.
  • Seven out of 10 markets had foreign-born populations above the national rate of 13.1 percent in 2010. The Miami metro had the highest share born abroad, at 39.2 percent.
  • In six of the 10 markets, area inhabitants who were foreign-born and moved from abroad accounted for a higher-than-average share of all inhabitants who moved, based on 2010 census survey data for people who moved during the prior 12 months. New York County had the highest share: 7.7 percent of the people who moved in that county were both foreign-born and hailing from abroad.
  • In seven out of 10 markets, the median sales price for an existing, single-family home was lower than the national median of $163,500 in fourth-quarter 2011. In eight out of 10 markets, the median sales price for a condo was lower than the national median of $160,800 for that same quarter.
  • Condo prices fell on an annual basis in the fourth quarter in seven out of 10 markets. All seven saw their prices decline by more than the national rate of -1.7 percent.
  • Seven of the 10 markets had a higher share of distressed sales in fourth-quarter 2011 than the national rate of 23.7 percent. Eight of the 10 markets had higher foreclosure activity rates in fourth-quarter 2011 compared to the national rate.
  • Nine of the 10 markets, except for Honolulu, had higher vacancy rates in 2010 than the national rate of 13.1 percent. Cape Coral-Fort Myers had the highest rate, at 37 percent.

U.S. real estate is in demand

Foreign buyers account for a small but growing segment of overall U.S. sales. Sales of U.S. existing homes totaled $1.07 trillion in the 12 months through March 2011, according to the National Association of Realtors' 2011 Profile of International Homebuying Activity.

Of that $1.07 trillion, foreign buyers accounted for 7.7 percent, or $82 billion, up from $66 billion in NAR's 2010 profile. Two groups accounted for about $41 billion each: foreign buyers with permanent residences outside the U.S., and buyers who are recent immigrants of less than two years or temporary visa holders residing in the U.S. for more than six months, according to NAR's 2011 profile.

Demand for U.S. real estate from abroad has inspired some real estate companies, including Realtor.com operator Move Inc. and global franchisor Re/Max, to launch international versions of their real estate search sites.

Four states accounted for 58 percent of international sales in the year through March 2011, according to NAR: Florida (31 percent), California (12 percent), Texas (9 percent), and Arizona (6 percent). Other states corresponding to the markets on this list made up smaller shares of overall international sales: 3 percent in New York and 2 percent each in Hawaii and Nevada.

International buyers came from a total of 70 countries, NAR reported, and the top five accounted for 53 percent of transactions: Canada (23 percent), China (9 percent), the United Kingdom, Mexico, and India (7 percent each).


Source: National Association of Realtors' 2011 Profile of International Homebuying Activity.

International buyers tend to have different motivations for buying U.S. real estate than domestic buyers. Foreign buyers are often limited to a six-month stay in the U.S. in any given year due to visa restrictions. In order to visit the U.S., foreigners must apply for either a B-1 visa for temporary business visitors or a B-2 tourist visa, both of which are typically limited to six months and may be issued for single or multiple entries.

Travelers coming from one of the 36 countries that participate in the Visa Waiver Program may enter the U.S. without a visa if they are staying for 90 days or less.

Both the B-1 and B-2 visas require that a traveler's permanent residence be outside of the U.S.

Only 37 percent of respondents to NAR's national survey said their international clients intended to use their purchase as a primary residence. Of the remainder, 28 percent planned to use it as a vacation home for family and friends, 16 percent as a residential rental property for investment, and 13 percent for both vacation use and rental income.


Source: National Association of Realtors' 2011 Profile of International Homebuying Activity.

Nearly equal percentages of respondents said the most important factor influencing their clients' decision to purchase was their belief that U.S. real estate was a "secure" or "profitable" investment, and their wish to buy in a "desirable location."

"All real estate is local, and the important domestic market drivers -- jobs, consumer confidence, family formation, and economic growth -- have had major negative impacts on existing-home sales in domestic transactions," NAR said in its 2011 Profile of International Homebuyers in Florida.

"International sales of U.S. homes to foreigners, however, have different market drivers -- perceptions of value relative to foreign comps, the desire to diversify assets, potential vacation use, rental opportunities, and an interest in placing assets in areas with well-defined and secure property rights."

A home in the U.S. can serve several purposes for an international buyer. Many such buyers tend to see U.S. real estate as a safe haven for their money amid economic or political uncertainty in their home countries.

The markets on this list are also highly desirable as places to vacation, often with favorable climates, beaches, an international ambience, or other tourist attractions. Most of these 10 markets have also been hit hard by foreclosures and the declining prices that accompany them, making them rife with rental investment opportunities.

Canada, the single biggest source of foreign buyers in the U.S., is experiencing a real estate boom, partially fueled by Asian investors, which some fear is actually a bubble waiting to burst.

Home prices in the country have risen nearly 20 percent in the last five years, with the greater Toronto, Montreal and Vancouver areas seeing even steeper rises, according to a home-price index from the Canadian Real Estate Association.

The national average price for a Canadian home in January was $348,178 ($351,379 in U.S. dollars at a recent exchange rate), compared with $201,200 (in U.S. dollars) for a U.S. home.

According to the 2012 Demographia International Housing Affordability Survey, which ranks 325 metropolitan areas in Australia, Canada, Hong Kong, Ireland, New Zealand, the United Kingdom and the U.S. by affordability using data from third-quarter 2011, of 128 markets deemed "affordable," the U.S. accounted for 117. None were in Australia, New Zealand or the United Kingdom. The only Chinese market included, Hong Kong, was deemed "severely unaffordable."


Source: 2012 Demographia International Housing Affordability Survey.

A weaker dollar has also boosted foreign currency exchange rates. Nearly 80 percent of Realtors surveyed by NAR reported that the value of the dollar had either a moderate or very significant effect on international sales.

In March 2009, the U.S. dollar began a decline that now puts it on par with the Canadian dollar. The result has been that wealthy individuals from countries with booming economies despite the global recession, including Brazil and China, are taking advantage of their new purchasing power.

"Due to the depressed state of the U.S. property market, and the strong gains in appreciation of the yuan against the greenback -- up 34 percent over the last few years -- property in the U.S. is now affordable, and severely discounted on what it was previously," said Andrew Taylor, founder and CEO of Juwai.com, an overseas property portal for Chinese buyers that launched in December.

"(While) the Western world sees China as an emerging market/country, (the) Chinese now see the world as an emerging opportunity. This is particularly so with property," Taylor said.

Chinese buyers purchase real estate for three main reasons: education, immigration and investment, Taylor said.

"In fact, some of the latest research shows that 85 percent of China's wealthy are looking to educate their children overseas, and 60 percent of China's wealthy are actively engaged in international investment or immigration," he said.

Policies put in place by China's central government to curb China's own real estate boom have also encouraged Chinese buyers to turn their eyes overseas. These policies include higher interest rates, higher down payment requirements, and limiting the number of homes families can buy in more than two dozen cities across China, including Beijing.

Hope for beleaguered housing markets

Though a comparatively small segment of the U.S. housing market, foreign buyers represent hope for local markets plagued with unsold and foreclosed homes. They can also be a lucrative niche for some real estate professionals.

The vast majority of Realtors, 78 percent, reported that at least one of their transactions in the 12 months through March 2011 was with an international client. Only 8 percent, however, got more than half of their business from international clients during that time.

"There appears to be significant Realtor specialization on the buyer's side of the market, based on foreign language capabilities, cultural orientation, and expertise in bringing an international transaction to successful conclusion," NAR said in its national 2011 profile.


Source: National Association of Realtors' 2011 Profile of International Homebuying Activity.

There has been a moderate shift to lower price ranges among foreign buyers, at least partially due to overall price declines: In 2011, 45 percent paid under $200,000 compared with 25 percent in 2008; and 5 percent paid more than $1 million in 2011 compared with 9 percent in 2008, according to NAR.

Nevertheless, international buyers paid a median $200,000 for a property in the year through March 2011, compared with a median $170,000 for buyers in the U.S. overall.

This despite a bigger penchant for lower-priced condominiums among foreign buyers: 61 percent bought single-family detached homes compared with 88 percent of U.S. buyers overall; 26 percent of foreign buyers bought condos or apartments, 10 percent bought townhouses, and 3 percent bought commercial property.

About 62 percent purchased entirely in cash. Much of the remainder (36 percent) used mortgage financing, according to NAR's national profile. Foreign buyers often face difficulty in getting U.S. financing due to limited mortgage options, higher down payment requirements, and higher interest rates.

Credit histories are also more difficult to verify due to differences in credit-reporting standards internationally, NAR said.

About 55 percent of national survey respondents reported that at least one of their international clients did not purchase a property in the year leading up to March 2011. Financing problems were cited as the main reason by 32 percent of respondents, followed by an inability to find a property (31 percent).


Source: National Association of Realtors' 2011 Profile of International Homebuying Activity.

Congress has introduced legislation, the VISIT-USA Act, designed to promote U.S. home sales by offering foreign buyers a three-year residential visa if they invest at least $500,000 in cash in U.S. residential real estate.

At least $250,000 of that amount would have to be spent on a primary residence where the buyer would be required to live for at least 180 days of the year and therefore pay U.S. taxes on foreign earnings. The bill would not provide a path to citizenship or allow buyers to work in the U.S. Buyers would also not be eligible for government benefits.

"This concept has the potential to lift demand for the nation's excess homes. Our housing market will never begin a true recovery as long as our housing stock so greatly exceeds demand," said U.S. Sen. Charles Schumer, D-N.Y., who is co-sponsoring the Senate version of the bill, in a statement.

"This is not a cure-all, but it could be part of the solution to the housing crisis and won't cost the government a nickel."

The bill also includes provisions that would encourage longer stays in the U.S. for Canadian and Chinese nationals as well as ways to expedite the visa application process for all foreign nationals.

The bill is not without its detractors, however. In a piece titled, "Why We Shouldn't Be Selling the Right to Live in America," former Labor Secretary Robert Reich said the bill may be a boon to American home sellers who may find foreigners more willing than Americans to pay higher prices.

"But what about American homebuyers -- many of them young, just entering the market -- who would prefer low home prices that aren't bid upward by rich foreigners? It's not altogether obvious why we should favor American homeowners over American homebuyers," Reich wrote.