FOREIGN INVESTMENTS IN REAL ESTATE IN THE UNITED STATES
 
Despite current economic crisis, United States is still considered a prime “safe haven” for investment when comparing to real estate investment in other countries, according to the Research Division of the National Association of REALTORS®[1]. High unemployment rate combined with due adjustable mortgage payment that turned many homeowner up side down financially have led to the current unconceivable short sales and foreclosures. The law of supply and demand is tilted to the supply side. Demand may be weak, but effective demand is weaker (ability/power to purchase). More supplies mean more competitions; more competitions with low effective demand mean lower prices. Apparently with the current economic hardships, the majority of US buyers don’t have much power to purchase. This in turn interprets “less competition” for foreign investors.
 
Foreigner’s Home Buying Activity
According to the National of Realtors report of 2007, there are 18% of foreign investors actually successfully purchased US homes (chart 1). The origin of the foreign investors that made up the 18% of investment can be seen in chart 2.
 
Chart 1.
                                                                        
Chart 2.
 
Types of Property and Purpose of Investment
Per NAR 2007 report, “detached single-family homes or townhomes are the most popular housing choice” for all types of homebuyers. However, “foreign buyers show a stronger preference for condominiums/apartments.” As indicated in chart 3: “Between April 2006 and April 2007, more than one fifth – 22 percent – of homes purchased by foreign buyers were condominiums/apartments.
 
Chart 3.

Foreign Investors’ Affordable Prices
According to NAR 2007’s statistical report (chart 4), the median price, in 2006, foreign investors “paid for a home was $299,500.”  The lowest purchased price range under $200,000 for a property where investments poured in took 28% of the market. The next lowest range from $201,000 - $300,000 took 22%. The next lower middle range from $301,000 - $400,000 took 16% of the market (see chart 5).
 

Chart 4. 
                                                                         
Chart 5.

Origin of Investors and Financing Approach
Not as hearsay or previously thought and believed by most people, not all properties were all cash-out purchases. 69% of the foreign investors’ purchases went through some kind of financial programs (chart 6). Which origin of investor takes the most advantages of the financing system? Per NAR 2007, a top Five Countries of Origin are in the following orders: China, Mexico, India, United Kingdom, and Canada (chart 7).
 

Chart 6.
                                                                      
Chart 7.
 
Where in the US do the investors focused on?
Geographic and demographic play important parts in foreign investment segment in real estate. The NAR 2007 report finds that the most dominant region was the South with 49%, the West 31%, the Midwest 11%, and the Northeast region 9% hereafter (chart 8). In these dominant regions, Florida State, California State, and Texas were the three states that foreign investors most invested in (Chart 9).
 

Chart 8.
                                                                       
Chart 9.  
 
Is It Worth It to Invest in Real Estate in The US?
Per survey made by NAR 2007’s research, “U.S. visa restrictions were barriers to buying a property in the U.S.” Despite these obstacles, U.S. is still probably the most lucrative place for investments in real estate if we look at these benefits:
1)  “The U.S. market contains a large supply of real estate.”
2)  It’s “easy to purchase a home in this country.”
3)  “The U.S. does not restrict or scrutinize most property purchases by foreigners, as happens in other countries.”
4)  “Foreign investors have the same property rights in the U.S. as Americans do.”





[1] http://www.realtor.org/Research.nsf/files/07IntlSurveyProflie-final-07-27-07.pdf