Articles
INTERNATIONAL BUYER IMPACT
Published in the Bozeman Chronicle, September, 2007.
Last month, I utilized this space to discuss the second-home market as a whole. In the meantime, the results of a very interesting survey have recently been released by the National Association of Realtors® regarding second-home purchases made by international buyers. Americans have most often viewed home ownership as a stable long-term investment, and it appears that many buyers from foreign countries agree. The survey used the time period of April 2006 through April 2007, and the results lean toward the conclusion that although the housing market in the United States has slowed down since the incredible 2000-2005 boom, our national real estate market is still a popular option for numerous international buyers.
The report highlighted the preferences of international home buyers in the areas of type of property purchased, purpose of property, median price paid, type of financing used, and where the property was located.
The profile of a “typical” international home buyer would begin with the inclination towards a detached single-family home or townhome, which is also true for U.S. home buyers. However, buyers from foreign countries tend have a stronger preference for condos or apartments than buyers from the United States, with those sales making up 22% of the homes purchased during the survey period.
As for the rationale of why a second-home is purchased in this country, a full 47% of the homes were purchased with the intent of being used simply as a vacation home for family and friends. This category was followed at 31% by being used as both a vacation home and a rental or investment property. And finally, 22% planned to use the home strictly for rental and investment purposes.
It can be estimated that the international buyers are also leaning towards some of the nicer properties in the United States. Though the national median price in 2006 for residential real estate sold was $221,900, the median price for international buyers was $299,500. And even considering that the majority of this market segment (28%) was for homes under $200,000, a full 14% of the homes were sold for over $750,000.
Like domestic buyers, the majority of foreign home buyers obtained a mortgage to purchase their second home. However, 28% of foreign buyers vs. 8% of U.S. buyers paid cash for their home. Reasons for this could be due to simply more cash on hand by the international buyers or perhaps the absence of tax benefits for carrying a mortgage in the homeowner's country of origin.
Robyn Erlenbush is owner of ERA Landmark Real Estate (with offices in Bozeman, Big Sky, Livingston and Clyde Park) and Intermountain Property Management. She can be reached at robyn@eralandmark.com.