Foreign buyers are leaving the U.S. housing market, purchasing significantly less real estate than they once were. Homes purchased by foreign buyers dipped 36% between April 2018 and March 2019 to below $78 billion, according to a report from the National Association of Realtors.
Foreign buyers paid a median price of $280,600, higher than the median price of all existing homebuyers. However, the price is still down compared to the previous year’s median price of $290,400.
Slowed economic growth across the globe and tighter capital controls in China have helped fuel the decline.
China has still surpassed other countries to purchase the most residential property in the U.S., accounting for more than $13 billion worth of real estate purchases. However, that figure represents a 56% decline over the last 12 months.
Anecdotally, buyer demand has slowed in southern California, a popular area with Chinese buyers hoping to send their children to American colleges.
The Chinese government is limiting how much money Chinese nationals can take out of the country. Because of these limitations, buyers from China have less capacity to buy property in the U.S.
It’s also speculated that Chinese buyers are putt off by the political climate in the U.S.
Home sales in the U.S., as a whole, are facing a slowdown. Sales of existing homes fell 1.7% in June, and new construction has also tapered off. Existing home sales rose in the Midwest and Northeast, but they fell in the West and South.
The biggest obstacle buyers face, experts say, is rising prices which are forcing more Americans to rent or turn to corporate housing. The median selling price for homes in June increased 4.3% from last year to an all-time high of $285,700. Prices have been rising every month for more than seven years, preventing many Americans from diving in. Supply has continued to lag, particularly in the lower-price segment of the market.
In June, there were 1.93 million existing homes on the market, up from 1.91 million in May. At last month’s sales pace, it would take more than 4 months to exhaust the current inventory.
Lack of affordable lots and skilled labor have slowed home starts as well.
The slowdown comes despite a big drop in mortgage rates since last fall. The 30-year fixed mortgage rates have fallen to an average of 3.81% from a seven-year high of 4.94%. Further declines are likely, as the Federal Reserve is expected to lower interest rates for the first time in a decade.