.: ResalesFL :.

Profile of International Home Buyers in Florida

NAR Research produces the premier measurement of residential real estate activity– the existing home sales series – and analyzes how changes in the U.S. and international economies can impact the real estate business. It also examines trends in real estate practices, and how NAR members are adapting technology in their business operations. NAR Research looks at regulatory and legislative policy proposals and how those policies could affect REALTORS® and their clients, America’s property owners.To find out about other products from NAR’s Research Division, visit our web site at www.REALTOR.org/research. National Association of REALTORS® Research Division 500 New Jersey Avenue, NW Washington, DC 20001 http://www.realtor.org/research%20202-383-7518 email: eresearch@realtors.org.1 For the past decade, the U.S. housing market has been one of the economic wonders of the world. Home sales started an almost consistent rise in the mid-1990s, and set four consecutive records from 2000 through 2004. The availability ofmortgage credit for a broader range of potential homebuyers helped bring new participants into homeownership. At the end of 2004, the U.S. homeownership rate was 69 percent. And residential real estate was easily outperforming the U.S. stock market, with home price appreciation often in double-digits. Driving this amazing activity is high demand from all segments of the U.S. population. The U.S. housing boom was and continues to be fueled by these same fundamentals, but it is also attracting homebuyers from outside the U.S. REALTORS® in a variety of market areas are brokering home sales for clients from countries all over the world. There is increasing anecdotal evidence that

international real estate clients have become significant players in many real estate markets, especially in Florida. To date, there is little formal research that exists on these international homebuyers. To help fill that gap, the National Association of REALTORS® Research Division, in concert with the Florida Association of REALTORS®, conducted a survey of homebuying activity in Florida by foreigners. In May of

2005, this survey was sent to members of the Florida Association of REALTORS® in order to better understand the extent of non-U.S. resident homebuyers, why those buyers purchased homes in the U.S., and what types of properties they bought and for what purpose. Results of the survey were based on 986 respondents (REALTORS®) who closed 1844 home sales transactions to non-U.S. residents in the previous 12 months. Analysis of the results indicates that International buyers of U.S. homes in Florida during the period May 2004 to 2005 resided in more than 100 different countries of varied population and geographic size, various cultures, and located in all regions of the world. While this survey focuses on home sales activity to foreign buyers in Florida, some of the results can help inform REALTORS® around the country about homebuying preferences of non-U.S. residents. Because U.S. real estate is a popular investment option for many people outside the United States, this Profile can provide insight to the segment of the homebuying population from other countries. Lawrence Yun, Ph.D. Keunwon Chung.2 NOTES: For purposes of this survey of International Homebuying Activity, an international homebuyer or foreign homebuyer is defined as one who principally resides in another country (outside the U.S.), and is not classified as a foreign-born resident of the U.S. International buyers are not U.S. citizens (either naturalized or native-born and living outside the U.S.), a U.S. immigrant, or a foreign student or worker on a temporary visa. In this Profile, some information from The 2004 NAR Profile of Home Buyersand Sellers and The 2004 Florida Profile of Home Buyers and Sellers is

provided. These 2004 profiles are based on data from a survey conducted in the summer of 2004. Because of sampling and methodology differences, results are not necessarily directly comparable to that of the 2005 International Homebuying Profile, but may provide additional context for examining international homebuying activity. An additional technical note is found in Appendix II..3

International Homebuyers in

Florida

International buyers of U.S. residential real estate are major players in the Florida housing market. They account for 15 percent of total home sales in

the state. Of the REALTORS® who participated in the survey, 87 percent reported that they did at least one home sale transaction with international buyers. Two thirds – 66 percent – of those REALTORS® who brokered foreign-buyer purchases noted that one to four of all their

transactions were with international clients. For the majority of these real estate professionals, foreign homebuyers accounted for 25 percent or

less of all sales transactions between May 2004 and May 2005. The median share of foreign-based business was 17 percent. But 11 percent of REALTORS® indicated that a quarter to half of their home sales transactions in the last twelve months were with international clients. A not insignificant share of REALTORS® – seven percent – dealt predominantly with international clients.

Homebuyers from Around the World

While Florida’s international homebuyers came

from more than 100 countries in all areas of the

world, the majority of all home purchases by

foreign buyers in Florida – 58 percent – were

made by Europeans. More than half of the buyers

from Europe were based in the United Kingdom.

In fact, the United Kingdom was the number one

country of origin for foreign homebuyers,

accounting for a one third all international

purchasers. Eastern European countries, which

include Russia and the former Soviet Republics,

currently account for three percent of

international homebuyers.

Number of Home Sales

to Foreign Home Buyers

(percent distribution)

Zero

1 to 4

5 to 10

More than 10

66%

13%

10%

13%

Proportion of Home Sales to International

Clients as Percent of All Transactions

(percent of REALTORS who brokered International transactions)

1 to 25 percent

74.0%

25 to 50 percent

11.0%

51 to 75 percent

8.0%

76 to 100 percent

7.0%

Change in Percent of International Homebuyers

in Past Five Years

Percent

Increased 49

About the same 45

Decreased 6

Region of Origin

of Foreign Home Buyers

(percentage distribution)

33.3%

3.0%

21.2%

8.1%

4.0%

7.1%

21.2%

2.0%

United Kingdom

Eastern Europe

Other (Africa, Australia,

New Zealand

South America

Canada

Asia

Central America

and Caribbean Western Europe (exc. U.K.).4

One third of international buyers were from

Latin America (including South America, Central

America and the Caribbean). Spanish and

Portuguese-speaking buyers from that region

accounted for 29 percent of the total.

[The proportion of international homebuyers

from the United Kingdom, Germany, Canada

and Venezuela is sufficiently large to allow for

separate analysis for those countries. See page 4.]

Price of Homes Purchased by

International Homebuyers

The majority of foreign homebuyers purchased a

single-family detached house or a townhouse

that cost anywhere between $100,000 and

$400,000. The median price paid for a home

was $299,000. (As a comparison, NAR’s existing

home sales statistical series report the median

sales price for all existing single-family home

buyers in Florida was $196,200.)

As the results indicate, foreign buyers bought

either a single-family dwelling (house or

townhome) or condominium/apartment. The

survey offered a third option for response – a

timeshare – but received no response. This result

could indicate the boom in international

homebuying in the U.S. is not related to

timeshares in any way. At the same time the

results do not suggest any trends relating to the

time-share market. Rather, it is likely that

REALTORS® – who generally assist clients in

the buying and selling of homes – may not

consider time-shares as part of their normal

residential brokerage business.

Financing the Home Purchase

Well over half of international homebuyers

financed their Florida home purchase with a

mortgage, but 36 percent of buyers paid cash for

their home. This is significantly different from

the results in NAR’s 2004 Profile of Home

Buyers and Sellers, in which only 8 percent of

Top Countries of Origin

of Foreign Homebuyers

33 United Kingdom

7 Germany

7 Canada

7 Venezuela

5 Colombia

3 Brazil

3 France

35 All others

0 5 10 15 20 25 30 35 40

percent of homebuyers

Sales Price of Homes

Purchased by Foreign Buyers

Price Paid for Home Percent of Buyers

Under $100,000 7

$100,000 to $200,000 16

$200,001 to $300,000 27

$300,001 to $400,000 18

$400,001 to $500,000 9

Over $500,000 22

Median Home Price $299,000

Type of Home Purchased

by Foreign Buyer

(percent)

61.0%

39.0%

Single-family detached

home or townhouse

Condominium

or Apartment.5

all domestic homebuyers paid cash and 92

percent had some part of the purchase price

financed. (For all of Florida homebuyers in 2004,

90 percent used a mortgage to finance the

purchase of their home; 10 percent did not).

One possible explanation for this disparity in the

use of cash to purchase a home could be that

because international buyers do reside outside the

U.S., they may be looking for less risk in their

home investment to insure against price declines.

At the same time, cash purchases lessen the

foreclosure risk among this group of buyers.

Lower foreclosure risk, in turn, lessens the

possibility of a price decline.

Why they buy

The majority of all domestic homebuyers

purchase a home for use as their primary

residence. For foreign buyers, an almost equal

share purchased their Florida homes to use

either as a vacation home (38 percent) or for

purely investment purposes (37 percent). For

comparison, 58 percent of all domestic second-home

buyers purchased their second property

either to diversify their investment portfolio or

to generate rental income. Seventeen percent of

foreign buyers needed a home in the U.S.

because they spent some time in this country for

their job.

Because foreign buyers are, by definition, non-residents

of the U.S., most of them plan to

spend less than six months in the Florida home

they purchased.

Where They Buy

According to the most recent information from

the U.S. Census Bureau, Florida is the fastest-growing

state in the country. U.S. residents have

been relocating there for various reasons –

vacation, retirement, change of lifestyle – and

Florida is one of the major gateways for immigration to the U.S.

Method of Home Purchase

by Foreign Buyers

(percentage distribution)

Cash

36.0%

Mortgage loan

58.0%

Don't know

6.0%

Principal Purpose for Purchasing a Home

(percent distribution)

Vacation home

for family/friends

Rental property

for investment

Second home needed

for part-time work in U.S.

Don't know

010 20 3040

Length of Time Foreign Homebuyer Plans

to Use the Property Purchased

(percent)

27 27

Less than

2 weeks

2 to 4

weeks

1 to 2

months

3 to 6

months

Don't know

30.6

Foreign homebuyers are following those U.S.

residents to similar destinations. Nearly a third

of international homebuyers in Florida

purchased their properties in the Miami-Ft.

Lauderdale area. Another third chose the

central Florida regions of Orlando and Tampa-St.

Petersburg. Nearly a quarter purchased

homes in the Gulf Coast areas of Sarasota, Ft.

Myers and Naples.

Foreign Homebuyers from Different

Countries

According to the survey results, the top four

countries in which foreign homebuyers live are

the United Kingdom, Germany, Venezuela and

Canada. Below are some highlights about

buyers from those areas.

United Kingdom

Thirty-three percent (33%) of international

buyers are based in the United Kingdom. (For

ease of discussion, homebuyers from the U.K.

are referred to here as "British", even though