Published August 19, 2024 • 5 Min Read
Since 2009, the National Association of Realtors® (NAR) has conducted an annual survey to measure the volume of U.S. residential real estate transactions with international clients. From April 2023 to March 2024, $42B was spent by foreign buyers who made 54,300 home purchases. These figures represent the lowest volume registered by NAR since the inception of the report, with dollar volume down 21% and transactions down 37% compared to the previous year.
Foreign buyers face common headwinds
High inflation, high interest rates and limited inventory all presented challenges to international (and domestic) buyers this past year. In fact, the U.S. housing market experienced its lowest overall level of sales since 1995 as many potential buyers waited on the sidelines for conditions to improve. It was a reality reflected in the numbers reported by realtors working with international clients – 69% of those surveyed this year reported they had a client who decided not to – or was unable to – purchase a U.S. property.
Economic factors may have also played a role in buyers’ approach to purchasing. 69% of Canadian purchasers paid all cash for their U.S. property – a sharp increase from the 51% of all-cash buyers the year before – despite the Loonie’s weaker year-over-year performance against the U.S. Dollar. This is likely due to higher interest rates throughout 2023 – a trend some expect will reverse in the coming months.
“With the expectation of lower interest rate trends for the rest of 2024 and 2025, there is greater potential of U.S. mortgage financing in the year ahead,” says Alain Forget, Head of U.S. Sales and Business Development at RBC Bank. “There are also a lot of Canadians who are currently on the sidelines, hoping for a better CAD/USD exchange rate. And if the CAD doesn’t rebound as rates go down, U.S. mortgages may become an even more cost-effective – and attractive – option compared to an all-cash purchase.”
Canada tops the list of foreign buyers
In the latest NAR report, Canada passed China as the country with the most real estate purchases by an international buyer, representing 13% of the pool of foreign purchases. China and Mexico were next at 11%, followed by India at 11% and Colombia at 4%.
While more real estate purchases were made by Canadians, buyers from China spent more – spending $7.5 billion on U.S. real estate, compared to the $5.9 billion spent by Canadian buyers.
U.S. remains more affordable despite rising prices and depreciating foreign currency
Low supply and pent-up demand kept U.S. housing prices strong and increased on a year-over-year basis. As of the end of March 2024, unsold homes on the market were 14% above the level the year before.
Foreign buyers also had to contend with depreciating currency against the U.S. dollar – as of March 2024, more Chinese yuan (9.4%), Euros (3.7%) and Canadian dollars (3.6%) were needed to purchase a U.S. dollar compared to one year ago.
Still, the affordability of U.S. single-family homes helped to offset the cost to buy for many foreign buyers. For example, the average home price per square metre in Toronto as of June 2024 was $12,504. In looking at the price per square metre in U.S. metros, housing prices are comparatively inexpensive:
| U.S. Housing | Price per square metre |
|---|---|
| San Diego-Carlsbad, CA | $7,520 |
| Naples-Imokalee-Marco Island, FL | $4,920 |
| Miami-Fort Lauderdale-West Palm Beach, FL | $3,620 |
| Urban Honolulu, HI | $6,280 |
| Los Angeles-Long Beach-Glendale, CA | $4,760 |
Canadians primarily buying vacation properties, and primarily in Florida
Of Canadian purchases of U.S. real estate, almost half (49%) purchased a home for vacation use. Of those homes, more than two-thirds were single-family homes, while townhomes and condos represented 18% and 8% of sales, respectively.
Consistent with buying patterns over the last decade, Florida remained the top destination for Canadian real estate buyers. Here’s where Canadian buyers purchased in the U.S. this past year:
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Florida: 41%
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Arizona: 23%
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Hawaii: 9%
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California: 6%
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New York: 4%
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Texas: 4%
While the heavy activity in Florida is no surprise, purchases made in Hawaii represented a significant year-over-year increase – the year before, only 2% of purchases made by Canadians were in the Aloha State.
37% of home purchases were made in a resort area, indicating that a large portion of Canadians are buying second homes and/or retirement properties close to beaches, golf courses and other warm-weather lifestyle amenities.
Buying U.S. real estate: The bottom line
While the U.S. real estate market has been dealing with some challenging economic factors – inflation, higher mortgage rates, climbing prices and limited inventory – Canadians can still find deals south of the border. And they have been buying properties, as demonstrated by Canada’s place at the top of the foreign buyers’ list. Consistent with previous years, Canadians are buying in their favourite U.S. destinations – namely Florida and Arizona – while interest in Hawaii has increased. With a concentration of homes purchased in resort areas, it’s clear Canadians are buying for the sunshine and the lifestyle the southern U.S. states can offer.
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This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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