It’s a big world out there. One of the many Herculean challenges a real estate agent confronts daily is how to filter out the noise and hone in on what is most important and most relevant to their market—focusing exclusively on one individual neighborhood, a handful of towns or maybe a county.
But here in 2022, is that a mistake? Has our planet grown so interconnected, so accessible that even in the eternally local realm of real estate, agents or brokers can—or should—be looking beyond national borders when planning to grow, protect or bolster their business? And if so, what does this globalism look like, and does it matter to anyone outside of the coasts and major metros?
The answer to all of these questions is, to greater or lesser degrees, yes. Almost a fifth of REALTORS® said they had worked with an international client in 2019, before the pandemic, and while right now this influence is concentrated in places like Miami, New York and San Francisco, it is far from being exclusive to these regions.
And yes—ignoring the international real estate community could very well mean missing out on some tremendous, long-term opportunities, as well as falling behind the evolution of who is buying and selling homes, and how.
“The money flowing in is not what it had been—there’s some limitations,” says John Yen Wong, an associate broker at eXp in the San Francisco Bay Area. “But the interest has not faded.”
Wong might have more insight than almost anyone into the recent history, mechanisms and relationships that connect overseas buyers with the domestic real estate market. As co-founder of the Asian American Real Estate Association of America (AAREA), Wong has built relationships with potential buyers and trade organizations in countries around Asia and beyond—including a long-running connection with the incredibly powerful China Real Estate Association—which has allowed members to access new opportunities through both formal and informal channels.
At the same time, a pulse of general uncertainty stemming from Russia’s invasion of Ukraine along with a relaxation of pandemic restrictions could push more potential global buyers to U.S. real estate markets—big money investors but also upwardly mobile middle-class families.
Marci Rossell is chief economist for the Leading Real Estate Companies of the World® (LeadingRE). Although it is impossible to fully predict consumer reactions to the current geopolitical crisis or attribute any trend to any one outcome, she says that broadly, overseas buyers crave U.S. real estate in times like this.
“When political instability occurs, people perceive U.S. real estate to be a safe haven,” she explains. “I think that we have yet to see foreign buyers come back to the U.S. in a meaningful way. But I do think that six months out , this could definitely spur European buying.”
Who and why
For those agents or brokers who are interested in building connections and expertise in overseas real estate, there might not be a better time to get started. Another factor that will almost certainly increase foreign buyers soon (though again, the timing is hard to predict) is the ending of covid restrictions. As many countries relax their travel restrictions, more and more people are likely to explore a vacation home, or even a permanent move to the U.S.
According to Fernando Arencibia Jr., the broker-owner of Arenci Properties Realty in Miami and current chair of the Miami Association of REALTORS®, this is already happening to some degree.
“A lot of international buyers were not making their way to the U.S., and now they are,” he says. “The lifting of the sanctions is giving people the freedom to come in.”
Foreign buyers purchased 107,000 homes last year in the U.S., according to data collected by the National Association of REALTORS® (NAR), with numbers declining ahead of and during the pandemic from a recent peak of 284,000 in 2017. But a significant number of agents (24%) responding to an NAR survey last year said they expected an increase in the number of real estate deals with foreigners in the next 12 months.
The perception has long been that overseas real estate investors are usually deep-pocketed and mysterious, snapping up huge swaths of inventory at a time to the detriment of locals. Canada recently banned many foreign buyers temporarily as the government seeks to cool their hot housing market.
According to both Wong and Arencibia, in reality, the pool of foreign buyers is made up of a broadly diverse range of people with both young and old, families and individuals, cash buyers and mortgagors.
“Miami is not only a place for the ultra-rich,” Arencibia says. “We do have a healthy number of that middle class, upper-middle class buyers.”
Wong says some of the strong sentiment against foreign buyers can easily harm real estate markets, violate fair housing laws and ostracize buyers who are just looking to enjoy the amenities and opportunities available in the U.S. Some of it even takes the form of racism and overt discrimination, which is masked behind what Wong describes as legitmate concerns about the influence of autocratic governments like the Peoples Republic of China.
“I think that what AREAA is focused on is that it doesn’t mean you’re oblivious to the risk if you don’t let the risk be the overriding generalization that colors every person who is of Asian descent,” he says.
Making it happen
Maybe the most salient question regarding overseas buyers is not tied to geopolitics or demographics but is much more practical: is it worthwhile from a business standpoint?
Importantly, brokers and agents should not be looking at wooing foreign buyers as a short-term play, according to Wong. Even though a variety of factors have decreased the number of international transactions significantly over the past decade or so, the relationships forged between agents around the world—between AREAA and the China Real Estate Association, for example—are designed to outlast the up-and-down nature of politics.
“At some point, the tensions that now exist will moderate and it could be a few years, it might be decades,” Wong says. “But at some point, when it opens up again, the interest will be there.”
At the peak of the foreign buyer market, Wong says that close to 40% of his business was foreign nationals.
On the other side of the country, Miami has been an international city for decades, with investors and buyers from 43 countries—many in Latin America but with representatives from all over the world. Arencibia says his association has recently signed agreements with real estate associations in Turkey, Tunisia, Indonesia and Nigeria.
“We can bring back that exposure to our members and to our Miami REALTORS®,” he says. “It’s always been important for us to bring that exposure, that connectivity. Like anything else in life, if you do it once you might have a little bit of an effect, but anything you do consistently, it pays off exponentially.”
Having the foundation, the education and the connections already in place allows agents to be ready at any given moment when overseas transactions pick up, Arencibia adds. The formal connections often facilitate large-scale opportunities—Arencibia mentions the city-wide “Art Basel” show that brings a “captive audience” from all over the world, with many people looking for, or at least interested in a second home or vacation property there.
For sellers, AREAA has a for-profit subsidiary that can market overseas properties to U.S. nationals, Wong says, and Miami REALTORS® likewise uses their connections to get domestic buyers to homes in countries around Latin America and beyond. Both organizations also offer formal classes on how to work with clients overseas.
But the more informal connections are where almost any agent or broker can start finding referrals and opportunities. Wong describes a huge, diverse and loosely-connected landscape of Facebook, WeChat and other social media groups spanning across the entire world where AREAA members help facilitate real estate transactions—both buyers and sellers, big-money and middle class.
“It’s kind of a new stage of networking,” he says. “That, I think, is the best way to do it.”
This is also where the foreign markets are creeping into the heartland—a trend that has been gaining steam for many years. Though Florida, California, Texas and New York still attract the majority of foreign buyers, Michigan and Georgia have both tripled their number of overseas buyers in the last decade, and agents in 45 states reported some level of foreign buyers or sellers.
Wong says last year, he had a handful of Chinese buyers very specifically interested in Idaho—something he could not immediately make sense of. A few months later, NAR chief economist Lawrence Yun identified Boise, Idaho as one of the hottest housing markets in the country.
“When I asked him why, he said he didn’t know—just the stats showed that,” Wong says.
Though he admits he cannot be certain, Wong says he believes that these clients—and others—are likely well aware of U.S. real estate trends, and are now more than ever looking beyond the big metros and coasts to where property values are growing and amenities are plentiful.
Right now, conditions are not necessarily ideal for people overseas to buy real estate in the U.S. Wong says many big lenders no longer have programs designed to help foreigners get mortgage loans, and there is still government scrutiny looking for potential money laundering activity particularly in higher-end properties.
But there are a variety of scenarios that could change this, and other international developments that might bring more foreign money to the U.S. real estate market. Rossell mentions Chinese domestic stock markets that have struggled in the wake of the invasion of Ukraine, potentially pushing more people to put their money in the safer realm of U.S. real estate.
Hong Kong and Taiwan are also carefully watching mainland China’s crackdown on dissent and attempts to aggressively consolidate its sphere of influence. Both big money investors and middle-class families in these regions could very well begin looking for a real estate connection in the U.S, she posits.
“It wouldn’t surprise me to see a second round of money moving out of Hong Kong and out of Taiwan,” Rossell says.
The bottom line is, U.S. real estate remains an attractive option for people all over the world, both in times of crisis and when they want to find relaxation and security. Against the hope of some sort of end to the pandemic along with an increased desire for security and safety, that time might be now.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas, jwilliams@rismedia.com.
