Rising Prices Decline The Demand For Foreign Investors
The house recovery of US has been boosted by the foreign investors. It is highly attracted by the declines in price. People are also looking for safer sources of investment. The foreigners have been buying large numbers of homes in America’s real estate market. However, this trend is slowly getting reversed. It has been found that the foreign searches have fallen down by 10% in the last year. In the second half of 2012, there were about 4.1% of home searches and these came from abroad when it was compared with the 4.5% in the second half of 2011. Foreign searches are going rapidly in Trulia but with the growing pie these are getting smaller. Now the question arises is the reason why the foreigners are pulling out from the housing market of US. There are actually two reasons for this. The price rise in US in turning them off and the interest has also fallen from the countries with Eurozone crisis. Here is a report of the searches of the foreigners.
Searching Place For International House Hunters:
Well, when it comes to searches by the foreigners, New York, Los Angeles and Miami are getting the most foreign searches. In fact, it was also found that Los Angeles is the top destination for the visitors from Russia and Japan.
On the other hand, the neighbors of America have something else as favorites. Canadians mostly look for homes in Phoenix while on the other hand the Mexicans look for homes in San Diego more than any other place.
New York also gets lots of searches from people outside US. At the same time, it is also a huge market for the domestic search. In the share of searches that comes from abroad, Miami tops the list. It has been found that almost over 15.7% of searchers are from foreign countries. On the other hand, when it comes to the largest metros, six of 10 metros have foreign searches and Florida tops the list. This is followed by Los Angeles, San Frncisco, Honolulu, Las Vegas etc. There are about 7% of foreign searches in New York and it comes at #13. The foreigners hardly look for places in Tenn, Knoxville, Tulsa, Oklahoma City, Okla and even Garry Ind.
When it comes to metros the foreigners have some favorites. They prefer nice winters and huge decline in prices. This indicates that the foreigners want both house bargains and sunshine as the primary factors. The relationship is also strong between the declines in price and foreign shares. Out of the ten metros with high foreign shares, San Francisco and Honolulu avoided huge drops in prices. They also do not offer great deal to the foreigners. However, they are cosmopolitan areas and gorgeous and have worldwide recognition.
The Retreat Of The Home Searchers:
Investing in US housing look like a good investment option. However, in the last one year, there has been no drop in prices of the American real estate. On the contrary, the prices rose by 0.3% year over year in the month of June. The prices also rose almost over 20% in some markets while fell by 10% in the others. This creates an effect on the demand of foreign housing. It also indicates that the searches of foreign share fell in the last year in those markets where prices rose.
The searched of foreign share fell in the four market with year to year increase in prices. Shares also fell in Miami, Phoenix, Cape Coral Fort Myers, Fla, West Palm Beach etc. It fell in full percentage in El Paso, North Port Bradenton-Sarasota FL, Fort Lauderdale with year to year price rises, as well. On the contrary, there were price declines in Atlanta and Chicago.
Thus, this gives an indication to that fact the rising prices actually turn off the foreign searches. The foreigners are attracted to those places where the prices have fallen. However, after the burst of bubble in US housing, they are losing their interest in those places where the prices have already gone up. In the last year, Miami and Phoenix offered better deals to the foreign investors that it does now. It has also been found that searches from some countries are sensitive compared to the prices. Canadians have cut back a lot on the searches in those places where the prices have bounced. Initially, they were attracted to Miami, Phoenix. On the contrary, searches in Japan were not attracted by the bargains, and thus even with the increasing prices, the investors are not moving away.
No More Silver Lining From Eurozone:
The crisis in the Eurozone last year lifted the housing market of US. In fact, it was found that foreign searches from Italy, Greece and Spain rose in the last year but searches from other European countries have fallen. The main reason for this is that many investors from the crisis countries found American real estate to be safe than assets in the home countries. This was a silver lining for US. The searches from Trulia increased in the fourth quarter of 2011. However, it declined in the first half of 2012. This is applicable in case of Ireland, Portugal, Greece, Spain, Italy and Cyprus that have been struggling with huge debts.
However, it is quite difficult to trace the reason for decline in the searches from these risk eurozone countries. The problems of these countries have not been fixed even now. Well, one of the possible reasons for this might be the permission of the private sector banks by the central bank of Europe to borrow money easily. As a result, the residents of these crisis countries panicked less and started investing in their home countries. Irrespective of the reason, the demand for US housing is no longer reaping the benefits of Eurozone crisis.
The Main Lesson:
If the foreign searches are attracted by the declines in price, they will be turned by the increase in the local prices. In fact, foreign interests for the homes in US are more sensitive to the changes in price compared to the domestic interests. With the rise in price, there will be an erosion of demand. The markets that also appeal less to the foreigners get little lift during the process of recovery. However, they have a better chance of getting the gains in prices. At the same time, the increased demand for the homes in US by the residents of eurozone risk countries have also declines. This indicates that the market for foreign demand can be highly fickle.