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Foreign buyers see opportunity in U.S.
real estate market

Decline of dollar, rise of euro make housing prices seem
inexpensive overseas

Sunday, September 16, 2007

NORTH PALM BEACH, Fla. — Looking for a ray of sunshine in today's overcast housing market? Here's one: Foreign buyers still want a piece of the American dream
Foreign-born buyers have not only contributed substantially to the growth of the U.S. housing sector but also continue to help soften the landing as the market wobbles to correct itself.

According to the 2007 "State of the Nation's Housing" report from Harvard University's Joint Center for Housing Studies, the percentage of foreign-born buyers that contributed to net household formations, previously 15 percent in the 1980s and nearly 30 percent in the 1990s, grew to 40 percent between 2000 and 2005.

They're coming to America all right, at a rate of 1.2 million net immigrants annually since 2000. A record 12 million additional immigrants are expected to arrive between 2005 and 2015.

"Basically, this country's household growth depends on foreign-born households," says Zhu Xiao Di, senior research analyst for the center. "It may surpass 50 percent very soon. The tightening of credit may affect them, but still, when you look at the larger picture, they are almost the only positive sign out there."

Little wonder, then, that during the past 12 months, one in three Realtors worked with an international client or prospect and nearly one in five sold a home to a foreign buyer, according to the "2007 National Association of Realtors Profile of International Home Buying Activity" released July 30.

Those numbers are likely to grow as foreign investors, bolstered by favorable exchange rates, take advantage of the cooling U.S. housing market to snatch up great deals on vacation homes.

When Engel & Volkers Group, a high-end worldwide real estate licensing company based in Hamburg, Germany, quietly opened its first U.S. office in Naples, Fla., in 2004, it was watching two indicators with keen interest: the steady rise of the euro against the U.S. dollar and the anticipated end to the fevered price appreciation of U.S. residential real estate.

When the U.S. housing bubble burst in some parts of the country two years later, Engel & Volkers was flooded with European customers ready to buy a piece of America at fire-sale prices.

"About six years ago, when the euro was introduced, it started at something like 79 U.S. cents to the euro," says Stefan Bolsen, head of Engel & Volkers Florida. "These people sold their properties in the U.S. then, got a great deal on the exchange rate, cashed out their appreciation and went back to Spain, where they purchased a second home. Now Spain is so overpopulated as the main second-home market for Northern Europe that people want to cash out in Spain and come back to the U.S. It now makes sense, where the euro is so strong and the dollar is so weak, to purchase back again." The rise of the euro, combined with the decline in U.S. home prices, presented a clear opportunity for European buyers.

"The timing couldn't be better," says Bolsen. "As a U.S. citizen, you buy in the U.S. right now at 2004 price levels. Considering the currency exchange rate, people from Europe purchase at a 2002 price point. That is very, very attractive."

So attractive, in fact, that Engel & Volkers plans to open more than 200 franchise offices in Florida alone during the next 10 years, and an equal number in New York, New Jersey and the New England states. It's also looking to expand into California and U.S. and Canadian resort areas and gateway cities.

One additional bright spot: Tightening credit in the U.S. is unlikely to discourage their clients. According to National Association of Realtors 2006 statistics, foreign buyers were nearly four times as likely as Americans to pay cash for their homes (28 percent versus 8 percent), and spent more on average for the homes they bought ($299,500 versus $221,900).
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