Experts: Foreign Buyers Not Bolstering Recovery

Following a recent ""report from Trulia"":https://themreport.com/articles/foreign-investment-in-us-homes-wanes-2013-06-21 stating foreign interest in the U.S. housing market is on the decline, ""Capital Economics"":https://www.capitaleconomics.com/ reported Monday foreign investment is ""peripheral"" to our nation's housing market recovery.

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""A couple of years ago, a lot was being made of the potential for foreign buyers to come to the rescue of the housing market,"" Capital Economics said. ""We were dubious of these claims at the time, and a recent ""NAR [National Association of Realtors] survey"":http://www.realtor.org/sites/default/files/2013-profile-of-international-home-buying-activity-2013-06.pdf seems to have proven our doubts well-founded.""

The ""NAR"":http://www.realtor.org/ reported foreign buyers accounted for 6.3 percent of all existing home sales and 3.2 percent of all transactions over the 12-month period ending in March.

Sales to foreign investors declined by $14.3 billion from the previous year, according to NAR. The association [COLUMN_BREAK]

attributes about $8.8 billion of the decline to lower prices and about $5.5 billion to a decrease in sales transactions to foreign buyers.

Weakening currencies are deterring foreign buyers, according to Capital Economics. However, China is the exception.

The greatest share of foreign buyers come to the U.S. from Canada, China, Mexico, the United Kingdom, India, and Germany--in that order--according to Capital Economics.

As the dollar grows more favorable, even underpriced U.S. markets appear more expensive to foreign buyers.

However, the Chinese renminbi has strengthened, and Chinese investment in the U.S. housing market has grown from 5 percent five years ago to 11 percent last year.

California is benefitting from Chinese investment, according to Capital Economics. Chinese buyers have contributed to 17 percent of foreign sales in the state this year as opposed to 11 percent last year.

While China's GDP growth is projected to slow next year, Capital Economics believes ""wealth creation at the top of Chinese society, coupled with a slow but steady strengthening of the renminbi, should see Chinese interest in US housing continue to grow.""

Despite the growing interest from China, the analytics firm ""doubt[s] foreigners will make much of a contribution to the recovery"" due to further strengthening of the dollar and ""challenging"" economic conditions abroad.