Foreign buyers findinga 2nd home in the U.S.

Foreign buyers findinga 2nd home in the U.S.
Prices attractive as the dollar declines, real estate slumps
By Leslie Wines
Associated Press, December 25, 2007

Panden Rota, a Nepalese producer of fine rugs, is about to become a Manhattanite, the owner of a sumptuous apartment in the luxurious downtown neighborhood of Battery Park City.

His primary residence will remain in Katmandu, but his new home will allow him to spend more time at U.S. showrooms that display his rugs and with a brother and sister in New York.

"I looked at many places, and I decided that a Manhattan apartment will always hold its value," he said.

Rota is part of a growing wave of foreigners who buy second homes in the U.S. for work and play and as an investment.

Cosmopolitan cities like New York and Miami have long served as second homes for affluent and accomplished foreigners. But the trend is growing. One in five American Realtors has sold a home to a foreign investor in the past year, according to the National Association of Realtors.

Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.

At the same time, many foreign real estate markets, especially in Europe, have experienced sharp increases in home prices.

"There are markets like Paris and London and the south of France where some home values have gone up 100 percent," said Christian Voelkers of the Hamburg Realtor Engel & Volkers Group. "At the same time, U.S. prices have either stayed put or come down."

Engel & Volkers, which caters to wealthy clients, plans to open 300 residential sales offices across the U.S. in the next few years. The currency advantage is greatest for British citizens, given that each pound is worth well over $2. By contrast, the euro is worth about $1.45, while the Canadian dollar in recent weeks is hovering near parity with its U.S. counterpart.

"At this point, the English are more actively looking in Manhattan than American buyers," said Ivan Hakimian of New York's Itzhaki Properties.

Mia Wilkinson, a transplanted Englishwoman who works for Rubloff Residential Properties in Chicago, deals often with British and other foreign executives transferred to the U.S.

"Before, people would stay in corporate rentals," she said. "But now these same people are turning around and buying properties."

Wilkinson, who has been in the U.S. six years, has bought property in Chicago.

The expansion of foreign real-estate investment in the U.S. also means that areas that once were not popular with international buyers are receiving interest. Doug Aitkin, who works for North Carolina's World Trade Center, said the Research Triangle area, comprising the cities of Durham, Raleigh and Chapel Hill, is getting inquiries from French and Scandinavian home buyers, a new phenomenon.

In Los Angeles, demand from wealthy South Koreans for attractive condo towers and mid-level-rise buildings has helped revitalize the once-forlorn downtown neighborhood, said Johanna Gunther, a senior vice president with the Ryness Co.

And Canadian buyers eager to enjoy Arizona's dry, warm climate reportedly are giving Scottsdale's phlegmatic residential real estate market a boost.

The National Association of Realtors found that 7.3 percent of the houses sold last year in Florida went to foreign buyers. Miami, in particular, is a magnet for buyers from throughout Latin America and Europe, helping to mitigate the fallout from the area's housing slump.

Despite the news waves of foreign buyers in many U.S. markets, few suggest international investors by themselves can entirely offset the nation's housing crisis, brought on by the failure of many subprime mortgage loans made to home buyers with weak credit histories.

The fact that international investors are helping to prop up some troubled housing markets only emphasizes the level of stress in residential real estate, said Constantine Valhouli, a principal with Boston's Hammersmith Group.

"Relying on foreign real estate investors is fundamentally as risky as relying on subprime mortgages," Valhouli said, noting that both distort demand and can conceal the depths of the problem U.S. home buyers and sellers face.

"Foreign buyers aren't going to save the U.S. housing market. They're just a temporary fix like a finger in the dike. Fundamentals matter."