The U.S. real estate market has been thriving over the past several years. Even with increased borrowing rates, the lack of U.S. property inventory has kept property prices stable and, in many markets, expected to appreciate beyond market expectations. 

Now, picture this: What if you purchased today at higher interest rates where owner-occupied buyers are sitting on the sidelines? Sure, your cost of borrowing would be higher; however, the likelihood of buying a property for more favorable terms and price is certainly higher. Now imagine what will happen to that property if interest rates were to drop to 4% next year. 

Let the frenzy begin (again)! 

Sophisticated real estate investors and funds jump at the opportunity to buy when others are not. This is when great deals are available, and competition for these properties is low. Sophisticated investors avoid getting caught in the FOMO frenzy when rates are low, and everyone is buying. They buy now and then simply wait to refinance to a lower rate when it makes sense. Marry the property. Date the rate.

Here’s the thrilling part for foreign national and U.S. expat investors who are contemplating a purchase in 2023. America Mortgages has loan programs such as 40-year fixed terms or 10-year fixed interest-only programs, which offset the current higher rates, making payments more affordable. 

Shifts in Property Prices

If interest rates were to fall to 4%, one immediate consequence would likely be an upswing in property prices. Lower interest rates make borrowing more affordable, creating a larger pool of potential homebuyers including those looking to buy a home to live in (owner-occupied) and real estate investors. This heightened demand typically drives home prices up. However, the extent of this price increase would still depend on factors like the overall health of the economy and the housing supply.

Homeownership Trends and Refinancing

Indeed, things are changing in how people see owning a home. James Healy, a real estate expert, says Millennials are playing a big role in this shift. He explains, “The American dream of owning a home is still there, but now millennials are the ones taking the lead. They see real estate as an investment, even if they live there, and they might not feel as emotionally attached as in the past.”

Furthermore, homeowners are now embracing the concept of shorter-term investments, with an increasing number contemplating stays of just 2 to 3 years in their properties. This shift in mindset opens opportunities for refinancing. In situations like this, refinancing within a year to get interest rates under 4% starts to look really appealing, making it easier to achieve the dream of owning a home.   

2024 Mortgage Rate Forecast

As per MBA’s projections, the average interest rate for a 30-year fixed mortgage is estimated to drop significantly by late 2024. If you are looking to buy a home now, it’s just a matter of waiting for interest rates to become more favorable. If rates go in the opposite direction, you have the comfort of knowing you’re in a long-term fixed-term loan regardless of the age of the borrower, Something very unique to global real estate investors. 

Why Act Now?

• Long-Term Appreciation: Property values are projected to continue appreciating over time. Although they might not grow in price as quickly, a recovering economy, low unemployment rates, and limited housing supply collectively support the enduring appreciation of property values.
  
• Resourceful Lenders: At America Mortgages, we specialize in helping foreign national and U.S. expat investors navigate the U.S. property market. We offer a range of customized programs designed to simplify the loan qualification process.

In conclusion, while lower interest rates might seem important for the U.S. real estate market, there’s more to think about. Investors should consider how sophisticated real estate investors and funds look at property investing in a “down” market. They look at how property values could grow over time and creative financing options that can maximize yield. They also focus on the “now” while strategically planning for “tomorrow.” 

Whether you’re a foreign national, a U.S. expat, or a seasoned investor, America Mortgages’ specialized lending programs are designed to make your homeownership dreams a reality. With our expertise and dedication to your success, we ensure that you not only secure favorable terms but also embark on a journey of financial growth and prosperity. Trust America Mortgages to be your partner in achieving your real estate goals. Your future in U.S. real estate begins with us. [email protected]

www.americamortgages.com

Everyone is aware mortgage interest rates have been rising since early last year. The average interest rate on a 30-year mortgage is now almost 7%.

Those rates have undoubtedly made buying a home more expensive. In fact, according to the Mortgage Bankers Association, the median mortgage payment is now $2,162 — up 14% from a year ago, making it difficult for many homebuyers to afford; hence, they are forced to rent, creating a perfect storm for rental property owners. 

Sophisticated investors rejoice as it is now a BUYER’S MARKET. If you take the popular “marry the property, date the rate” approach, experts say those higher rates might not seem all that bad.

What exactly does this approach entail, though? Here’s what you need to know.

What does “marry the property, date the rate” mean?

“Marry the property, date the rate” is a popular saying these days, thanks to higher interest rates. Essentially, the idea is that when you buy a house in today’s market, you focus on finding the perfect investment property or second home — a home you love and want to tie yourself to for the long term (like a marriage). 

But your rate? That’s something you approach as only temporary — someone you’d date but never really commit to. 

“This strategy suggests that you should prioritise finding the right property that checks all the boxes for your long-term needs and preferences rather than getting overly fixated on the current interest rates,” says Nick Worthing, America Mortgages’ Vice President of U.S. Lending. “In other words, focus on the specifics of the property itself, as it’s a long-term investment, while considering interest rates as a variable that can change over time.” He further states, “Sophisticated investors jump into the market when they are in the driver’s seat and can negotiate great deals. The novice investor jumps into the market when everyone else does. It doesn’t mean one investment strategy is right and the other is wrong; it simply means an – opportunity.”

The key component of the “marry the property, date the rate” approach is refinancing and potentially taking advantage of increasing property values once rates decrease again (and if history repeats itself, they will). If you choose this strategy, you’d take today’s interest rates as a necessary evil and then plan a refinance down the road — once rates fall and you’re done “dating” that initial rate. 

When is it smart to “marry the property, date the rate”?

Taking the “marry the property, date the rate” approach can be a smart strategy as long as you follow two simple rules: First, make sure your mortgage payment is one you can comfortably afford for the foreseeable future and the rental amount is sufficient to cover all or most of that amount. There’s always the chance that rates won’t drop soon, so make sure you aren’t overextending yourself. “If you find the right property at a good price, then it is always the right time to buy with a long-term hold philosophy. In a Buyer’s Market, when the owner-occupied buyer is sitting on the side-lines, the investor has the upper hand to get into a property deal at terms that haven’t been seen for the past few years. 

Second, the seller will be willing to “make a deal,” and you need to get the property at a good price. This will not only help offset the cost of those higher rates, but it’s also the one variable you can’t go back on. The strategy here; you have the option to renegotiate your mortgage rate if rates fall, but you can’t renegotiate the purchase price.

When shouldn’t you “marry the house, date the rate”?

Dating the rate isn’t a good idea if you’re in a particularly hot housing market. This likely means you’ll pay an inflated price for your home and compete against people buying their “dream home” to live in. This is not an investors’ market unless you’re looking for a quick flip. If you don’t plan to hold the property for a while, this strategy may not work for you. While refinancing can help you take advantage of lower rates later on, it does come with costs. When interest rates decrease, America Mortgages can easily give you a breakdown to see if/when refinancing makes sense.

Other ways to deal with higher mortgage rates

Rolling over for today’s high mortgage rates isn’t your only option if you want to buy a home in today’s market. For one, you can explore alternative mortgage products that America Mortgages offers. While rates on 30-year loans might be near 7%, there are numerous ways to offset the rate with creative loan programs. 

• Interest Only – service the interest at a fixed rate for 10 years. You will not be paying down the principal, but for savvy investors, this is an excellent way to maintain a positive yield.

• 40-year mortgage loans – yes, you read that correctly. America Mortgages now has fixed rate 40-year tenure. This is an excellent way to fix your rate over the long haul. You know exactly what that payment will be for the next 40 years; as rental prices increase, your payment will stay the same. Even if you don’t refinance, this is a fantastic way to see passive income with a long-term hold strategy. 

The monthly payment for a amortization 30-year fixed mortgage (P/I) with a loan amount of $250,000 at an interest rate of 5.00% is $1,380. The monthly payment for a 40-year fixed, 10 year interest-only mortgage with the same loan amount of $250,000 at an interest rate of 7.5% is only $1,526. This is an increase of $146, a 10.5% increase.

When compared to the rising cost of rent, the increase in monthly mortgage payments is relatively minimal. The average rent for a two-bedroom apartment in a major U.S. city has increased by more than 40% in the past two years. This means creative financing even in a higher interest rate environment can actual improve rental yield overall.

Will mortgage rates go down soon?

There’s no way to tell for sure if mortgage rates will drop, but if history repeats itself, expect rates to be lower within the next 12 to 24 months. Fannie Mae, the National Association of Realtors, and the Mortgage Bankers Association (MBA) agree, too. MBA predicts the average rate on 30-year mortgages will fall below 5% (owner occupied) by the end of 2024, while Fannie Mae’s projection is a 5.9% average. NAR predicts a slightly higher 6% rate.

It all will depend on inflation and the Fed’s actions in response to it. If inflation stays high and the Fed continues to increase its benchmark rate, mortgage rates could increase even further. If inflation cools and the Fed stops its rate hikes or reduces its rate altogether, mortgage rates could fall. We expect the latter, especially going into the next Presidential election. 

The bottom line

For now, mortgage rates are still higher than they were, but still historically low over a 20-year period.

While the “marry the property, date the rate” approach will work for some investors, it’s not the right move for everyone. Always talk to your America Mortgages professional or financial advisor if you’re unsure what is best for your finances. If you do opt for the “date the rate” strategy, make sure you view it with a long-term hold (5 years+). Though refinancing may be an option later on, there’s no guarantee rates will drop while you own the property. 

Trust the experts

Unlike most banks and brokers that see one International Investor looking to obtain a mortgage a year, 100% of our clients are International Investors. Trust the experts in this industry to understand the complexities of Foreign National or U.S. Expat clients. For some, this is a rarity. For us, this is all we do! If you’d like information on loan programs or to schedule a call with one of our mortgage professionals, please use this convenient 24/7 calendar link.

www.americamortgages.com

Considered the “bible” for foreign investor trends in U.S. residential real estate, the 2023 National Association of Realtor’s report on Foreign Investments has just been released, and the results are eye-opening!  

This is why we got into this business in 2017!  

Problem: Foreign Investors found it difficult to securing financing for their U.S. real estate investments. 

That is when we started on our journey to fix this!  

Watch our DemoDay Presentation! 

Before we start… 

 If I told you that in a year that saw: 

• Interest rates rising globally (in the U.S., rates tripled!) 
•  Russian-Ukraine conflict 
•  Other Geo-political concerns 
•  Inflation concerns 
•  Supply chain issues stemming from Covid-19  

And I said U.S. real estate purchased by foreigners was ONLY 10% LESS THAN the previous year. 

Would you believe me? 

Of course not! 

Frankly, this report surprised me but states the resilience of the U.S. real estate market, especially with foreign investors and overseas investors.  

If you have any questions about this report or anything real estate financing-related, please feel free to reach out to me directly at [email protected] or my personal mobile +65 9773-0273. 

Sincerely, 

Donald Klip, Co-Founder 

America Mortgages

Before we begin, I want to thank our summer intern, Angelina Hong, who is currently reading the Classics at the University of Oxford in the UK and the author of this report and many of our previous articles. We wish her the best in her future endeavours! 

International Buyers of U.S. Real Estate: 2023 Highlights 

In the ever-evolving landscape of global real estate investment, the United States remains a sought-after destination for international buyers. The year 2023 has brought about significant changes and trends in the international real estate market, with foreign buyers continuing to play a vital role. This article explores the statistics and key factors driving the international buyers of U.S. real estate in 2023.

Key Statistics (April 2022-March 2023): 

$53.3 billion of foreign buyer purchases 

84,600 foreign buyer existing-home purchases 

Average foreign buyer purchase price rose to $639,900 

Top foreign buyer: China 

Top destination: Florida 

Part I: Strong U.S. Housing Demand, Tight Supply, Soaring Home Prices 

The United States housing market has experienced its own set of dynamics. In 2021, it witnessed the highest levels of home sales since 2006. However, 2022 saw a slowdown and normalisation of the market due to various factors. In response to inflationary pressures, mortgage rates were raised, which impacted housing demand. 

As of the end of March 2023, the housing market faced challenges related to supply. Unsold homes were 4% above levels seen one year prior. The median price of existing homes also hit a notable milestone, reaching $375,700 in April 2023.  

Part II: International Buyers 

Purchases of Existing Homes 

The 2023 statistics reveal a shift in the international buyer landscape. The number of existing homes purchased by foreign buyers decreased to 84,600, marking the lowest figure since 2009. This decline represents a 14% drop from the previous year, with 14,000 fewer foreign buyers participating in the market. 

The dollar volume of foreign buyer purchases also decreased by 9.6% to $53.3 billion, reflecting the impact of market dynamics. 

READ – still $53 billion of demand, despite the issues mentioned above!

Origin and Destination 

The origin of international buyers continues to diversify. Asian buyers maintain their dominance, representing the largest group with a market share of 38%. Latin American buyers follow closely behind, accounting for 31% of the market. European and Canadian buyers hold 14% and 10% of the market share, respectively. 

China remains the top country of origin for international buyers, representing 13% of the market. Chinese buyers stand out with the highest average purchase price at $1.2 million, often investing in expensive states such as California and New York. In contrast, Mexican buyers tend to purchase less expensive properties, with Texas being a preferred destination. 

The top 10 countries of origin of international buyers: 

1. China
2. Mexico
3. Canada
4. India
5. Colombia
6. United Kingdom
7. Australia
8. Germany
9. Venezuela 
10. Israel

In terms of destinations within the United States, Florida remains the top choice for international buyers, with a significant 23% share of the market. California and Texas closely follow, each with a 12% share.  

The top 10 states for international buyers:  

1. Florida
2. California
3. Texas
4. North Carolina
5. Arizona
6. Illinois
7. New York
8. Ohio
9. Pennsylvania
10. New Jersey

Financing 

Foreign buyers continue to exhibit a propensity for all-cash purchases, with 42% choosing this payment method, compared to 26% among all buyers of existing homes. Those foreign buyers residing abroad are more likely to make all-cash purchases. 

Property as a Real Estate Investment  

Foreign purchases of U.S. real estate saw 6% increase from the previous year, indicating a growing interest in real estate investment for various purposes. 

READ: Year-on-year INCREASE in property purchased for investment purposes!!!

The majority of foreign buyers prefer detached single-family homes, with 76% making such purchases. Additionally, foreign buyers tend to gravitate towards suburban areas, with 45% choosing this type of location. Interestingly, more than three-quarters of Asian Indian buyers opt for suburban properties. Conversely, Canadian buyers are more likely to purchase properties in resort areas for use as vacation homes. 

Part III: Reasons for Not Purchasing U.S. Property 

Despite the allure of U.S. real estate, some international clients cite their perception of hurdles for investing in this sector. 

Here are the common misconceptions, the actual facts and our solutions: 

Cost of properties	Not at all. See the following chart on price comparisons to global cities
Difficulties in finding suitable properties	This can be an issue with time zones, which sites to look at etc. We have fixed this – AM Property Finder.
Immigration Laws	As a foreign real estate investor, there are NO restrictions!
Challenges in obtaining financing	This is all we do. Check out our Foreign National loan programs.
Property taxes	You earn income, you need to pay taxes; however, there are many ways to deduct expenses to maximise your rental income.
Exposure to U.S. tax laws	The reality of U.S. taxes is MUCH EASIER than perception. Some states, like Texas, don’t have state taxes, which is why it’s one of the most popular investment destinations. Also, there are many ways to deduct expenses to maximise your rental income.
Maintenance fees	Any real estate investment will have maintenance required, but that is why you pay a small fee to the property manager. AM Concierge service can introduce you to our preferred managers to make your investment seamless and hassle-free.
Currency transfer difficulties	No issues here. AM Concierge service has partner remittance firms that help our clients. Even in China we have viable solutions from our partners.
Insurance	Insurance is a small percentage of the rental income you receive, and we have partners to help you with this.
Exchange rate concerns	If you are funding the mortgage payments in your home currency, you may experience a currency loss, BUT you can easily hedge this, PLUS you will be earning USD rental income.

America Mortgages Concierge Services: 

•  Property Finder 
•  Property Management 
•  International Remittance Solutions (including China) 
•  Property Taxes 
•  Tax Advice and Filing 
•  LLC company set up 
•  Immigration Consultants 

In conclusion, the 2023 statistics on international buyers of U.S. real estate demonstrate a changing landscape influenced by global economic conditions, supply and demand dynamics, and evolving buyer preferences. While challenges persist, the U.S. remains an attractive destination for international real estate investment, drawing buyers from diverse backgrounds and motivations. 

Contact us at [email protected] and seize opportunities in the thriving U.S. property market. Visit www.americamortgages.com for more information.

1. Wish I Could Time the U.S. Real Estate Market

“The market can stay irrational longer than you can stay solvent. That’s why it’s important to have a long-term investment horizon when you’re investing in real estate. Don’t try to time the market. Just focus on finding good deals and investing in properties that you believe in.” – John Maynard Keynes, Economist

The U.S. real estate market is an ever-changing landscape, but there has been far more success stories than not. However, understanding the factors that affect the market, such as interest rates, can increase your chances of making a wise investment in a timely manner.

For example, when interest rates are high, it’s an excellent time to buy since the marginal buyer can not afford the mortgage at current levels. This creates less demand and gives you pricing power over sellers to negotiate a better purchase price.

Conversely, when interest rates are low, it’s a great time to sell, as financing becomes more affordable and potential buyers emerge, creating more demand and giving more pricing power to sellers to negotiate higher selling prices.

Most sophisticated investors jump into this type of market immediately as property values will remain stable, and the opportunity to get not just a good deal but a great deal is much more possible. Remember, “Date the rate. Marry the property.” Interest rates will go up, and interest rates will go down. The unique aspect of U.S. real estate investing is that the U.S. allows you to fix an interest rate for 30 years regardless of the borrower’s age. If rates go down, refinance to a lower rate. If rates keep increasing, then you have the confidence of knowing that your mortgage payment is fixed. However, the likelihood of rental rates increasing is almost certain.

If you think interest rates are high, here’s a look at historical interest rates in the U.S.:

As you can see, interest rates have been trending downward for many years. This is good news for potential buyers because it means that monthly mortgage payments will be lower.

Bottom Line: The time you spend in the market is more important than timing the market.

2. I Wish Interest Rates Were Lower

Even though interest rates are higher now than they were a few years ago, they are still historically low. In fact, the average interest rate on a 30-year fixed-rate mortgage is currently around 7.50%. This is still much lower than the average interest rate of 14.6% in 1980.  

So, why do investors still invest in U.S. real estate when interest rates are high? There are a few reasons:  

Real estate is a tangible asset – Unlike stocks or bonds, real estate is a physical asset that you can touch and see. This makes it a more attractive investment for some people.

Real estate is a long-term investment – If you buy and hold onto a property long-term, you’ll likely see your investment appreciate in value.

Real estate can generate income – If you rent out your property, you can generate income to help offset your mortgage payments. With 30-year fixed rates (regardless of age), investors have the confidence of knowing their expenses are fixed, while rental rates increase over time.

3. I Wish Property Values Doubled Every Year

It would be great if property values doubled yearly, but unfortunately, that’s unrealistic. However, in some areas, property values appreciate more quickly than in others. For example, in hot real estate markets like San Francisco and New York City, property values can double in as little as 10 years.

In stable, consistent real estate markets such as the U.S., property values generally appreciate at an average rate of 3%-5% per year. However, several factors can affect the rate of property appreciation, such as the overall health of the economy, the supply and demand for housing in a particular area, and interest rates.

We at America Mortgages are here to help foreign nationals and U.S. expat investors navigate the intricacies of U.S. real estate investing. Our expertise and tailored mortgage options can help you achieve your investment goals and make the most of the opportunities in the market.

Our team of experienced loan officers is well-versed in working with foreign national and expat clients. We can help you navigate the complexities of U.S. mortgage options, ensuring that you have access to the most suitable financing solutions for your specific circumstances. Whether you’re looking to diversify your investment portfolio, purchase a home, or establish a foothold in the U.S. real estate market, America Mortgages is your trusted partner.

Contact us today at [email protected] to explore how we can assist you in achieving your U.S. real estate investment dreams. With our expertise and personalised approach, we are here to help you seize the opportunities and build a successful real estate portfolio in the U.S.

www.americamortgages.com