Foreign investment in U.S. residential real estate drops 36%

As the market for residential real estate continues to heat up, the local news media have been full of doom and gloom. However, there may be signs of a slowdown ahead.

A recent article in the Boston Globe detailed how local prices for single-family homes and condominiums hit all-time records in June. The story's headline portrayed this as a disaster: "If you don't already own a home in Massachusetts, it may be too late," it read.

Elsewhere, there are signs that the U.S. housing market may be cooling after several years of sustained heat. One of the latest such potential signs of a slowdown is a substantial drop in the number of foreigners buying homes in the United States over the past year. According to the National Association of Realtors, the total dollar amount of foreign purchases of U.S. homes dropped 36% between April 2018 and March of this year. The most significant drop was among Chinese buyers, whose purchases dropped by a full 56%.

Massachusetts ranks fourth in the most popular U.S. states among Chinese buyers, many of whom are attracted by the educational and health institutions in the area, as well as by the U.S. economy's general stability.

Analysts are not sure what is prompting the decline in foreign investment. Some say one cause could be the Trump administration's high-profile crackdown on immigration, as well as its battles with China over trade. Would-be buyers in China could also be hampered by recent changes in Chinese policy about how the nation's currency can be spent overseas.

It may be too early to say whether the decline in foreign home buyers will have a noticeable effect on the overall housing market in Massachusetts. However, the drop shows how global politics and economic concerns can affect something as rooted in place as the purchase of a home. With that in mind, it's more important than ever that everyone with a stake in Massachusetts residential real estate gets help from an experienced and knowledgeable real estate attorney.

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