International Buyers Dominate Miami's Residential Sales

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An estimated 60 percent of home sales in South Florida these days involve a foreign buyer, according to the Miami Association of Realtors.

That's an astounding number, no matter how you analyze the real estate market. Not only are international buyers playing a key role, they are driving sales at a time when U.S. investors clearly remain wary of pulling the trigger.

To a degree, this is a not a new phenomenon in Florida, which accounts for more than 20 percent of international sales in the U.S., by far the largest state for international buyers, according to the National Association of Realtors. For years international buyers have represented anywhere from 30 to 50 percent of sales in Miami and other tourist areas, led by condo-crazed investors from the U.K. and Europe.

In many ways it was a no brainer. With the pound and euro soaring, Europeans were offered a nice discount based on the exchange rate alone. As prices started plummeting, Europeans were often the only buyers with cash and a clear reason to buy.

But the exchange rate bonus has dwindled in the last year. The pound dipped to $1.42 in May, down from $1.98 in May, 2007.

Yet international investors and second home buyers continue to snatch up property in the Miami area, where there are indications that overall sales are starting to pick up. The number of sales in June was up more than 50 percent from the dark days of 2008. In July, pending sales in Miami-Dade County were up 40.5 percent from a year earlier, while prices continue to slide.

To a certain degree, the international buyers are clearly bottom-feeding. Prices continue to slide, even though activity is picking up. Half the recent sales in Miami and Broward counties were short sales or bank-owned sales, according to local estimates.

The volume of distressed property hitting the market will continue to dampen prices in Miami for months ahead, even while other markets in the U.S. shows signs of stabilizing, analysts say.

"When you're in a neighborhood that has two foreclosures and a short sale that are priced $50,000 or $75,000 below what you thought you could get for your home, you do not set the barometer for the other [home] prices," industry analyst Jack McCabe of McCabe Research and Consulting recently told the Miami Herald. "They set the prices for you."

Evidently it's European and South American buyers taking advantage of the situation.

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