Fewer international buyers are purchasing homes in the United States, a turnaround from a surge in 2017 that could affect home sellers, real estate agents, mortgage lenders and others who deal with the housing market.

The drop is attributed to a number of economic factors and to noneconomic ones such as U.S. policy toward immigrants.

Total international sales fell 21 percent from April 2017 to March 2018 to $121 billion, according to an annual survey from the National Association of Realtors, or NAR. For existing home sales, foreign buyers and recent immigrants accounted for 8 percent of the $1.6 trillion in sales, down 10 percent.

Five countries accounted for nearly half of the dollar volume of purchases by foreign buyers: China, Canada, India, Mexico and the United Kingdom. Buyers from China spent the most at $30.4 billion in residential property, a 4 percent drop from last year. Canadians were second at $10.5 billion, a 45 percent drop.

Most buying expensive homes to live in

Investors are one segment of the market of foreign homebuyers in the U.S., but not the main one. Most international buyers — 52 percent — buy U.S. property as a primary residence, according to NAR.

Indian buyers were the most likely to buy for a primary residence, at 86 percent, while Canadians were the most likely to buy a vacation home in the U.S., at 40 percent. Chinese buyers were most likely to purchase a house for student housing.

Most foreign buyers buy a single-family home (66 percent), followed by a condominium (14 percent), townhouse (13 percent) and land with intent to build a home (3 percent).

International buyers typically buy more expensive homes than domestic buyers. The median price for a foreign homebuyer was $292,400, compared to the median price for all existing homes of $249,300. Chinese buyers purchase the most expensive properties, with a median price of $439,100, NAR found.

Foreign buyers are also more likely to pay all cash, with 47 percent of all international transactions reported as all cash, compared to 21 percent of existing-home sales. Most buyers from Canada, 78 percent, paid all cash.

Economic factors

NAR attributed the drop in foreign sales to rising home prices and low inventory, among other economic factors.

“Inventory shortages continue to drive up prices and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same, limited supply of homes,” said Lawrence Yun, NAR chief economist, in a statement.

A strong U.S. dollar may also be deterring some foreign buyers, says Michael Kelczewski, a real estate agent at Brandywine Fine Properties Sotheby’s International Realty in Wilmington, Del., who works with buyers from China and India.

The government of China restricts the amount of money a Chinese buyer can spend and transfer overseas, though there are workarounds, Kelczewski says.

Working with foreign buyers can require educating them on issues that Americans may almost understand innately. In China, for example, the land underneath a home isn’t owned by one person forever, as it can be in the United States, Kelczewski says.

“They need to understand that American property rights are very stringent,” he says. Title liens, for example, can last for hundreds of years and a title search must be done before buying a home. Buying title insurance is also necessary.

New federal rules to prevent money laundering in real estate transactions may also be slowing foreign purchases. Known as FinCEN, the 2017 rules have reporting requirements on all-cash and shell company purchases to help real estate agents report suspicious activity.

For example, on properties valued at $1 million or more in the Florida counties of Miami-Dade, Broward and Palm Beach where jumbo mortgages may be needed, title companies have extra reporting requirements. The government found that about 30 percent of such transactions were linked to possible criminal activity and/or shell company purchases, according to NAR.

The Trump effect

Anti-immigrant policies of President Trump may also be affecting foreign home sales.

Forty-four percent of NAR members who participated in the survey said they’re unsure about the 12-month outlook for international residential buyer activity, and 25 percent said they think it will either drop or remain the same.

Yun, the NAR economist, attributed this uncertainty to confusion and ambiguity over policy changes on international trade and immigration.

Some potential foreign buyers may have concerns about future travel and visa issues, while others may feel unwelcome or are making a sort of silent protest by not making the U.S. their primary destination for a second home, says Sep Niakan, a broker at HB Roswell Realty in Miami.

“Because of his somewhat xenophobic rhetoric,” Niakan says of Trump, “many foreign nationals are thinking twice before buying in the U.S.”

Cheaper alternatives around the globe

Housing in other countries can be much cheaper than in the United States, or other factors may make other countries more appealing.

London is popular with foreign buyers as home prices drop up to 30 percent in prime residential areas, says Chris Bean of Property Savior in the United Kingdom. Uncertainty around Brexit and cheaper British currency also help, Bean says.

“One reason that many foreign buyers are declining in the U.S. is because of a weaker British Pound,” Bean says. “Britain has always been considered a safe choice for foreign property buyers such as the Chinese, Russian and Middle Eastern buyers. A weaker British Pound means that you can get cheaper properties in London than in New York, Florida or L.A.”

Still, NAR is hopeful that foreign buyers will continue buying homes in the U.S.

“Even in this current global environment of political uncertainty, the U.S. real estate market continues to be seen as a safe, secure and profitable place to invest in property,” said NAR President Elizabeth Mendenhall in a statement.