The strong dollar has been blamed by many American multinational corporations for depressing their profit margins and earnings. This is not hard to understand. After all, when the dollar appreciates, American products become less attractive because they cost more. This is pretty straightforward.
However, the strong dollar negatively impacts the US economy in more ways. Not only are exports affected but the US real estate. You have to remember that a lot of the rebound in hot local property markets in the United States are driven by foreigners. These are Brazilians, Russians, Chinese, and Europeans snapping up premium American real estate at great prices. Well, those bargains are in the distant past. Thanks to the increasing dollar, American real estate has become quite unattractive to foreign investors. Pair this with the cooling global economy and there is less foreign demand.
This may be good news actually for American property buyers. While the US economy is still recovering, many red-hot property markets have seen price appreciations that priced local buyers out. With fewer foreigners driving up the prices of local real property, this might provide local buyers with the opening that they need. Moreover, with the recently announced home-buying incentives and loosened federal regulations, there might be a nice, still surge of new homeowners.
It’s an open question whether the surge of local American buyers (assuming the Federal incentives truly pan out as expected) would be enough to compensate for dampened foreign demand for US real estate. Keep in mind that many foreign buyers, the Chinese in particular, tend to pay for real estate in full. That’s right-they pay in cold hard cash. All upfront.