NAPLES, Fla. – Over the past six years, Russian buyers of U.S. real estate have preferred the sunny coasts of Florida over property in any other state in the nation. Wealthy Russians have reportedly bought so many luxury condo properties in the north Miami city of Sunny Isles Beach that some have termed it “Little Moscow.”
“They love to be here, and they like to spend their money and enjoy their life,” Lana Bell, a South Florida real estate agent told NewsNation.com.
But it’s not just the wealthy Russian elites seeking Florida sunshine.
Across the state from Warm Mineral Springs in North Port all the way up to small town of Steinhatchee near the Panhandle, Russians and Eastern Europeans have established communities, according to population data from the U.S. Census Bureau’s American Community Survey.
Over the past six years, 29% of Russian real estate transactions in the United States occurred in Florida, the most in the nation, according to a report from the National Association of Realtors® (NAR).
But even as countries across the world impose sanctions on Russia for invading and waging a brutal war against its neighbor Ukraine, the impact to U.S. home or property prices is not expected to be meaningful, even without any Russian purchases of Florida real estate.
“Russia has little direct impact on the U.S. real estate market as it accounted for less than 1% (0.8%) of all foreign buyers who purchased U.S. residential property from April 2015 through March 2021, according to data from NAR’s survey of foreign buyer transactions of its members,” covering about 5,000 respondents, the report said. Any effect from the loss of Russian purchases would tend to be at the high end, as the NAR’s report notes that Russian buyers buy more luxury properties than the average Florida buyer.
Still, with the transition of the pandemic to a different phase, the loss of Russian buyers could be offset by the resumption of purchases by people from other countries, as well as within the U.S.
Craig Cerreta, the managing broker for Premier Sotheby’s International Realty’s Sarasota office, said the pandemic caused a near shutdown of foreign buyers, but that the segment has been bouncing back in recent months.
During the COVID pandemic, real estate prices have drastically increased in Florida as migration brought new residents to the state, with people retiring early or enjoying the ability to work remotely.
Historically, Cerreta said, Canadians, followed by residents of the United Kingdom, have accounted for the majority of international real estate transactions in the Sarasota market.
“There is no question that they (Russian purchasers) are small” locally, he said. “But they are typically high-end buyers.”
The NAR data says that the average Russian real estate transaction was about $650,000. The average for all international buyers was about $480,000.
But, with the demand seen for Florida properties, combined with historically low number of properties for sale, any loss of Russian purchases are being more than made up from demand from other buyers, Cerreta said.
Cerreta recently sold a home he owned in the Sarasota area. During the open house, more than 170 people viewed the residence and 21 people made an offer. Three of the offers came from people in California, something that surprised the longtime real estate agent, as Californians have historically not been a large market for the west coast of Florida.
Any loss of demand from Russian buyers for luxury properties or other property types won’t be felt in the Sarasota market, he said.
In February, 72% of all real estate sales in the Sarasota market closed at or above the list price compared to 43% at or above list price in February 2021, Cerreta said. “There’s not enough inventory to meet demand,” he said of the Sarasota market.
Sergei Sokolov, a Realtor with Sarasota’s Michael Saunders & Co., was born in Ukraine but moved to the United States when he was 5 years old. The now-47-year-old real estate professional, fluent in Russian and Ukrainian, said Russian speakers often want a Realtor who speaks their language.
The first house he sold in Sarasota in 2004 was to a Russian speaker, and he does about three or four transactions a year. Sokolov specializes in entry level homes typically in the $350,000 to $400,000 price range, with the majority of his Russian-speaking buyers already living in the U.S. or Canada and unlikely to be impacted by the Russian-Ukrainian war.
“I don’t expect there to be much of an impact on my business,” he said. “There’s just a lot more demand than there is supply.”
The next closest U.S. state for Russian buyers was Georgia with 16% of all Russian purchases of U.S. real estate, roughly 13 percentage points behind Florida. New York (13%), California (8%) and Illinois (5%) rounded out the top five states for total transactions from Russian buyers.
The NAR report said that even in Florida, purchases of real estate made by Russians accounted for just 0.2% of the Sunshine State’s real estate transactions from July 2020 to June 2021. Those numbers may be skewed as the pandemic caused many governments to restrict travel to other countries.
A 2020 profile on international residential transactions in Florida conducted by the NAR with Florida Realtors, the largest trade organization in the state, concluded that foreign buyers accounted for $15.6 billion in real estate transactions from August 2019 to July 2020 – about 11% of the state’s sales. The total transaction volume for Florida real estate in that time period was $137 billion dollars.
However in that report that largely accounted for sales just prior to the pandemic, Russia did not rank among the top 15 counties for any Florida metro besides Miami. The Miami metro market, the largest in Florida, had just 2% of home sales go to Russian buyers.
The largest group of foreign buyers by transaction volume came from Latin America and the Caribbean with about 37% of the total value of homes purchased by international citizens.
Canadian buyers had the most transactions at 21% followed by Brazil (7%), Argentina (6%), Venezuela (5%), Columbia (5%) and the United Kingdom (5%).
The metro area of Miami-Fort Lauderdale-West Palm Beach had the lion’s share of foreign buyers with 47.3% of all purchases. The Tampa-St. Petersburg-Clearwater metro accounted for 11%; Orlando-Kissimmee-Sanford had 9.7%, North Port-Sarasota-Bradenton had 6.9% and Cape Coral-Fort Myers came in at 4.7%.
Larger economic issues
While Russians account for a tiny fraction of all real estate purchases in Florida, the real impact of the conflict may be felt at the gas pump as international buyers cut ties with Russian energy. President Joe Biden announced a ban on Russian oil earlier this week.
Chris Jones, president of Florida Economic Advisors and a University of South Florida faculty member at USF in the economics department, agreed with the real estate experts that the reduction in demand from Russian buyers for U.S. real estate won’t shift home prices in Florida.
However, the impact of rising gas prices could be dangerous for the U.S. economy, he said.
He anticipates that gas prices will increase at least another 50 cents before the end of May, with peak price per gallon of gasoline surpassing $5 per gallon this year. As people pay more at the pump, they have less money to spend on goods and services that drive the economy, which he believes will lead to a decrease in the nation’s economic output.
He said he fears that the American economy could be headed toward “stagflation” because of the rising gas prices. Stagflation happens when an economy has rising inflation at the same time as slowing economic output.
“We’re already halfway there,” he said, pointing to rising inflation.
Rising gas prices will also have an impact by raising prices on nearly all goods and services which could then cause fewer people to be able to afford to purchase residential property.
Less demand, caused largely by rising gas prices, would then impact Florida’s real estate market.
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