Perfect Storm for buying U.S Property
Many Canadians dream about escaping the dreary winter months by owning a place in Florida, Arizona or even California. Staggeringly low prices for U.S. real estate, combined with a loonie at parity or higher, is creating an unprecedented opportunity. “Right now it’s the perfect storm,” says Al Andersen, a Phoenix-based realtor with Russ Lyon’s Sotheby’s International Realty. “It’s the best real estate market in Phoenix in 25 years. We’re bumping along the bottom.”
Applications for home mortgages in the United States jumped to the highest level in three months last week, buoyed by improvements in the job situation.
“The job market is beginning to gain traction, consumer confidence is improving, and even though mortgage rates have increased, they’re near historic lows,” said Mark Zandi, chief economist of Moody’s Analytics Inc. in West Chester, Pa. “Prices may go down a bit more, but we’re still seeing a pop in sales.”
Another report from the National Association of Realtors said the latest decline in U.S. home prices was driving a boost in sales as bargain hunters rush to buy before mortgage rates rise from November’s record lows.
“It’s hard to pick the bottom” says Brian Wruk, a partner in Transition Financial, a cross-border planning firm with offices Arizona. He’s telling clients not to rush to buy, but to have their Canadian dollars converted to U.S. dollars now — at today’s sweet rates — if they’re even thinking of buying.
“You need to get that currency risk out of the picture — get Canadian dollars into U.S. dollars now, so you’re ready to move.”
Competition for these units is fierce and almost everything is bought ‘‘as is’’ and most likely with cash. There are about 40,000 listings in the area, up from a more typical 10,000 units, but still banks generally won’t negotiate the price so most deals are done at list price or higher.
While Western Canadians often buy in Arizona and California, Eastern and Central Canadians favour Florida.
The U.S. real estate bubble peaked in either 2006 or 2007, depending on the market. The “correction,” as it’s politely called, is staggering.
“What makes buying particularly appealing to Canadians right now is the exchange rate,” Mr. Wruk says. In 2002, the loonie was trading at US62¢. This week, the loonie hit a three-year high, trading US3¢ above the U.S. dollar.
That means Canadians were effectively paying a 40% premium on U.S. property as recently as 2002. Now a dollar is pretty much a dollar.
Some people are indeed finding spectacular properties.
Mr. Wakeham says the Canadian contingent in Palm Springs is steadily growing. “Canadians are coming in and buying and renovating — keeping the economy growing.”
‘Perfect storm’ for buying U.S. real estate: realtor
BY M.B. HUTCHINSON, FINANCIAL POST MARCH 13, 2011