No Better Time to Buy Real Estate in Sunbelt
Real Estate prices down, loonie up. Bank of Montreal chief economist Sherry Cooper admits she probably got a little bit lucky with her timing with her recent decision to buy a condo near Sarasota, Fla.
“I bought it last summer for my mother,” she said this week as the loonie reached par with the U.S. dollar. In retrospect, she should have waited until the dollar hit par.
The double whammy of falling U.S. real estate prices and a rising loonie have created a once-in-a-lifetime bargain for Canadians looking for property in the U.S. sunbelt states.
On a statewide basis, the Florida Association of Realtors reported last month the median price for a single-family home was down 5% from a year ago. Condo prices are off 7% from a year ago, while sales activity among condos is off 19% from a year ago and the lack of demand is expected to continue to knock prices down.
Prices have declined sharply in Arizona, another popular destination, especially for Western Canadians. Phoenix-area house prices drop 6.6% in the second quarter compared to a year earlier, according to a recent report from Standard & Poor’s. Nationally, U.S. existing home prices were down 3.2% compared with a year ago.
“I love the Canadian dollar at parity,” said Ms. Cooper this week in a economic note. “We are truly richer, as the money we earn and the money we invest is worth more. The confluence of events of the past two years — a collapsing market stateside and a stronger currency — just might mean that house on the beach with the palm tree by the window may not be as out-of-reach as I thought.”
The past president of the Washington-based National Association of Realtors, which has 1.3 million members, said Canadians are starting to buy in record numbers to the point that it is affecting the market.
“It’s awesome,” said Dorcas Helfant-Browning, about the two currencies being almost equal. “I would say the impact of Canadians buying has become significant.”
It’s not enough to turn around the U.S. housing market but these days real estate agents like Ms. Helfant-Browning will take what they can get.
“We’ve become a big vacation spot for Canadians,” she said about her own area of Virginia Beach, which has a two-square-mile resort area that is now packed with Canucks. “We’re an easy driving destination and our extended golf season has attracted a lot of Canadians. You can look in the parking lots and just see Canadian licence plates.”
Prices in Virginia Beach are flat but Canadians buying time shares in the region–a huge part of the local market — are taking advantage of the rising loonie.
The president of the Canadian Snowbird Association, which has 70,000 members, said Canadians are going to flock to the United States because of the improved currency and lower real estate prices.
But Gerry Brissenden expects a major shift in where Canadians move to in the United States because of tax changes in Florida that are hitting non-state residents hard.
“It’s a big problem down there now. They have this thing called the homesteader tax. A homesteader [a permanent Florida resident] can pay taxes of US$1,000 while a snowbird would pay US$7,000 to US$8,000 taxes,” Mr. Brissendeen said. “And they have identical units.”
Florida has capped annual tax increases to 3% for residents but not for Canadians and Americans from out of state.
Mr. Brissendeen doesn’t believe a slumping U.S. market will be enough to continue to lure Canadians to Florida at past rates. It currently attracts about 70% of the Canadian Snowbird Association’s members.
“Other places like Georgia, South Carolina, Texas and Mexico are aggressively going after snowbirds,” he says. “I have so many people who live in Florida saying they are going to go somewhere else.”
The vice-president of the National Association of Realtors, Tony Macaluso, agrees Florida is coming under heavy competition.
“Panama just passed a law that exempts new owners from property taxes for the first 20 years,” said Mr. Macaluso, who owns a brokerage firm in Palm Beach Gardens, Florida.
All the warm-weather U.S. states are going after foreign nationals and Florida must compete. “We’ve got Brits moving into Orlando and Germans on the west coast of Florida,” he said.
A study by the National Association of Realtors found about 15% of transactions in Florida are with international buyers.
“It’s not just Canadians. Look at the British pound. It’s gone up considerably. The Brits are getting more than two-for-one for the pound. A US$400,000 house here sounds like half-price,” Mr. Macaluso said.