U.S. Home Prices Losing Appeal for Canadians
For months we have been talking about how now is the time to buy property in the U.S. As they transitioned from the road to disaster to the one of recovery, home prices in the U.S. were at nearly unbelievable lows, and the fact that our dollar sat higher than theirs for awhile made purchasing property across the border even more attractive. But now, the U.S. is no longer recovering. They’re just enjoying their recovery. And that means those real estate properties might not be there for that much longer.
One of the biggest signs of recovery is the real estate market in the U.S. The average price of a home in the States before the recession was $227,000; and while prices still haven’t met that peak level, they’re getting close. During the first quarter of this year the average American home cost $176,000, a 12 per cent increase up from the year before. And those figures are only going to get higher. Not to mention the fact that some of the most popular hot spots for Canadians have seen some of the biggest drops in activity.
Two of those spots in particular are Florida and Arizona, the two most popular locales for Canadians to spend their winters. But the recession had a devastating effect on these areas, and the fact that they were so popular prior to it may have only hurt them. That’s because now these regions are faced with an overbuilding problem and a lot of foreclosures.
Joe Morgan, a real estate agent in southwest Florida says that he’s seen the drop in interest for himself. He specializes in golf vacation properties, and he’s watched prices in his Naples neighbourhood drop by 50 per cent or even more.
“Snowbird business has been solid now for three years in a row,” he says. “Probably two, three years back was the ideal time to buy, but our prices have started going up over the last 12 to 18 months.
“Distress properties, foreclosures and short sales, are a lot more limited now than they were, but there’s still some opportunities out there,” he continued. “So I don’t think there’s any reason for Canadians to give up on the dream at this time. There’s still some strong values. It’s just that they didn’t catch the market at its bottom.”
And it’s not just high home prices that might keep us at bay for a little while longer – it’s also the fact that our dollar is falling and isn’t expected to go back up at least for the rest of the year. While it was at par several months back it’s now fallen again to four or five cents below par, and some expect it to fall to levels of ten cents below par by the end of this year. That makes buying a home even costlier in the U.S., because hefty fees in exchange rate conversion will also be added.
Jed Smith, research director with the Realtor’s Group, said that this bad news could actually bring an increase to the market, even if it’s just for a short time. He says that Canadians might fear that things are only going to get worse instead of better, and that will prompt them to buy now.
“Obviously earlier would have been better, but later will probably be worse,” he says. “As the market moves up, sometimes people buy because they are afraid that if they wait longer they are really going to have to pay more.”
Are you considering purchasing a snowbird property in the U.S.? Do higher home prices and a decreasing dollar change your plans any, or spur you on?