Is it still a good time to buy US property?

Canadians still looking to buy a vacation property in the United States have to look harder for deals today and saving money on exchange rates is more enticing than ever. Recovering prices and a weaker loonie have eaten into bargains south of the border.

The Canadian dollar touched its lowest level in six years against the greenback Thursday, adding some new urgency to buying U.S. property while making the people who bought at the bottom of the market look mighty smart.

In the past year, the dollar has lost 12%, an easy 12% gain for Canadians who bought U.S. property.

With the perfect storm of strong currency, low prices and better access to credit, in part due to the still lofty value of our Canadian homes, we have gotten used to some pretty great deals south of the border.

The purchasing power of Canadians had made us the No. 1 foreign buyer of U.S. residential property for the 12 months ending, March 2013. Canadians accounted for 23% of the US$68.2-billion of foreign purchases, according to the Washington-based National Association of Realtors.

The question now is whether the chance to buy cheap U.S. property has come and gone. New data released from the Washington-based national association shows the median price of existing homes was up 9.9% in December on a year-over-year basis, up from the 9% year-over-year pace in November.

And inventory levels finally seem to be shrinking as the U.S. homes available for sale hit 1.86 million units in December, a 9.3% drop from a year ago and the lowest absolute inventory since January 2013.

During the 2006 bubble peak, the U.S. national median price of an existing home reached $230,400. The median price was back up to $197,100 in 2013 but real estate is inherently local and the recovery has been greater in some markets than in others.

“Canadians like Florida, Arizona and to a degree California,” said Toronto-Dominion Bank deputy chief economist Beata Caranci, noting Florida is probably the top destination for Canadians and its price increases have not been as pronounced. “The fundamentals are still there in terms of attracting Canadians.”

While the dollar doesn’t look strong compared to where it was a few months ago, looking at it in historical context, it’s fall is not that dramatic.

“It’s still a good market in terms of affordability, it’s just eroding year by year and month by month,” said Ms. Caranci.

There’s no question buying a U.S. property has been top of mind to some of his clients, says David Kaufman, chief executive of Westcourt Capital Corp. which advises high net worth investors.

“It can be a good hedging strategy, and it’s a natural hedge. Many high net worth Canadians spend significant amounts of time in the U.S.,” says Mr. Kaufman. “If you’re going to spend 20% of your time and dollars in the U.S. every winter, you might as well.”

U.S. vacation homes are still mostly a luxury for many people. Unless you’re getting a lot of use out of the property, it’s likely cheaper to rent.

Source: Garry Marr, Financial Post

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