“The Canadian way is you use common sense”
Real Estate Snowbirds look to cash out of their U.S. Sun Belt getaways Agents lament: “Anybody got any Canadian buyers?”
Fitful financial markets and signs of a real estate slowdown in southwest Florida so unnerved Canadians Fab and Christa Michetti that in March they sold one of their two vacation homes there. The isolationist talk in the U.S. Republican primary campaign didn’t help calm them either.
“How safe are my assets going to be with the change in the political landscape?” asks Fab, a retired Ford Canada employee, who declined to discuss individual presidential candidates. He also pointed to the American dollar’s strength—it’s raised the payoff, in Canadian dollars, from selling his house. “I’d rather have my money in my pocket,” he says.
Canadians who collected Sun Belt bargains after the 2007-09 housing crash have shifted from buying to selling. They’re locking in gains from real estate appreciation plus the 30 percent rise in the greenback vs. their home currency over five years. The stronger U.S. dollar has also made maintenance costs, property taxes, and homeowners association dues on U.S. homes more expensive for Canadians.
“The Canadian way is you use common sense,” says Carol Bezaire, vice president for tax and estate planning at Mackenzie Investments in Toronto. “If you made a profit, how much do you need to make before you decide to pull out? You get the money out and get it working somewhere else.”
Naples, Fla., where the Michettis sold their house, has been one of the hottest second-home markets in America, thanks in part to Canadian “snowbirds” escaping the cold winter. Prices rose 8 percent over the past year—but sales volume plunged 19 percent in the first quarter, possibly a sign of slower appreciation ahead. Waning interest from Canadians has exacerbated an increase in the inventory of homes for sale, which is up 33 percent from a year ago. Transactions are also down in oncebooming getaway cities such as Palm Springs, Calif.
In the Phoenix area—which includes Scottsdale, popular with vacationers— Canadians purchased only 110 homes in the first quarter, down from a peak of 1,454 in the second quarter of 2011, according to Mike Orr of the Cromford Report, a website about the region’s housing market. Sellers from Canada outnumber buyers 5 to 1, he says.
The pullback among Canadian buyers comes at a precarious time for pricey U.S. vacation-home markets, as soaring property prices and stock market volatility give discretionary buyers pause. Last year about 920,000 vacation properties changed hands nationwide, down almost 19 percent from a high in 2014, according to the National Association of Realtors (NAR).
“They gave us a heyday for a while,” Kelly Trembley, a real estate agent with Bennion Deville Homes in La Quinta, Calif., says of buyers from the north. When he meets other agents now, he adds, “they’re all saying, ‘Anybody got any Canadian buyers?’ ”
Inventory began rising at the end of last year because vacationers saw an opportunity for a currency play, says Joshua Devane, an agent with Bennion Deville who works in the Palm Springs area. The U.S. dollar in January was at its highest level relative to the Canadian currency since 2003. “Everybody got the same idea, and inventory in the market became a little bit flooded, which makes it difficult to move properties,” says Devane.
Until last year, Canadians were the top international buyers of U.S. real estate. At 14 percent of foreign sales, they’ve slipped to No. 2, behind the Chinese, according to an NAR survey.
The looming U.S. election may be speeding up the decision to sell. “If Mr. Trump does become president, do you have visa restrictions, and does that impact snowbirds?” asks Bezaire of Mackenzie. Lawrence Yun, chief economist for the NAR, says such
uncertainties give Canadians an extra push “to make the decision this year rather than after the election.”
Fab Michetti says he’ll consider buying again if there’s another downturn. “It’s a gut feel that says, ‘If you’re not certain of things, get on the sidelines and watch the parade go by,’ ” he says.
The bottom line Canadians have slipped behind the Chinese as the top foreign buyers of U.S. real estate. It’s about exchange rates—mostly.