“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?”

Bloomberg Businessweek (North America) - - Con­tents - Prashant Gopal

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.

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