Arizona’s still hot for snowbirds
Bargains are harder to find, but the lifestyle lures Albertans
Although the real estate market in the Phoenix, Ariz., area passed its best-before date a couple of years ago, there is still room for Canadians to lay claim to a bargain or two, says an industry watcher.
“It’s far too late for Canadians to capitalize on the bargains that existed in 2009 through 2011,” says Mike Orr, director of the Centre for Real Estate Theory at the W.P. Carey School of Business at Arizona State University.
“However, prices are still going up and likely will continue to do so until a significantly greater supply comes to the market.”
The suggestion is that there is still some wiggle room for buyers looking for a place in the sun.
Figures from Arizona State University and the RL Brown Housing Report show that for 2012, the median price jumped by about 34 per cent, while foreclosures plunged 46 per cent from the previous year. The median is the middle of the range of prices.
As of June, the median price for single-family homes reached $190,000 US — the highest level in five years — and is 27 per cent higher compared with the previous year.
Calgarian Evelyn Studer, an executive and single mom, first entered the Phoenix housing market in early 2012, putting in an offer on an investment property that cleared the short-sale process 10 months later.
Since then, she has closed on a second rental home — another short sale — and recently put down a deposit on a recreation home that she is having built. All three properties are in Goodyear, which is west of downtown Phoenix.
A short sale is any sale of real estate that generates proceeds that are less than the amount owed on the property.
It occurs when the lender and borrower decide that selling the property and absorbing a moderate loss is preferable to having the borrower default on the loan. It is therefore an alternative to foreclosure.
“The market was pretty depressed when I first bought, but (it now) appears to be on the move, with multiple offers on some homes,” says Studer, who is chief financial officer and controller for Petrocapita Oil and Gas LP.
“Now, although prices are going up, they are still reasonable. For instance, the base price of my recreational property went up more than $10,000 (US) in six weeks, but is nicer than my Calgary home and for half the price — and it will have a pool and hot tub.”
Studer is part of the stilldeep Canadian buyer pool active in Arizona that Orr estimates makes up about three per cent of the Phoenix market, peaking at around five per cent two years ago.
A decade ago, Canadians made up less than one per cent of the buyers, says Orr, adding that in a typical month, about three quarters of all homes are bought by people with Arizona addresses, with the other quarter by out-of-state or out-of country purchasers. Earlier this year, Canadian buyers outdistanced Californians as the largest out-of-state buyers of properties.
Canadians continue to take advantage of a buoyant loonie and a strong economy here at home — along with still depressed U.S. housing prices — to get into home ownership in sunbelt states in general, and Arizona in particular, said Laurie Lavine of Calgary-based CIR Realty in an earlier interview. The company specializes in helping Canadians buy in the U.S.
“Their goal is that by the time they’re ready to retire, they’ll have their Alberta property and their Arizona property paid for and they can enjoy the best of both worlds — being able to spend winter down there in the nicer weather,” he says.
The market for homes under $200,000 US is quite active and multiple offers are becoming more commonplace, says Lavine.
Financial planner Terry Ritchie says there has been a shift in investor interest, with much of the activity moving to the U.S. Midwest where there are opportunities for stronger returns.
“Investor interest may have dried up a bit (in the Phoenix area),” says Ritchie, who is the director of cross-border financial planning for Cardinal Point Wealth Management. “They are now going outside the traditional areas to places like Indiana and Michigan.”
Most people buying now in the Phoenix market are doing it for lifestyle reasons, he says. “Those buyers are still there, but the great bargains aren’t.”
Orr made particular note of the activity being shown by Albertans, who “are doing very well with their oil and oilsands industries, so people are making money up there.”
What’s going to happen with Canadian buyers as the housing turnaround continues is still up in the air — especially as the median price continues to trend up. Phoenix home prices will likely appreciate by at least 10 per cent this year, another 12 per cent in 2014 and 10 per cent the year after that, Orr says.
That could have an impact on buyers from outside Arizona, including Canadians, a majority of whom are cash buyers. Many who are selling properties also prefer to deal with cash customers.
“At the moment, cash is king, especially if you’re in a multiple-offer situation,” says Orr.
“The seller will often take the cash deal, even if it’s not the highest bid, because they’re confident that it’s going to go through.”