Eric Beauchesne, Canwest News Service Published: Thursday, September 11, 2008
OTTAWA — Canadians have been flooding into the depressed U.S. housing market, purchasing a record number of homes south of the border, and twice as many as a year earlier. Armed with what until recently was a strong currency, most were also paying cash, according to the 2008 National Association of Realtors annual profile of international home buying activity in the United States. Canadians have replaced Mexicans as the top foreign buyers of U.S. properties, the survey revealed. The surge in purchases of U.S. properties by Canadians is due to the combination of the stronger dollar, a drop in U.S. house prices, and last winter’s record snowfall, John Clinkard, a consulting economist with Reed Construction Data, said in an analysis of the report Wednesday.
The annual report, based on a survey of U.S. realtors, found that in the 12 months ended last May, nearly a quarter of foreign buyers of U.S. properties were from Canada, double the proportion of a year earlier, reflecting both a surge in Canadian buyers to a record high and a drop in purchases by other foreigners.
“Condominiums were most popular among those foreign buyers from Canada,” it said, noting that nearly half of all properties purchased by Canadian buyers were condominium apartments.
Florida and Arizona were the most popular states for Canadian buyers, accounting for more than 60% of their purchases. The amounts Canadians paid for their properties were relatively modest compared with other foreign purchasers. The median price — with half higher and half lower — of properties purchased by Canadians was US$277,800, well below the US$450,000 by buyers from China, and less than the US$297,000 paid by all foreign buyers. Among the six top nationalities of foreign buyers of U.S. properties, only Mexicans paid a lower median price than Canadians.
Only 5.1% of Canadian buyers paid more than US$1-million. Foreign buyers, especially Canadians, were also much more likely than Americans to pay cash for their homes. “In fact, buyers from Canada were more than twice as likely to purchase a U.S. home with cash than via any other method,” it said, noting that 69% did so. That foreign buyers were more likely to pay cash for their homes may be because they tend to be relatively well off, or like Canadians, are not entitled to deduct mortgage interest payments, which makes it less attractive to take out a mortgage than it is for Americans.
Mr. Clinkard, meanwhile, predicted the shopping spree will likely cool as a result of the recent retreat in the value of the Canadian dollar, slowing income growth in Canada, and a firming of U.S. housing prices. “However, over the longer term, an increasing number of retiring Baby Boomers seeking relief from the winter chill will ensure that Canadians continue to be major foreign buyers of U.S. residential property for the foreseeable future,” he added.
