Canadians 'loonie' for Arizona real estate

Rising currency, California housing crisis fuel buying spree

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Dec. 17, 2010

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Rising currency, California housing crisis fuel buying spree

Steve Bergsman
Inman News™

At last count back in 2008, Maricopa County, where I live in Arizona, boasted a population of just under 4 million people, ranking it fourth among the country's counties. To get that big, a county needs size (9,224 square miles), lots of babies and plenty of immigrants.

Historically, the main point of departure for people moving into Maricopa County was California, and the emigrants were either job seekers, retirees or folks cashing out of their expensive residences in places like Los Angeles, San Diego and Orange County and moving to Phoenix, Scottsdale and Mesa where homes were half the price of where they left.

For the past seven months, however, Maricopa County has gotten a new No. 1 source of homebuyers: Canadians.

Starting in December 2009 and running through June -- the most recent numbers tracked by Irvine, Calif.-based John Burns Real Estate Consulting -- Canadians have supplanted Californians as the biggest buyers of Maricopa County residential real estate.

I would like to declare, like Paul Revere, "The Canadians are coming! The Canadians are coming!" But, they are already here.

According to Jed Smith, the managing director of quantitative research for the National Association of Realtors, Canadians accounted for 11 percent of foreign buyers of U.S. homes in 2007, but over the last three years the numbers jumped -- well, quantitatively!

From April 2009 to April 2010, 23 percent of foreign buyers were Canadians; from April 2008 to April 2009, 17 percent; and from April 2007 to April 2008, 24 percent.

The top foreign buyers for U.S. homes over the past three years, reported NAR, have been Canadians, followed by investors from Mexico, United Kingdom, China, Germany/France, India and Argentina/Brazil.

Generally, foreign purchasers on average acquire homes toward the upper end of the U.S. housing market, which is understandable considering the reasons they buy: desire for a second home, diversification of assets into the U.S., pooling of investments by families, and an attraction to urban, higher-priced markets.

Unlike those buyers from other foreign countries who often seek out expensive, trophy properties, the Canadians tend to buy homes "more toward the $200,000 range," said Smith, which is why so many are looking south. Due to the recession, there's plenty of homes for sale really cheap in those sun-drenched locations Canadians love.

Canadian buyers generally come from the big cities such as Vancouver, Calgary or Toronto, where homes are very expensive, so to buy a vacation house in economically busted-up states at a price tag of $100,000 to $200,000 seems like a steal.

Finally, Canadians are buying because the Canadian dollar, informally known as the loonie, has strengthened and is now about at par with the U.S dollar.

Canadians prefer Arizona and Florida, said Smith, which is not out of line with locations other foreigners prefer.

The top four states for all international purchasers are, in descending order: Florida, California, Arizona and Texas -- to be followed at a distance by Georgia (an up-and-comer), New York and Nevada.

In Maricopa County, Canadian buyers have outpaced California buyers in seven of the last eight months, "which is astonishing when comparing distances," said Gregory Tsujimoto, a senior consultant at John Burns.

The reason for transformation is twofold, Tsujimoto explained. First, there are more Canadian buyers. Second, California is another state hard hit by the recession and subsequent housing crisis, and Californians can no longer easily cash out of their present houses and move elsewhere, to places such as Maricopa County.

As a result, there are fewer California buyers.

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