Advice for Snowbirds with Strong Loonies – Thinking of a Snowbird Nest in the South? Now’s The Time—But Be Careful.
If you ever thought about buying a vacation home, condo, or golf villa in the U.S. sunbelt, for your own personal use or for renting out to friends or club mates, now is the time. But be careful.
While house property values have been soaring in most of Canada, they have been plunging mercilessly across the U.S., including the vacation sunbelt areas in Florida, Arizona, California, and south Texas. Over the past year, average appraisal values have dropped at least 10 to 15 percent in many of these areas, and inventories of unsold properties have piled up. The result—it’s a buyer’s market like no other—in which sellers, realtors, developers and mortgage companies hurt by the recent sub-prime crisis are at your mercy.
Right now, both coasts in Florida, and the central interior and the panhandle areas are loaded with unsold condos and new subdivision villas some of which developers started building during the boom years three years ago and are now sitting empty.
But despite the bargains available, you still have to be careful. For the time being, stay away from new development projects that have not yet been completed. Because of the financing crisis some developers are walking away from projects they started in the boom years, leaving those who made substantial deposits on planned units in the lurch. Stick with up-and-running developments with decent occupancy rates where you actually see plenty of happy neighbours.
And watch out for variable rate mortgages with premiums that might increase while property values decrease. This market might drop even lower. Which shouldn’t bother you if you’re in this for the long haul and your mortgage rates are fixed and not subject to financing fluctuations. If you intend to use the property for the remainder of your retirement years, either on a full time basis during the winter months, or renting out for part of that time, you will do well over the long haul If you’re thinking of flipping for a quick profit, forget it.
Another plus is that if you’re well qualified, you can also benefit from mortgage interest rates that are not far off their record lows of a few months ago. As non-U.S. residents you’ll likely pay a point or so higher than permanent residents, perhaps about 7 percent, but by historical standards, that’s very attractive too.
Do the math. Tally up the renewed value of the loonie and look at the existing market. A perfect storm like this doesn’t happen often.
