In real estate, the only thing more important than location, location, location is timing, timing, timing. Now is the time for Canadians and Europeans to buy Arizona real estate. These exchange rates won’t last forever.
One group hasn’t soured on the U.S. real-estate market: foreign buyers.
With the dollar at historic lows against the euro and other currencies, real-estate agents, appraisers and developers say overseas buyers are stepping up their purchases in the U.S. Some are buying vacation homes in Florida, California and Colorado that would previously have been considered out of reach. Others are gambling that properties purchased now will translate into savvy investments down the road, when both the dollar and the U.S. housing market eventually rebound.
This is perhaps the best time since the 1970’s for Canadians to buy Arizona real estate.
Calgary, Alberta, resident Verna Shewchuk says she and her husband, Dennis, had been considering buying a vacation home in a golf community in the U.S. for several years before making an offer on a $2.75 million home in Scottsdale, Ariz., in June. They closed on the property three months later, when the Canadian dollar was valued at about 95 U.S. cents — one of the best rates in years. Still, it wasn’t as good as a month later, when the loonie passed the U.S. dollar in value. (It is now at US$1.02.) “If we’d waited a month, it would have been even better for us,” Ms. Shewchuk says.
Earlier this month I calculated that Arizona home prices were 12% cheaper for Canadians than they were in January because of U.S. dollars were cheaper.
22 responses so far ↓
1 Mark // Oct 16, 2007 at 1:44 pm
Wow, so if you’re Canadian you should catch the falling knife? The dollar will get weaker and prices will drop further. Why would anyone, from any country buy a house today when they can buy it even cheaper tomorrow?
2 RE Investor // Oct 16, 2007 at 3:30 pm
“The falling knife syndrome”. It is amazing to me that people don’t understand the basic laws of investing - by low sell high. How is it that when housing was at all time highs, the crowd was saying “buy now and make a million” now the same crowd is saying “don’t buy, its a falling knife”. The only time it is not a falling knife is when it is not - and the only time to not get in the market is when it is not. Unless you have a crystal ball that I don’t have, then buy when no one else wants to (now give or take a few months), then wait until the next cycle and sell high (1 year ago, or the next cycle). Not the opposite. Maybe the folks in Canada have a diferent time horizon than you. Maybe they see the problem being that later on, even though house pricing may be lower, in real terms the cost will be higher due to improved dollar vs. loonie exchange rate. Or maybe they figure interest rates will be higher later on. Or - god forbid, they may just want to have a home and not a flip, or and investment on a short time horizon. That type of narrow minded comment is typical of the sheeple that got in too high, and now won’t get in while there is value. Do you honestly believe that in 5 years houses are going to be worth nothing? Do you really think that the fundamentals of growing population and low unemployment are going make housing cheaper. Or is it that you think that people are going to stop making babies and the population will dwindle to nothing and there will never be demand for housing. Which is it, because unless all of those come true, it will be like every other cycle and reach a bottom (of which timing the market is stupid and dangerous) and then grow again. Sorry for the rant, but god I am tired of hearing the same old “catch a falling knife” phrase uttered by the same type of people that bought at the height of the market as an “investment” because “housing never goes down”.
3 Mark // Oct 16, 2007 at 4:04 pm
My crystal ball (or common sense) tells me that the bottom will be reached when fundamentals are right. That is, when ownership with 20% down is better than renting and enough people can afford to save up that 20%. With the rising cost of Health Care, Education, Gas etc the middle class cannot afford today’s prices. I want the Phoenix Economy to continue to grow. For that to happen prices must come back from their artificial levels. Please remember that a primary reason for the population growth in Phoenix was affordable housing. You cannot take that away and expect growth rates to remain the same. Prices have a long way to come before they settle. Right now there is no way to even put a price tag on a house. What annoys me is all the Realtors who always claim that it is the right time to buy. They were saying buy buy buy as the market peaked and now they are saying buy buy buy as the market crashes. I’ll wait at least another year. Please remember, we all aren’t mortgage brokers making 15 grand a month…oh wait they all lost their jobs. Time for them to sell cars or tend bars. And if some rich folks in Canada want to come down and buy a vacation home, more power to them. But it certainly isn’t the “Right” time since the article is about timing. I’d rather see it crash and crash hard than make it a long painful thing. Either way, it’s going to happen.
4 Paul Cooper // Oct 17, 2007 at 12:01 am
You go ahead RE investor. Be my guest and catch the falling knife. There are some 65,000 homes out there so lots of easy knives to catch. And 6 months from now you’ll be sitting pretty looking at lower prices. The RE bubble implosion has lots more years to go. You remind me of the ones during the stock market bubble implosion in Lucent. Stock was the cheapest of all telecoms at $79/sh. So lots throught it was a bargain when it was cut in half at $40/sh. Then again at $20/sh. Then again at $10/sh. It eventually bottomed at 0.5/sh. And no, I’m not saying that stocks and RE is the same. However knife catching works exactly the same in both.
5 MPS // Oct 17, 2007 at 12:56 am
Thanks Paul. This is just the start of a free fall in Phoenix. The only reason that the price decline isn’t so apparent is that there isn’t much selling at all. Nothing to chart. Foreclosure tidal waves will keep hitting the shore. Recession is looming.
6 RE Investor // Oct 17, 2007 at 8:06 am
Maybe I am just a contrarian here, but all of your thesis on the Phoenix market assume that markets operate in a vacuum. It is either this way, or this way and nothing can change. I bought my properties way before any of this nonsense - circa 1999 - 1998, last property purchased as forclosure in 2003, and that was supposedly the time that prices would keep going forever. I quit in 2003 because of the fundamental issue mentioned above. Then loan products changed. However, I think that anyone that has the hubris to call a bottom, or not call a bottom when so many things are in play is just showing lack of experience or arrogance. I got criticized the same way on other blogs as chicken little when I made a reverse comment in 2005 that things were too expensive. It almost was the same comment as you threw at me about the falling knife, just in the opposite direction. Again - Hubris. I am not saying that in some neighborhoods there will not be a problem with prices moving forward, what I am saying is that for you to criticize a Canadian couple or anyone else that chooses to purchase a home now because you “know” what is going to happen is just arrogance, and is the same arrogance as the “investors” displayed in the boom. BTW, everyone on Wall Street “knew” that the banks, in particular Goldman Sachs was heavily leveraged to sub prime, if you took that opinion, you would have lost around 100 points in the last month not buying GS at 160, now it is 227. And that Canadian couple may just be laughing at all of us in a little bit. Think about it, if they are buying a 2 Million dollar home, they must have some brains. Just a little contrarian food for thought. I could be wrong, but I am open enough to know that I don’t know the future any more than the next guy.
7 Mark // Oct 17, 2007 at 9:54 am
This is what I criticized: “Now is the time for Canadians and Europeans to buy Arizona real estate.” If that is true I think it’s quite clear that in a month it will also be the time and in a year it will also be the time. Of course it’s impossible to pick the exact timing to buy at the bottom and sell at the top. Of course if you want to go long on your investment you will be alright in the long run. Today you just need to put much much more down than you will need to in 6 months. You’re arguement sort of supports mine. The article was about timing the market. “NOW IS THE TIME” run run run, everyone buy real estate. John had to dig to find a “now is the time” article. Every other article out there is saying the market has a long run down to go, “it will be mid next year”, “it will be 2010″, “it will be 2011 blah blah blah”. I’m not saying I can time stamp the future bottom. I’m saying that if you thought that real estate was too expensive in 2005, you were right and based on fundamentals it’s far too expenisive today as well. Plus all it takes is an elementary understanding of market psychology to know what happens in a crash. The truth is now is NOT the time. The article certainly didn’t convince me that the dollar is going to all of a sudden strengthen. Corp america likes the weak dollar. Now, not only can they outsource the jobs all over the world, they can sell their products abroad as well. This equals bigger profits in richy rich’s pockets. It has become obvious in the last decade, there is no limit to the greed of the pigs who run corp america. On that note, too bad BofA bailed out that pig at CountryWide. He should go to jail.
8 Arizona Mortgage Guru » Blog Archive » Best Time for Canadians to Purchase Real Estate in the US // Oct 17, 2007 at 10:01 am
[…] of the US. As any serious Real Estate agent will tell you the Phoenix and Tucson areas are one the best markets in the country. Plus for Canadians its a welcome change in weather, not that this is earth […]
9 RE Investor // Oct 17, 2007 at 10:10 am
I apologize for characterizing your statements. On all those points we are in complete agreement. Corporate America does love a weak dollar and in some cases I think we might also benefit from it (as long as your major investments are in foreign trade or assets and out of dollars). And as far as courtywide, I would love nothing more than to see that steaming pile of you know what just finally die. And “Orange Man” Mozillo have to give up all his ill gotten gains to the foreclosed homeowners and stockholders he swindled. I am long Real Estate and I think that anyone who purchases Real Estate should be long. The get rich quick non-sense unfortunately on the part of individuals, banks and mortgage brokers is what caused all this. If none of the “new products” had come about, we would still be at 2003 - 2004 pricing levels which were high but sustainable with a growing economy and responsible underwriting, thanks to Mozillo and others like him, now we deal with a big crisis and exaggerated correction.
10 Mark // Oct 17, 2007 at 10:52 am
Thanks RE I.. I think alot of people reacted to the market not to get rich quick but because they feared missing the boat for ever. These people had to pay more than they could really afford and hope it some how worked out. Now they are strapped with oversized payments on houses that are worth far less than what they bought them for. That is the sad part of this. Many people’s life savings have evaporated because they put what ever they had down on a place that they won’t be able to keep. If you financed at 100% I say go hand them the keys. It’s the bank’s problem now. I think the goverment has to step up and admit there is no real bail out possible. But they could waive the income tax on the 1099s for the foreclosures. I mean, if someone buys a house for 200K, puts 20K down on it plus closing costs and then loses it. The bank sells it for 140K in some auction. And now Mr “I lost my life savings and house” owes uncle sam taxes on 40K. Jesus.
11 John Wake - Realtor // Oct 17, 2007 at 2:19 pm
Great points!
Even though the median home price may be declining doesn’t mean that there aren’t good deals out there. I spoke to a Canadian yesterday who shocked me when he said he bought a golf course home in an older part of Sun City for $140,000 this summer. The home previously sold for $180,000 last winter, he said! Without researching the home my ballpark guess is that price is like a 2004 price and is an excellent price. My point is that just because the median home price will likely continue to fall doesn’t mean there aren’t some good values out there.
“Now is the time for Canadians and Europeans to buy Arizona real estate.” Okay, insert “seriously consider” into the sentence.
This is more of an exchange rate play than a real estate play at this point. When the Loonie is at the strongest point since 1976, I think it’s more likely that it will be weaker in the medium term than stronger. So it gets down to your expectations of both the exchange rate and Arizona real estate prices.
There can also be advantages for Canadians and Brits in diversifying their portfolios with US dollar denominated assets.
“Or - god forbid, they may just want to have a home and not a flip”
Yeah, it could happen. There might actually be some Canadians and Brits out there whose main purpose is to have an Arizona vacation or golf home to improve their quality of life. If that’s the case then why wait? The exchange rate could turn against them at any time. Why get greedy?
And if you buy soon… cough… you can get the whole winter in Arizona.
12 RE Investor // Oct 17, 2007 at 3:17 pm
Agreed, for the government to 1099 a homedebtor after they have lost their down payment for a real loss in value is ridiculus! If they did that with stocks, you would have such an outcry from hedge funds and wall street fund managers that someone in the finance committee would be meeting their replacement as they exit the chambers. I am not even sure how that IRS tax rule originated. I suspect it came about from some serious lobbying on the part of the MBA in the last downturn so the banks and S&L’s could pass their losses on to someone else, at least on paper. If anyone knows the history of it’s roots in tax code, just for fun, do post…
13 RE Investor // Oct 17, 2007 at 3:31 pm
One last point while I am thinking of it. Usually lowering of interest rates and increasing inflation bodes well for housing, but in this post bubble environment, anything is possible. However, the builders may have to reduce building (following the lead of the NAHB) due to the exploding costs of raw materials such as copper, cement, steel, forest products and oil. It would stand to reason that at some point, it will just become too expensive for builders to build specs. Their margins will be too thin. This should bode well in the future for existing homes due to the higher cost to the builders per sqft to build vs. market prices and basis prices for existing homeowners. Of course as was mentioned earlier on, we have to work through all of this excess inventory. And BTW I do agree that it would be good for the market to just hurry up and correct completely, people feel some short term pain, and then things return to historic appreciation vs. rent vs. income ratios. Those foreigners come from some country’s with some pretty steep inflation problems in previous years, and it may just be the right time for them from a world perspective.
14 John Wake - Realtor // Oct 17, 2007 at 8:58 pm
“If anyone knows the history of it’s roots in tax code, just for fun, do post…”
I don’t know the history but I know the U.S. House of Representatives just passed a bill to change that. It’s now up the the Senate. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/07/RE94SHPUP.DTL
15 Russ // Oct 18, 2007 at 10:33 am
“How is it that when housing was at all time highs, the crowd was saying “buy now and make a million” now the same crowd is saying “don’t buy, its a falling knife”.”
You are confusing your “crowds.” The folks (like me) who know that buying Phoenix residential RE while it is in the early stages of price decline is akin to catching a falling sword were NOT encouraging others to buy at the market highs of late 2005. I was selling, and I encouraged anybody who would listen to do the same.
How is buying a house for 20% below peak “buying low,” when the price is heading lower? I do not require a crystal ball. I have a high IQ, a university education, and a penchant for preserving capital.
BTW, lumber prices are declining rapidly.
16 RE Investor // Oct 18, 2007 at 10:37 am
Well I am sorry, I guess I am just a dumb hick, with not even a highschool education and the IQ of a slug because I don’t agree with the doom and gloom crowd. Your elitest attitude is exactly the same hubris that I referred to in previous posts. Since you are obviously far superior to me, please let us dumb hicks know what is going to happen next, that way we can make the obvious good choices that you do. Show us the way oh great one.
17 Russ // Oct 18, 2007 at 10:59 am
“with not even a highschool education and the IQ of a slug because I don’t agree with the doom and gloom crowd”
Sorry for not playing along and pretending that intelligence, education, and plain old reading are useless in predicting economic conditions. That is what the old “crystal ball” reference implies. . . that it is impossible to see the continuation of price declines despite the fact that the lending mania that led to the price boom is over.
18 Russ // Oct 18, 2007 at 11:32 am
“This is just the start of a free fall in Phoenix. The only reason that the price decline isn’t so apparent is that there isn’t much selling at all. Nothing to chart.”
This is exactly right. There is a nice, fairly new (built from 2002 to 2006) subdivision that I am familiar with in a NW suburb of Phoenix. Like much of metro Phoenix, it was the site of rampant price escalation, much speculation, and many suicide loans.
With 3 or more bedrooms, 1800 square feet or larger, the MLS shows 33 active listings in this subdivision. Pending: zero. Sold in the last 30 days: zero.
So, is that like infinity months of inventory? Just joking, there was a sale within 60 days. So, 0.5 house sales per month and 33 houses. 66 months of inventory for that subdivision/size range. Interesting stuff.
19 RE Investor // Oct 18, 2007 at 11:56 am
Oh why bother anymore. This is precisely why I referred to “sheeple” earlier in the posts. If you look at generalities then you are like the people that invest in mutual funds, the S&P, and RE when it is going up. The Warren Buffets and George Soros of the world do not follow the crowd, and most of the time they are called crazy - until long after they make their bet, then everyone is saying “Oh, I knew that”, then the crowd follows them. Leaders lead, followers “read the paper, follow the school system, get a day job, etc” and make some other leader wealthy. Like everything else, the devil is in the details. Did you know that certain small markets in Phoenix have posted gains lately and YOY? I know, that is heracy to the bubble blog crowd, because housing must be in the toilet, right? And then as far as Russ’s numbers for resale, finding those numbers is like spearing fish in a barrel. Now, use your “conventional wisdom” and not “crowd wisdom” and find some areas with appreciation. Trust me, they are out there, but like the boom, the hurd always only goes in one direction or the other. Hurd investing will make you marginal returns, for above average to stellar returns, you need to buck the hurd. Or, like those Canadian’s and french etc. maybe just want a home and not a flip or investment….
20 Cbass // Oct 18, 2007 at 2:04 pm
Hurd- dictionary.reference.com/browse/hurd
Herd- dictionary.reference.com/browse/herd
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