Canadians take advantage of subprime woes, high dollar
Derrick Penner
Sun
Langley couple Phil and Casie Laird wanted a vacation home for their young family. But after the astute real-estate investors looked around British Columbia, they instead decided their best option was…
Langley couple Phil and Casie Laird wanted a vacation home for their young family. But after the astute real estate investors looked around British Columbia, they instead decided their best option was to try for a cross-border bargain.
They liquidated an Abbotsford investment property and took out lines of credit to snap up a four-bedroom, 21/2-bath rancher on a quarter-acre lot that backs onto a golf course and is a half-block from the beach in quaint Birch Bay Village for $266,000 US.
“If we were to look at something like that in the Okanagan, we’d be paying twice as much,” Phil Laird said.
The house needed some work — new appliances, paint and a lot of landscaping. Still, Laird, whose day job is as an administrator at Trinity Western University, estimated “now is a good time to get in [to the U.S. market] because of the way the dollar is and the fact that the U.S. market right now hasn’t grown, in terms of price, in the same way as north of the border.”
And in U.S. markets farther flung than Birch Bay in Washington state, the bargains for Canadians are becoming more plentiful as many areas have hit downturns following the subprime mortgage meltdown.
The Lairds, who bought the house with Phil’s brother and sister-in-law, Steve and Andrea Laird, plan to use it as an income property, renting it out for about five years until their children are a little older.
Mike Kent, the Lairds’ realtor in nearby Blaine, said his local market, Whatcom County, is faring better than other markets, with little of the subprime effect so far. Average prices this year are up almost three per cent in the county, hitting $331,499.
“Most people who bought here, bought properties to use, as opposed to buying condos in Miami Beach that they intend to flip,” he added.
Still, Kent said fewer buyers from California, where markets have been harder hit by the mortgage meltdown, are venturing north to Birch Bay than in past years. Canadians are a bigger presence, accounting for about seven of every 10 sales for his office.
“If it weren’t for Canadians coming back, [our sales] would definitely be off,” he added.
Kent said the big equity gains Canadians have earned are still the biggest driving factor, and their greatest influence is on markets closest to the border.
Laird said proximity was another attraction of the Birch Bay property. Not only was it the right price point, but depending on the border lineup, it can be as little as 25 minutes from his family’s home in Langley.
Kent added that he is “seeing a lot of Canadians inquiring and cruising around, trying to learn more about this market. And we hear the same thing over and over again. Prices continue to remain high, particularly in the Lower Mainland.”
In the meantime, Kent said condominiums can be had for as low as $110,000 to $120,000 US. For houses, people can find near-new 1,500- to 1,800-sq.-ft. detached ranchers for $250,000 to $275,000 US.
Kent has also heard interested Canadians complain that Vancouver Island seems harder to get to due to ferry lineups.
And he guesses that Canadians must be starting to reconsider whether it is the right time to buy winter vacation getaways in Palm Springs, Phoenix or other sunbelt locations.
Patrick Jerns, a realtor in Surprise Valley, near Phoenix, said Canadians are a noticeable presence in Arizona markets, but are far from being the biggest out-of-town buyers. And Jerns hasn’t noticed whether Canadians are starting to buy in bigger numbers.
However, Jerns said Arizona markets peaked in 2006, and have since begun to deflate. Prices in his own community of Sun City West are down six per cent from a year ago, he added, and anyone buying now “is in the catbird seat.”
Foreclosures in the area have hit “astronomical” levels, Jerns said.
He added that since economic conditions are good in Canada, and market conditions in Arizona are favourable for buyers, “It’s like Nordstroms is having a big sale.”
Robert Keats, a Phoenix-based financial planner with the firm Keats, Connelly and Associates Inc. who specializes in advising both Canadians and Americans on moving or investing across the border, said there is definitely heightened interest in U.S. real estate among Canadians.
“The smart money is starting to look,” Keats said.
“I remember the last time we had these situations,” he added. “It was the early ’90s, during the savings-and-loan scandal.”
A downturn in real estate followed that debacle, and Keats said the Canadians who stepped in to pick up bargain-priced property reaped big gains once markets recovered — sometimes doubling or tripling their investments.
In Birch Bay, Laird says his family hit the market at just the right time. He sees a lot of new building activity in the community, including a lot of luxurious condominium developments.
When he and Casie began to look around Whatcom County, Laird said his first thought was “if we’re going to do something, we’d better do it quickly.
“If Canadians become accustomed to driving across the border again, as they did 15 years ago, then we’re going to see pressure on prices.”