If you ever thought about buying a vacation home, condo, or golf villa in the US 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 US, 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 per cent 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, 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 that boast decent occupancy rates and 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 those in this for the long haul and whose 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 it out for part of that time, you will do well over the long haul. But if you’re thinking of flipping for a quick profit, forget it.
If you’re well qualified, another plus is benefitting from mortgage interest rates that are not far off their record lows of a few months ago. As non-US residents, you’ll likely pay a point or so higher than permanent residents (perhaps about 7 per cent), but by historical standards, that’s very attractive too.
Do the math. Tally up the renewed value of the loonie. Look at the existing market. A perfect storm like this doesn’t happen often.