TORONTO, ONTARIO and CHICAGO, ILLINOIS--(Marketwire - Sept. 14, 2012) - The price of vacation homes in the sunny south - particularly Florida, Arizona and Nevada - are more affordable now than at any time in nearly four decades, according to a new report by Dr. Sherry Cooper, Chief Economist, BMO Financial Group.
However, the report shows the wide gap between average home prices in Canada and the U.S. is likely to narrow as the housing market in the U.S. continues to recover.
In fact, prices are already beginning to rise, but this has been more than offset by the recent strength in the Canadian dollar. Furthermore, U.S. foreclosures have declined, and sales are up, especially for investors buying cheap properties with the intent to turn them into rentals.
"Canadians represent the largest single foreign purchaser of U.S. property in sun and sand states," said Dr. Cooper. "With interest rates so low and the Fed working to push them down even further, housing activity is likely to continue to recover."
While Dr. Cooper noted that perspective buyers should not expect the bubble-level prices to return, vacation or retirement properties south of the border are a good investment.
According to a BMO survey, among those considering property in the U.S., 56 per cent would do so to gain a vacation or secondary property, while 44 per cent cite affordability and one-third its attractiveness as a long-term investment (29 per cent).
Nationwide, house prices in the U.S. have fallen 32 per cent from their peak levels in 2006, and prices in regions that are traditionally destinations for Canadian snowbirds have dropped even more. For example, prices in Tampa have dropped 45 per cent, Miami is down 48 per cent and Phoenix is off 50 per cent. That said, prices in those metropolitan areas are now on the rise again from their lowest point, with Tampa up 5.4 per cent, Miami increasing by 7.3 per cent and Phoenix rising a strong 15.7 per cent.
BMO Mortgage Expert, Laura Parsons, advises that those interested in purchasing U.S. properties should consider financing the new purchase with a financial institution in the U.S. - preferably a Canadian-based bank with branches south of the border. "Having expertise at the local level is always the best approach, particularly for real estate, as conditions and trends can vary drastically from one location to the next," said Ms. Parsons.
Ms. Parsons noted that BMO customers can visit a BMO Harris branch in the U.S., which has locations in Illinois, Indiana, Arizona, Florida and Wisconsin. "There's a lot to consider when making this decision, and having a Canadian partner can help provide a clear understanding of the differences between Canadian and U.S. financing, which can save a lot of time and headache."
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $542 billion as at July 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.