Before purchasing a property down south, rent first for a month and explore, experts advise. Live in the area, plug into the locals, and find a local real estate agent who can help you determine whether it’s a good fit.Getty Images/iStockphoto
This is the first in a series of stories on retirement and second home destinations in North America.
When it comes to Canadian retirement fantasies, winters spent basking in the sunshine ranks at the top of the wish list. Add a polar vortex to the mix, and the idea of becoming a snowbird is becoming more appealing to Canada's 55+ crowd.
"It's definitely a trend that is growing," says Evan Rachkovsky, research and communications officer for the Canadian Snowbird Association.
No country sees more Canadian snowbird dollars than the United States, Mr. Rachkovsky says, because retirees are looking for climate, affordability and activities.
"[In the United States], they don't have to learn another language, they've likely travelled to the U.S. for family vacations, they are familiar with these areas, so I think that familiarity plays a lot into where they purchase homes."
In the years since 2007, when the U.S. housing bubble burst causing rock-bottom prices in real estate, Canadians have been snatching up properties in droves. According to the National Association of Realtors (NAR), Canadians accounted for 23 per cent of the $62-billion (U.S.) in foreign real estate purchases in the United States in the 12 months ending in March of 2013, twice as high as the next group of foreign buyers, the Chinese, who accounted for 12 per cent of sales.
The most popular states to buy in were in the south. Florida garnered 39 per cent of Canadian purchases, followed by Arizona with 24 per cent and 8 per cent in California.
Peggy Mason, of Palm Springs CA Golf Properties, says Canadian snowbirds are an essential part of the area's economy, not just when it comes to real estate, but also in the community at large.
"Where I live, in Lakes Country Club, 27 per cent annually of our buyers are Canadian," she says. "We are a huge destination for Calgary, we've got that direct flight, two hours and 20 minutes. They are an integral part of our economics down here."
But as American real estate prices creep up and the Canadian dollar sits at its lowest level in six years, prospective snowbirds are wondering: Can I still find a deal?
Yes, says Tannis Dawson, a senior tax and estate planning specialist from Investors Group in Winnipeg. But you might have to work a little harder to find it.
"It's hit and miss," says Ms. Dawson, who specializes in cross-border planning. "You have to do your research and really look. But I'm still getting inquiries from people looking [to buy], and the amounts that they are inquiring about are still good deals."
She's seeing values between $80,000 and $200,000 "for a decent-sized home." (Canadians spent a median price of $183,000, the NAR report says, the majority of it going toward single-family dwellings; 86 per cent purchased their property in cash.)
"I think it's still a pretty good time, up until about a week ago our dollar was still really good, it's come down since then," Ms. Dawson says. "There are estimates that by the end of the year it will be lower, so it's probably a better idea to buy now."
Brian Wruk, on the other hand, sees a market that is "drying up significantly" when it comes to Canadians purchasing property in the United States.
Based in Phoenix, Ariz., Mr. Wruk is a financial planner at Transition Financial Advisors Group, a cross-border financial advisory firm. He's also the co-author of The Canadian Snowbird in America: Professional Tax and Financial Insights Into Temporary Lifestyles in the U.S.
"House prices are on the rise here and the Canadian dollar is weakening," Mr. Wruk says. "A lot of people were looking at properties here in Arizona at $150,000 and below. That market has just pretty much been bought up."
According to the NAR report, the median existing-home price for all housing types across the United States in December was $198,000, up 9.9 per cent from December of 2012. And at the same time as prices are going up, inventory is going down.
Lawrence Yun, NAR chief economist, said in a December, 2013, news release, "Low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains."
The NAR attributes the lack of new construction to the fact that credit is still overly restrictive in the United States, which means small builders aren't able to get construction loans despite demand in their communities.
Like many in the U.S. media, Mr. Wruk suspects that the rising American housing prices might actually mean another "mini-bubble," and suggests people might be better off waiting awhile before making a purchase.
Bill Ness is the founder of 55places.com, a research and review website for age 55+ and "active adult" communities across the United States. He's still seeing good prices for homes in the 500 communities that are reviewed on his site, if people are willing to dig a little.
"If you look at the prices, they are still way below where the historic highs were in 2007 and early 2008. So some people may look at it and say, 'I can't get as good a price as I could have in early 2013,' but you're still paying less than someone who bought in 2007, for example."
What's the key to finding the good deals? Mr. Ness says that in general, the closer you are to a coast or a desirable metropolitan area, the higher the prices will be.
"If you want to be as close as you can to Fort Lauderdale, you might pay $300,000 for a condo you could get for $150,000 if you go 10 or 15 miles north," he says. "The builder got the land for less and so can offer it for less. And the newer the home, the higher they tend to be priced."
When it comes to Florida properties, Mr. Ness says traditional snowbird hotbeds such as Naples, Orlando, Bradenton and Venice attract the most interest, but lately he's seen people migrate to areas that weren't considered as popular before.
"We've seen a number of active adult communities pop up around Jacksonville in recent years. Also, along the Treasure Coast area," he says. "Some people prefer that because it's a little less congested, prices are a little more favourable in some cases."
The same holds true in California, Mr. Ness says. "A lot of people have this perception that California is unaffordable and that's not necessarily the case," he says. "If you're looking to be in places like Orange County or San Diego, that might be price prohibitive, but if you look at places like the Inland Empire [east of Los Angeles] or Palm Desert, you can find new construction, single-family homes for the upper 100s."
If you do find a property online that looks like a winner, Mr. Wruk says, be sure to check it out in person before you leap.
"If there's a particular place you like, rent a place there and explore," he says. "Get plugged into the locals, find a local real estate agent, live in the area and make sure it's a fit. And before you leap, you may want to go to another area and rent there for a month."
"I really tell people, they may have some dreams of sugarplums dancing in their heads, but make sure, because it's a big commitment, when you're looking at spending that kind of money."