Canucks in Florida, go home

By Romana King on July 8, 2013
Estimated reading time: 2 minutes

American families are being shut out of the starter-home market, causing a backlash against foreign investors.

Alan Lulay, a sales consultant with Divosta/Pulte Homes, rig

U.S. families may have a few choice words for Canadians hoping to buy a property down south. That’s because many Americans feel they’re being shut out of the recovering housing market—forced to wait, watch and rent the homes they’d like to purchase, as Canadians, Chinese and institutional investors, among others, outbid them and snap up single-family homes. Over the last couple of years, U.S. real estate has started to make a slow comeback, with homes appreciating 20% to 40% since the 60% drop in value during the 2008 housing crash. This makes real estate very affordable for Canadians, if not for American families. “Your average working family, at least where I live, is not able to buy a home,” testified Democratic congresswoman Loretta Sanchez to Federal Reserve chairman Ben Bernanke in May. Sanchez lives in California, home to some of the country’s hottest residential real estate markets, and a favourite among foreign buyers, including Canadians. Sanchez worries locals are becoming “permanent renters” due to the influx of cash-only investors into the U.S. housing market. “People feel it’s a little unfair,” says Arnold Porter, a Phoenix, Ariz.-based realtor who works with Canadians buyers. To put things in perspective, international buyers bought 4.8% of the five million U.S. homes sold in 2012. By far, the largest group of foreign buyers was Canadian—accounting for nearly 25% of those property purchases. But the bulk of property investment purchases has actually come from institutional money. “These investors looked at the stock and bond market, saw there were better returns on real estate, and began investing in homes and renting them out,” Porter says. As a result starter homes, typically priced at US$200,000 or less, are attracting bidding wars. Often cash buyers—rather than families financing through lenders—win. Even so, Canadians can still find deals south of the border—particularly in condos and vacation homes. “Canadians who buy one or two homes aren’t impacting the market. It’s the large institutional investors who are getting the backlash,” says Porter.