U.S. Homes Serve up Deals for Canadians
For Canadian buyers, this is the best time to invest in the U.S. housing market in nearly 40 years. So, don?t be surprised if our neighbors from the north continue to invest in homes in our sunny states.
The U.S. home market has long been an attractive lure for foreigners. But during the boom, buyers were priced out because of a strong U.S. dollar and skyrocketing home prices. A widening gap between the average Canadian and U.S. home price and a strong Canadian dollar is turning the tides, making investments in American homes more lucrative.
And Canadians are lapping it up.
According to Dr. Sherry Cooper, BMO chief economist, Canadians are now the largest single foreign buyer in states such as Florida, Arizona and Nevada. For the potential Canadian buyers still on the fence, Cooper said, now is the time to make a decision.
?With interest rates so low, and the Fed working to push them down even further, housing activity is likely to continue to recover,? Dr. Cooper told the Financial Post.
With the U.S. market on the path of recovery, home prices will again rise and the price gap between American and Canadian homes will likely close.
Home Prices to See Modest Growth, Says Poll
The American home market is on a recovery path and home prices will continue to grow, says a Reuters poll. The poll also found that Fed buying of mortgage-backed credit would also help the housing market.
The good news is 35 of the 38 economists polled said the market was recovering. But, as we have said earlier, it?s going to be a slow road with speed bumps.
?We still have years to go for a full recovery,? Scott Brown, an economist at Raymond James in St. Petersburg, Florida, told Reuters.
But, after the free fall of prices any positive growth is welcome.
According to the poll, home prices would rise 2.5 percent next year, up from the 1.8 percent projected in a July poll.
Fed Comes to Housing Market?s Rescue
The Federal Reserve this week announced a new stimulus program to bolster the housing market and accelerate its recovery by immediately buying up billions of dollars of mortgage-backed securities. These securities are ?bonds that are a collection of home loans, which were bought by investors.
The latest proposal could provide a much needed push by lowering interest rates farther and triggering home sales and refinances.
The Fed didn?t put a deadline on the plan, saying it was was willing to do more if the labor market outlook doesn?t make substantial improvement.
?The employment situation ? remains a grave concern,? Ben Bernanke said at a news conference Thursday. ?While the economy appears to be on a path of moderate recovery, it isn?t growing fast enough to make significant progress reducing the unemployment rate.?
According to the Los Angeles Times, many analysts doubt the bond buying would have a significant impact on the economy, but it should have a positive effect on the housing market.
Undeveloped Land in High Demand
Another sign of a resurgent housing market ? investors are beginning to cash in on residential plots ready with construction and zoning approvals.
These chunks of land were snapped up cheap by money managers at bankruptcy proceedings during the tough times in the market when builders went bankrupt and banks seized up the properties. The money managers held on to these tracts of landing waiting for the right time to cash in.
And now they are again releasing them into the market for returns as high as more than 20 percent on their initial investment, Reuters said. Some are pairing up with builders to build new homes.
The move is triggered by rising home sales, slowing foreclosures and low interest rates.
?We are coming out of the mother of all housing cycles, and residential land is the best way to play the ultimate recovery,? Michael Barr, a Paulson & Co. portfolio manager, who oversees the Paulson Real Estate Recovery fund told Reuters. ?Land is the highest returning component of the home building equation.?
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