Whether it is due to the weaker U.S. dollar, the large foreclosure inventory for sale, more favorable economic expectations going forward, or all of the above, Canadians are emerging as the largest group of foreigners purchasing residential property in U.S. Sun Belt states. And they do not mind buying foreclosures.
Albeit for different reasons, location matters to international buyers, too. According to the National Association of Realtors’ 2011 Profile of International Buying Activity, Florida and Arizona remain the top two choices for Canadian buyers and investors because of their favorable winter climate.
Both foreclosed and not foreclosed homes for sale are available in abundance in Florida, California and Arizona, the nation’s top foreclosure states .
NAR data show these states are among the few that consistently attract foreign buyers. In 2011 up to 58% of all sales to international buyers came from four states: Florida 31%, California 12%, Texas 9% and Arizona 6%. During the 12-month period ending March 2011, Canadians accounted for 23% of all foreign buyers representing the largest group.
Reportedly, 43% of these Canadian buyers have cited location as the most important factor when deciding to purchase, while 27% see the U.S. real estate as a profitable investment. Similar culture, geographic closeness and lack of a communication barrier also are seen as positive factors.
Florida ranked first in 2011 home sales to its Northern neighbor in part because Canadians have a preference for sunny weather and lakefront recreational locations. In 2010 8% of Florida resales were to Canadian buyers.
According to Canadian media reports, the vast majority of Canadians paid cash for their purchase “in part due to the somewhat cumbersome” U.S. mortgage process, says Jerry Bevers, Arizona mortgage market manager for M&I, a part of BMO Harris Bank NA of Chicago that operates over 650 branches and 1,350 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida.
BMO Harris Bank executives find that while larger numbers of Canadians are interested in the American housing market there are few lenders who have a mortgage process tailored for Canadians looking to purchase a home in the U.S.
Since the firm’s parent company, BMO Financial Group, is based in Toronto, it offers “relationship products” specifically designed to meet the needs of Canadian citizens who choose to purchase or refinance a primary residence, second home or investment property in the U.S.
Canadian homebuyers also appear to have a different attitude towards property management that explains at least in part why many favor affordability over new construction—or these buyers’ interest in resale and bank-owned properties.
According to the 2011 Annual Homeownership Poll conducted by Toronto-based RBC, one of the top residential mortgage lenders and homeownership advice providers in Canada, up to 83% of Canadians “would rather renovate their homes than find a new place to live” even if the current home needed major work.
RBC’s 19th Annual Homeownership poll conducted online by Ipsos Reid during the last week of January indicates reasons to renovate ranged from making the home more attractive 66%, increasing the home value 46% and maintenance repairs 39%. About four-in-ten Canadians, or 39%, said that they want to renovate to increase energy efficiency.
"Canadians are more likely to customize their homes based on their personal preferences rather than buying new,” says Richard Goyder, RBC vice president of personal lending.
They also tend to set a strict budget, which helps to stay on track without breaking the bank. When asked about their renovation budget, 78% estimated they would spend less than $10,000. Up to 71% would mostly finance these projects with cash or savings, another 15% will take a line of credit, 13% would use home equity refinancing, 10% credit cards and 4% personal loans.
At 46%, almost half of the respondents plan to do much of the renovations themselves, compared to 42% who plan to hire a contractor.
The bank advises borrower clients to create a renovation checklist that includes talking to a financial expert to assess the financing options available. It offers flexible financing options, such as the RBC MyProject MasterCard product that combines the benefits of a credit card and a personal loan.
The new financing option offers a number of attractive features. It enables users to benefit from a built-in budgeting tool that draws from a credit line of up to $40,000 for a single project financing.
For the first six months RBC MyProject MasterCard purchases are interest- and payment-free. After the grace period the line of credit converts to a loan with a structured payment plan with predetermined interest rates and a payment plan.
Another convenience is that all renovation project purchases are made using one card “to simplify finances and keep track of expenses.”
Goyder’s financial tips for homeowners conducting a home renovation project
“Plan, plan, plan,” he says. He suggests borrowers explore financing options and track spending throughout the project “from every nail and can of paint, to necessary building permits,” and contact multiple contractors before preparing a detailed budget.
