Tag Archives: Economic Recovery

Line up financing before looking for U.S. vacation property

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With winter looming, the lure of a vacation property in a sunny U.S. destination may be strong for Canadians looking to take advantage of low interest rates, a strong loonie and housing prices in the U.S. still suffering from a sluggish economic recovery.

Experts say Canadian buyers looking for a U.S. vacation home are advised to line up their financing before they head south with dreams of a sunny spot to retreat to when the snow starts to pile up.

Marc Knight, a real estate agent in Miami, says with cash on hand, the process is pretty simple for Canadian buyers. The trouble comes if you have to try and arrange financing from a U.S. bank.

“U.S. banks are definitely not lending as much as they did several years ago,” Knight said.

“For a foreign national, you’re probably looking at a 50 per cent down payment and then you also have to verify income, assets and so forth.”

However if you have the equity in your home in Canada, banks here are ready to lend.

Farhaneh Haque, director of mortgage advice at TD Bank, says there are two main ways to use the equity in your house to borrow the money for a vacation home — a home equity line of credit (HELOC) or refinancing your current home with a new mortgage.

A home equity line of credit allows a homeowner to borrow up to 80 per cent of the value of their home, less what they owe on their mortgage.

“It can serve to finance some of your investments south of the border at a very attractive rate. Presently you’re looking to prime plus one on the HELOC, so you can have access to those funds relatively quickly,” she said.

Alternatively, you could just refinance your mortgage, provided that you have the equity in your home.

“For example if your house is worth $500,000 and you only owe $100,000 on it, you could technically borrow another $100,000, $150,000, whatever it is that you needed… and use that as a cash payment for your property in the U.S.,” she said.

Haque said with rates for fixed-rate mortgages only marginally higher than variable rates right now, investors need to weigh their options carefully.

Potential buyers also need to keep in mind all of the extra costs, including condo maintenance fees, property taxes and utility bills, associated with a vacation property to make sure they don’t get in over their heads.

A report by TD last year found that more than one-third of baby boomers were considering buying a property south of the border. One-quarter said the prices brought on by the depressed real estate market in the wake of the financial crisis sparked their interest, while another 12 per cent were already considering opportunities.

Knight said he gets a handful of calls every week from Canadians looking for a vacation property.

“With the currency being what it is and the real estate prices having dropped significantly in Miami over the last couple of years, it makes sense for a lot of Canadians to look at Florida either for investment or for vacation properties,” he said.

Knight noted it wasn’t just Canadian snowbirds looking for a deal.

The Miami area, he said, has been on an upswing in the last year from the lows hit during the financial crisis as buyers from around the world have descended on the Florida hot spot.

“Buyers from Latin America, buyers from Europe, buyers from Brazil are buying some of the larger ocean front units and right now several developers have actually planned to build new condo towers, particularly in the downtown Miami area,” he said.

“The market overall is still pretty soft here in the United States, but in Miami it is definitely firming up and moving higher.”

http://www.winnipegfreepress.com/business/finance/line-up-financing-before-looking-for-us-vacation-property-experts-say-133178463.html

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Canada’s housing market will slow, bank says

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Scotiabank says Canada’s housing market is expected to see a modest slowdown in sales heading into 2012 and relatively flat prices, while several other countries will struggle.

The bank said in a report released Tuesday that Canada’s housing market has begun to cool, but it remains a “notable outperformer” compared with other countries.

“Ultra-low interest rates will continue to support affordability [in Canada] in the face of record high prices,” senior economist Adrienne Warren said. “Nonetheless, heightened economic uncertainty combined with recent signs of a loss of momentum in Canada’s jobs market could keep some potential buyers on the sidelines for the time being.”

Scotiabank said that of nine major developed markets it tracks, only three — Canada, France and Switzerland — had year-over-year real price growth in the second quarter of this year.

Prices in Canada were up by five per cent for that period, while figures for July and August show stable sales and a levelling out of prices.

In the other six countries — Sweden, the United States, the United Kingdom, Ireland, Australia and Spain — annual prices declined in the second quarter.

The bank said global housing demand is expected to remain “moribund” until the global economic recovery takes root and financial market stability returns.

“An oversupply of owner-occupied housing, due to overbuilding and rising foreclosures, remains problematic in many markets, adding to the downward pressure on prices,” the bank said. “A generally more cautious lending environment also will hold back the pace of recovery.”

http://www.cbc.ca/news/business/story/2011/09/27/housing-market-scotiabank.html

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Housing Market on recovery

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“In the last six to nine months, demand for housing was decrease in Winnipeg and in Manitoba, but it has picked up a good deal. Sales of existing homes in November, 2009 set a dollar sales record of $173 million compared to $113 million in November, 2008. People have recognized that the worst of the downturn is over. Potential home buyers are now more willing to enter the marketplace, confident of what the future holds.” said Jeff Powell, senior market analyst for Canada Mortgage and Housing Corporation in Winnipeg.

This can be seen as a good sign of recovery, well, at least for the housing market. The prices of built houses are in recovery and more homes and condos are being constructed based from what Canada Mortgage and Housing Corporation issued. The CMHC data foresees a 10% improvement in building and sales activity in 2010. However, the price growth of houses is yet unclear due to rising interest rates on Main Street which will have an impact with the Main Street recovery.

The said recovery is supported by growing employment rates and increased consumer confidence. As a matter of fact, The Bank of Canada will be raising short interest rates and lenders, who have more positive response to what the bond market says money cost, are already pricing higher rates into mortgages. The economic recovery and the status of the housing market right now rest on increasing consumer confidence. This could take an effort to maintain considering changing interest rates moving from a low 1.5% to 3% and 4$ or more.

Housing market trends in Canada had gone up and down for one reason, market liquidity. When market declines, houses for sale rise, house owners want to sell but couldn’t find the right deal. This goes the same way with buyers which yield to no closed business. On the other hand, during good market condition, house buyers become more eager to make deals before prices appreciate more. Liquidity rate and sales volume mark significant growth.

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