Rosalie Murphy of The Desert Sun writes that Brian and Linda Pahl have listed the 3 bedroom, 4 bathroom home that they purchased in the PGA West community in La Quinta, more than two years ago, for $450,000. The home is listed at $725,000. Not a bad return; but it gets better because the Pahls live near Vancouver, where one U.S. dollar currently buys about $1.33 in Canadian dollars.
Pahl is one of scores of Canadian snowbirds who is taking advantage of the currency disparity this season. As the Canadian dollar (or "loonie") languishes well below the U.S. dollar (one Canadian dollar bought 75 U.S. cents on March 25, according to Bloomberg, and the loonie fell below 70 cents this winter), Canadians have all but stopped buying desert homes, local specialists say. Instead, many Canadians are selling their homes instead. Since Canadians have made up as much as a third of the desert's homebuyers in recent years and the market is missing them.
The story really begins almost a decade ago, when, after the U.S. housing market crash of 2007, the Canadian dollar, which had historically been worth about 85 U.S. cents reached parity with the U.S. dollar and briefly exceeded it in value. Canadians began snatching up American homes, especially in the Sun Belt states of Arizona and California. Even as the U.S. economy recovered, Canadian buyers continued to make up more than 15 percent of the desert's homebuyers. Then came 2015. Oil, a huge driver of the Canadian economy, began rapidly losing value, and the Canadian dollar's purchasing power sank with it. At the same time, the U.S. dollar gained strength against currencies worldwide. Consequently, Canadian cash started to buy less in the U.S. In other words, a $400,000 house cost about $440,000 in Canadian dollars in 2014. Now, the price is more like $530,000 Canadian dollars.
The decline in the value of the Canadian dollar relative to the U.S. dollar is impacting Canadians’ spending and the time they spend in the U.S. Across the country, Canadians invested about $11 billion in U.S. real estate from April 2014 to March 2015, according to the National Association of Realtors — down from $13.8 billion the previous year, and a peak of $17.1 billion in 2010.
In the desert, home prices have fallen and the number of homes on the market has spiked. Coachella Valley homes sold for a median price of $283,000 in February — by far the lowest of the winter selling season, according to real estate research firm CoreLogic DataQuick. And inventory jumped by about 25 percent year-over-year, according to data from the California Desert Association of Realtors.
Experts agree that the valley is a "buyer's market" at present, since there are so many homes available. But they disagree about whether Americans are picking up the slack left by Canadians: some are seeing strong interest from buyers in Southern California, the Pacific Northwest and Chicago, but others note that it is yet to be determined who will pick up the Canadian buying slack in this situation.
To keep Canadians buying, some lenders like RBC Bank are trying to convince them to take out mortgages. Canadian buyers, like many in the second-home market, tend to pay in cash rather than loans; 73 percent of Canadians paid in cash from April 2014 to March 2015, according to the National Association of Realtors. With an open mortgage in U.S. dollars, if the Canadian currency grows stronger soon, Canadians can simply pay off those loans. The only money they'd lose to the poor exchange rate would come in their down payment.
To read Rosalie Murphy’s original article in the Desert Sun, please visit: http://www.desertsun.com/story/money/real-estate/2016/03/25/canadian-dollar-california-real-estate/81012194/