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Canadians buying homes in Palm Springs

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Wall Street Journal/July 2017

The recent surge in foreign buying was driven largely by Canadians flocking south to escape
their own overheated real-estate markets. U.S. home prices are starting to look like a bargain
compared with Vancouver and Toronto, where prices rose nearly 30% in the year ended in
March. The gains slowed to a 6% year-over-year increase in June.
“There’s the flashing red exit sign going ‘It’s time to get out now,’” said Brent Leathwood, a
broker in Florida who said he is seeing an uptick in Canadian buying.
The real-estate boom up north also helps give Canadians the cash to invest in vacation
properties to the south. Mr. Leathwood said he recently worked with a couple who flew down
from Vancouver.
“They’re shocked at what $300,000 or $400,000 will buy them,” he said. In Florida they can get
a detached single-family house in that price range, while in Canada even an 800-square-foot
condo is roughly twice that much, he said.
Foreign buyers tend to purchase more expensive homes than their local counterparts. The
median price for a home purchased by a foreigner was more than $300,000, compared with
roughly $235,000 for all existing homes sold in the U.S., according to the National Association of
Realtors.
After dipping in 2016 to nearly $9 billion in sales, transactions involving Canadians this year
more than doubled to $19 billion, a new high.
“Given the price appreciation that has occurred in those two cities, they have money to spend,”
Mr. Yun said.
Foreign buyers continue to make up a small share of the U.S. market overall, but in some places
they are a significant enough force to help explain why prices are rising so rapidly.
Purchases by foreigners accounted for 10% of U.S. existing-home sales by dollar volume in the
year ended in March, up from 8% in 2016.
Foreign buyers are disproportionately concentrated in a handful of states, with Florida, Texas
and California together making up 46% of foreign buying activity, the report said.
Still, Mr. Yun said, the major factor driving rapid price gains is a lack of new-home construction
that is leading to a dearth of supply.
“The way to assure more affordable homes is to build more and not to limit the demand. The
better approach would be to increase construction,” he said.
Chinese buyers remained the largest purchasers of U.S. homes by dollar volume, with $31.7
billion worth of purchases in the year, followed by Canadians, Britons, Mexicans and Indians.
The bulk of buyers from China, India and Mexico had recently moved to the U.S., while
Canadians and Britons were mostly buying second homes.
Kerry Lynn, a broker in New York City, said she is seeing more Canadians buying investment
properties because they see Manhattan prices as a relative bargain.
“They’re completely priced out of Vancouver,” she said. “They’re saying Toronto is getting way
more expensive, too.”