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Toronto housing market still on fire, adding heat to national debate

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Home prices rose across the Greater Toronto Area in October, matching similar gains in Calgary and Vancouver which should continue to inflate national housing numbers due out later this month.

The Toronto Real Estate Board said Wednesday the average sale price in the region in October was $587,505, an 8.9% increase from a year ago. While condominium price increases have slowed, low rising housing prices continue to rise with the average detached home selling for $951,746 in October, an 8.7% increase from a year ago.

“Strong growth in sales was evident across all major home types during the first full month of fall. This suggests that there are a lot of households across the Greater Toronto Area who remain upbeat about the benefits of home ownership over the long term, whether we’re talking about first-time buyers or existing home owners looking to change their housing situation,” said Paul Etherington, president of the board, in a release.

Related Vancouver home sales jump 15% in October from a year ago and prices are still climbing, too Calgary’s condo market booming as average price for single-family homes tops half a million Downtown living, where properties are small, but convenient, seen as driving force in 2015 real estate GTA sales were up 7.7% in October, gains that follow reports earlier this week that October Vancouver sales were up almost 15% from a year ago while Calgary condo sales jumped 14% during the same period.

Concern has been raised that those three markets may be skewing the national price figures which are due out on Nov. 15, a sentiment that even Joe Oliver, the finance minister, has expressed. The government has intervened four times to tighten mortgage rules, but Mr. Oliver has so far rejected further regulation.

In the Toronto market there are few signs of price growth slowing, with the exception of the condo sector which saw 2.5% year over year price growth for October.

It’s a much different story for low-rise housing. Detached home prices across the GTA rose 9.6% in October from a year ago while semi-detached and townhouses were up 8% and 9.5% during the same period, respectively.

Analysts have suggested provincial land use policy encouraging intensification have created the dichotomy between high-rise and low-rise housing in the GTA. The spread between low-rise home prices and condominiums prices has never been greater, according to Toronto builders.

“While sales growth has tracked strongly so far this fall, many would-be home buyers have continued to have difficulties finding a home due to the constrained supply of listings in some parts of the Greater Toronto Area, particularly where low-rise home types are concerned. The resulting sellers’ market conditions are forecast to drive strong price growth through the remainder of 2014 and indeed into 2015 as well,” said Jason Mercer, TREB’s director of market analysis, in a release.

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Home Capital grabs mortgage market share as Canada’s big banks shift to lower risk loans

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Home Capital Group Inc., Canada’s largest non-bank mortgage lender, is picking up loans banks are shunning amid tighter lending regulations.

The company reported originations rose 28% to $2.6 billion in the third quarter from a year ago. So- called traditional mortgage originations, which have loan to value ratios of 80% or less, jumped 35% to $1.8 billion from the previous year.

“We’re grabbing market share, some from the big banks,” Martin Reid, president of Toronto-based Home Capital, said by phone today. “Part of it is regulatory changes. Now people don’t qualify for insurance and banks may be less inclined to lend to them. The banks are just not set up for that type of underwriting.”

The banks are just not set up for that type of underwriting Home Capital is generating more business since the government began to tighten mortgage rules about five years ago and traditional lenders moved to lower risk exposure.

The Finance Department in 2012 reduced the maximum mortgage amortization period to 25 years from 30 years and cut the most homeowners can borrow against the value of their homes to 80%, among other changes. The Office of the Superintendent of Financial Institutions, Canada’s banking regulator, also introduced tougher standards for mortgage lenders.

Home Capital forecasts the trend will continue as the Bank of Canada and finance department seek to limit taxpayer exposure to a drop in home values through Canada Mortgage and Housing Corp., the nation’s government-owned mortgage insurer.

Related Toronto and Vancouver home prices pass Rome and close in on Paris Steady as she goes for Canadian housing market in 2015, says CMHC Any potential rule requiring banks to shoulder more risk or for CMHC to curb insurance would benefit Home Capital as the firm is able to tailor its lending for each loan, Reid said.

Home Capital dropped 7.1% to close at $51.60 in Toronto and has advanced 28% this year.

Home Capital third quarter net income rose to $73.8 million, up 11% from the same period last year. Profit excluding some items was $1.05 cents a share compared to the $1.06 cents a share estimate of 10 analysts surveyed by Bloomberg.

The company faced high development costs, traditional mortgage spread tightening and lower securitization gains, Fred Westra, an analyst at Industrial Alliance Securities, said in a note to clients.

Graham Ryding, analyst at Toronto-Dominion Bank, downgraded his stock rating to hold from buy today.

Bloomberg.com

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Toronto and Vancouver home prices pass Rome and close in on Paris

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Canada’s two priciest cities for homes can now be included in an international class that is attracting foreign investors from around the world, says a new real estate study.

The report from CBRE says “prime” residential property in Toronto is now $1,225 per square foot while Vancouver is $1,368 per square foot. Those dollar figures have vaulted the city past some pretty impressive competitors like Rome and Milan. Similar property in Paris is $2,000 per square foot while the most expensive city in the study, London, comes in at $3,636 per square foot.

We’ve got some serious real estate here “We’ve got some serious real estate here. Very quietly we have climbed the global real estate ladder,” said Ross Moore, national research director for CBRE in Canada. “There are a whole bunch of reasons people are buying property but parking capital is one reason. You get your money out of Russia, get your money out of China. Pick your country. You want to diversify. In Canada, people want to educate their kids here so they want to buy somewhere for them to live.”

The question of how much foreign ownership is influencing the marketplace has been debated heavily in both cities. Evan Siddall, the president of Canada Mortgage and Housing Corp., told the Financial Post this month his research team is trying to get more information to fill in the “data gap” on what percentage of Canadian homes are being purchased by overseas buyers.

The CBRE study finds that foreign buyers are influencing markets around the world and specifically pointed to Toronto and Vancouver as attracting retirees looking for luxury, the only other Canadian cities referenced.

“Retirees are the new downsizers looking for a lifestyle change. This group are essentially empty nesters who are looking to trade grand estates for turnkey urban condos with instant luxury amenities,” says the report. “These buyers have been prominent in Canada for some time with luxury condos in Toronto and Vancouver becoming increasingly popular from this new segment.”

Related Toronto housing market still on fire, adding heat to national debate Vancouver home sales jump 15% in October from a year ago and prices are still climbing, too The CBRE report comes as new statistics from real estate boards in both locales show sales continue to climb with prices following. Toronto realtors are now calling for the large price gains we are seeing to continue well into 2015.

The Toronto Real Estate Board said Wednesday the average sale price in the region in October was $587,505, an 8.9% increase from a year ago. While condominium prices have slowed, the average detached home sold for $951,746 in October, an 8.7% increase from a year ago.

Tyler Anderson/National Post GTA sales were up 7.7% in October. “Strong growth in sales was evident across all major home types during the first full month of fall. This suggests that there are a lot of households across the Greater Toronto Area who remain upbeat about the benefits of home ownership over the long term, whether we’re talking about first-time buyers or existing home owners looking to change their housing situation,” said Paul Etherington, president of the board, in a release.

GTA sales were up 7.7% in October from a year ago, gains that follow reports earlier this week that Vancouver sales were up almost 15% during the same period.

Concern has been raised that Vancouver and Toronto, along with Calgary, are skewing the national price figures which are due out on Nov. 15, a sentiment that even Finance Minister Joe Oliver has expressed. The government has intervened four times to tighten mortgage rules and cool the market but Mr. Oliver has so far rejected further regulation.

Analysts have suggested Ontario’s provincial land use policy encouraging intensification has helped fuel prices for single-family detached homes in Toronto.

“While sales growth has tracked strongly so far this fall, many would-be home buyers have continued to have difficulties finding a home due to the constrained supply of listings in some parts of the Greater Toronto Area, particularly where low-rise home types are concerned. The resulting sellers’ market conditions are forecast to drive strong price growth through the remainder of 2014 and indeed into 2015 as well,” said Jason Mercer, TREB’s director of market analysis.

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Downtown living, where properties are small, but convenient, seen as driving force in 2015 real estate

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TORONTO — Homeowners who choose the convenience of city life over the more generous living space in suburbia are driving Canada’s real estate market, according to a new report jointly produced by consultancy PricewaterhouseCoopers and the non-profit Urban Land Institute.

The annual outlook on emerging real estate trends says the move downtown, which has emerged in the past few years, will continue as more Canadians decide to stay in or move back to urban cores.

Much of this is due to changing demographics as young families and millennials forgo the white picket fence and house in the suburbs to take advantage of downtown living, where properties are smaller but offer more conveniences, said the 112-page report released Tuesday.

According to Statistics Canada, the most recent numbers available show that the population of urban centres grew 7.1% between 2006 and 2011.

Frank Magliocco, Canadian real estate leader at PricewaterhouseCoopers, said there are a number of factors behind the urban growth, including that Canadians are more aware of the environmental costs associated with urban sprawl as well as the cost in time and money of lengthy commutes.

As well, provincial land use regulations that protect green spaces — for example Toronto’s Greenbelt involving about 800,000 hectares of protected land from Peterborough, Ont., to Niagara Falls, Ont. — have made it more difficult to find land to develop and has pushed an explosion of condominium growth in major cities.

But one of the concerns is what will happen to these urban properties once the younger generation grows out of them.

“This continuing urbanization trend has fuelled the condo boom in Toronto and other cities, but some question what will happen as the lifestyles of today’s young urban singles and couples change. Will they move out of the city core in search of larger homes, schools and services, or will they — like their counterparts in other parts of the world — simply adapt to smaller living spaces?” the report asks.

Magliocco said Canadian cities will either go the way of New York, where families are willing to sacrifice space to live in the city, or the way of London, where families are used to living outside the city and commuting downtown for work.

The rapidly growing condo markets in cities such as Toronto and Vancouver have also raised concerns about an oversupply of units and whether the boom is overly weighted towards wealthy, foreign investors who lease the units to others.

Meanwhile, an expected rise next year in interest rates from historically low levels may also influence demand in the housing market.

However, among the 1,400 people interviewed and surveyed for the report, which included private property investors and developers, commercial developers and real estate service firms, the consensus was that the Canadian market is strong enough to weather a bump in mortgage rates.

“The improvement in the U.S. economy indicates that higher rates could be coming, but the economic stability in Canada and the United States will continue to attract foreign capital,” said the report. “In addition, retiring baby boomers are likely to flood the market with private capital as they look to turn stock options and retirement packages into stable, income-generating assets.”

Overall, the report sees developers responding to the needs of downtown dwellers by building more mixed-used properties, which include residential and retail space.

“Looking ahead, we can expect to see more and more retail and services along the streets of Canada’s city cores and along major transit arteries, especially where new developments predominate. Major brands are likely to move into these new spaces, too — though with new formats and smaller footprints,” said the report.

The report also noted that Calgary, Edmonton and Vancouver, will see the most residential growth in 2015, a trend that has been helped by more jobs becoming available in the West than in Central Canada, while Calgary and the Greater Toronto Area will hold the most potential for retail growth.

‘I did mess up’: Even the experts admit mistakes on picking a mortgage

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It can’t be easy for a certified financial planner to admit this, but Ted Rechtshaffen admits he blew it on his last mortgage.

“I was wrong. I had a variable rate mortgage and in 2009 I pulled the plug and went fixed,” said the president of TriDelta Financial in Toronto, joking about how his rate was 75 basis points off of prime and would amount to 2.25% today. “I did mess up, but my question was what benefit do I get locking-in versus going variable?”

You can hardly blame him for thinking rates were going to increase. Variable rates are generally tied to the Bank of Canada’s overnight lending rate and most so-called experts, even the most renowned economists, have called for the central bank to raise rates. They were all wrong. The last time the overnight rate moved was September 2010.

Mr. Rechtshaffen said the gap between a variable rate mortgage and a five-year fixed rate mortgage was just 25 basis points, making his decision at the time less difficult. Most of the time variable does beat fixed, something pointed out in a now well-quoted study by York University professor Moshe Milevsky who found that over 50 years floating rates saved you money about 90% of the time.

His study didn’t include the current rate environment in which fixed rates have hovered around 3% the past few years, a period when there’s been no movement on the variable rate. The website ratespy.com suggests the lowest variable rate on the market is now 2.10% while the lowest five-year rate is 2.65%. The average variable rate is roughly 2.4% compared to 2.94% for the five-year.

Rates could move very fast once they go up

Basically, you’re saving 55 basis points on a mortgage. Based on a $500,000 mortgage with a 25-year amortization, that 2.94% mortgage would require a monthly payment of $2,350.86 and result in $67,923.39 in interest over five years. At 2.4% your monthly payment drops to $2,215.01 and the total interest is only $55,229.04.

Mr. Rechtshaffen said there are really two points to consider when deciding whether to lock-in: what is the gap; and what you think is going to happen to rates.

In some ways it comes down to how much are you going to pay to buy what amounts to an insurance policy that your rate won’t go up? How big does the gap have to be for you to switch to variable?

“To me, I think you have to be getting three quarters to 1% [savings] in today’s environment. Rates could move very fast once they go up,” Mr. Rechtshaffen said.

Ultimately you can take that conservative planning too far and lock into a 10-year mortgage, a term with rates well above 4%. That makes it a very expensive product.

Rob McLister, editor of Canadian Mortgage Trends, said he rarely sees people lock in to a 10-year mortgage because rates are so much lower for other products.

The other thing to consider is that while prime may not move because of the Bank of Canada’s insistence on keeping rates steady, there’s nothing to say the discounting off of prime won’t grow. It has in the past with consumers getting up to one percentage point off.

“Before the Fed taper talk began in summer 2013, we were steering variable-rate shoppers out of variables and into one-year fixed rates, Mr. McLister said. “There was a high probability of variable discounts improving. This saved people interest for one year, after which they were able to switch into a better floating rate.
“Since then, variable pricing has improved as expected. Barring a global crisis of some kind, we could see another 10-15 basis point improvement through 2015. If that happens, you’ll see brokers advertising prime minus 0.90% or below next year.”

Will Dunning, the chief economist with the Canadian Association of Accredited Mortgage Professionals, said the biggest determinant of whether to go short or long is where you are in the home ownership cycle.

“When there is zero spread, people lock in but people’s history is more important. When you buy your first home, you’re very cautious and you go for five-year fixed,” Mr. Dunning said. “The older you get and the longer you’ve been in your house you are more likely to go variable rate.”

A survey by CAAMP last year found about 28% of the market had gone into a variable rate product compared to 65% who were fixed and another 7% who had a mixed product.

Mr. Dunning said when the spread between variable and the five-year fixed has been more than 100 basis points, and even closing in on 200 basis points, you will see a strong movement into a variable rate product because of the temptation of interest savings which outweighs the risks of rising rates.

So what would Mr. Rechtshaffen do today? “I just renewed my mortgage and went with five-year fixed,” he said.

Will it cost him money? Maybe. “But I’m happy to have a rate locked in and not worry about them going up,” he said.

Illustration by Chloe Cushman, National Post

Steady as she goes for Canadian housing market in 2015, says CMHC

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OTTAWA – The Canada Mortgage and Housing Corp. says it expects housing starts in 2015 to be about the same as they were this year, and in line with economic and demographic trends.

The national housing agency says “some moderation is expected” in 2016.

The CMHC says that on an annual basis, it expects housing starts to range between 186,300 and 191,700 units in 2014, with a point forecast of 189,000 units.

Next year, the agency says it expects housing starts to range between 172,800 and 204,000 units, with a point forecast of 189,500 units.

In 2016, the CMHC says it expects housing starts to range between 168,000 and 205,800 units, with a point forecast of 187,100 units.

The agency says it expects Multiple Listings Service sales to range between 467,400 and 482,000 units in 2014, with a point forecast of 476,100 units.

Next year, it says it expects MLS sales to range between 457,300 and 507,300 units, with a point forecast to 482,500 units.

The CMHC says the average MLS price in 2014 is expected to be between $401,600 and $405,400, with a point forecast of $404,800.
Next year, the agency says it expects the average MLS price to be between $403,600 and $417,800, with a point forecast of $410,600, while in 2016 the average MLS price is forecast to be between $407,300 and $424,500, with a point forecast of $417,300.

Canadian home sales fall for first time in nine months

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EOTTAWA — Sales of existing homes cooled in September as they fell 1.4% on a month-over-month basis, the first monthly decline since January, the Canadian Real Estate Association said Wednesday.

The association said sales through its Multiple Listings Service were down in about 60% of all local housing markets last month.

CREA president Beth Crosbie said affordably priced single family homes are in short supply in some of the hottest markets and that contributed to the monthly decline.

Related he $11 billion in mortgage payments the Bank of Canada doesn’t know about Even Canadian real estate companies don’t see much growth in home prices left While Toronto’s housing boom rolls on, some of the housing itself is falling apart “That said, there are other markets with ample supply, but sellers there are holding firm on price,” Crosbie said in a statement.

“There is a lot of variation in housing market trends depending on the type of housing, neighbourhood and price segment.”

Compared with a year ago, sales were up 10.6%. However CREA said September 2013 had five Sundays, considered to be the slowest day for home sales.

The average price for a home sold last month was $408,795, up 5.9% compared with a year ago.

Excluding the Greater Vancouver and Greater Toronto markets, the average price was $325,406, up 4.5% from September 2013.

The aggregate composite MLS Home Price Index was up 5.28% compared with a year ago.

BMO Capital Markets senior economist Robert Kavcic noted that there were large regional differences in house prices with Vancouver, Toronto and Calgary posting strong gains.

“Conditions get decidedly weaker anywhere east of Toronto, with no city reporting average prices up more than 3% year-over-year, and fully half below year-ago levels,” Kavcic wrote in a report.

“The good news is that the wide disparities in Canada’s housing market largely reflect economic, demographic and supply/demand fundamentals at work, all but eliminating any fears of a widespread ’bubble.”’

The number of newly listed homes fell by 1.6% in September compared with August.

CREA said the national sales-to-new listings ratio was 55.7% in September compared with 55.6% in August and within the 40 to 60% range usually described as a balanced market.

The association noted that just over half of all local markets posted a sales-to-new listings ratio in the balanced range.

There were 5.9 months of inventory nationally at the end of September 2014, up slightly from 5.8 months in August.

TD Bank senior economist Randall Bartlett said the lack of listings on the market continued to be a surprise.

“This suggests that home price growth may have more upside room over the next few months,” Bartlett said in a report.

“While the housing market continues to defy expectations in 2014, we still remain of the view that housing activity will eventually cool from current levels. With home prices continuing to rise above incomes, affordability will become an obstacle to housing demand once interest rates do eventually begin to rise.”

Meanwhile, the Teranet—National Bank national composite house price index posted a monthly increase of 0.3% for September.

The increase came as prices rose in six of the 11 metropolitan markets surveyed including gains in Calgary, Vancouver, Toronto, Halifax, Winnipeg and Quebec City.

Prices were flat in Edmonton and down from the month before in Hamilton, Montreal, Ottawa-Gatineau and Victoria.

CMHC continuing with plans for banks to take on more mortgage risk

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The head of Canada Mortgage and Housing Corp. said the Crown corporation is continuing with plans to have banks take on more risk when it comes to the housing market.

“In the insured market all of the risk is on CMHC’s balanced sheet or 90% on the government’s balanced sheet through private sector competitors. The government wants to reduce its exposure to the housing market,” Evan Siddall, president of Canada Mortgage and Housing Corp. told the Canadian Club in Toronto in what was billed as a “conversation” with Terry Campbell, president of the Canadian Bankers Association.

Mr. Siddall said the government has asked CMHC to look at options and advise it on what to do next.

Related Joe Oliver says Canada won’t make major changes to CMHC, housing finance CMHC could force banks to pay deductibles on mortgage insurance Canada’s housing market on course for soft landing, says CMHC Consumers with less than a 20% downpayment must get mortgage default insurance if they are borrowing from a bank regulated by the Bank Act. The government backs loans insured by CMHC 100% and for up to 90% for private entities like Canada Guaranty.

Mr. Siddall has said there is some value to banks having some “skin in the game” which some have suggested could mean banks pay a deductible of up to 10% in the event a consumer defaults.

“It’s kind of classic perspective,” said the CMHC head. “It’s this idea of moral hazard that if you took risk away from the people who confronted it in the marketplace, it could lead to bad behaviour. The stupid example is if you insure someone who is driving a car, they won’t be a responsible car driver.”

Mr. Siddall said the banks are responsible but the idea of deductible is “good idea” and something along those lines is good economic policy.

Sources have told The Financial Post that CMHC has already been in discussions with the CBA and Office of the Superintendent of Financial Institutions about the idea which is years away from being implemented.

Mr. Campbell told the audience a lot of conversation with the industry will be needed before anything happens.

“In Canada, as you know and everybody in this audience knows, we did not have a housing crash like some other jurisdictions,” said Mr. Campbell, chalking that up to good risk management on behalf of banks when it comes it lending. “I think banks do have an awful lot of skin in the game if you look at the growth in their uninsured portfolio.”

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CMHC admits ‘data gap’ in foreign ownership of Canadian real estate

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The president of Canada Mortgage and Housing Corp. acknowledges there may be a “data gap” when it comes to the degree of foreign ownership in the marketplace, as debate swirls over whether overseas buyers are inflating house prices in markets like Vancouver and Toronto.

Tracking foreign buyers in Canada’s housing boom: Can we do it? Should we even care?

A third of people buying homes in Canada may be foreigners, says one real estate company. A leading economist says the number isn’t even 5%. The country’s housing agency says it has no idea what the actual number is In an interview Monday with the Financial Post, Evan Siddall said the research arm of CMHC is tackling the foreign ownership issue and looking for more data from the banks.

“We are looking at information that lenders have because lenders have clients,” said Mr. Siddall. “The problem is people buy through nominees and corporations and they are allowed to do that. We need to look for ways to pierce that. The way we do that with Canadians is we phone. We can’t phone people in Singapore or Hong Kong, we don’t know who to call. We need to try and look through to the extent we are legally allowed to do so and that we are not accessing privacy information.”

We don’t think the level of foreign ownership in Canadian housing markets is excessive The issue has become a hot topic with one Vancouver brokerage suggesting about one-third of single family homes in the city are going to people in with connections to mainland China. Prices for a single detached family home in Vancouver have topped $1.2-million while Toronto is closing in on $1-million for a detached home — levels that many people blame on speculative buyers from overseas.

Related CMHC continuing with plans for banks to take on more mortgage risk Joe Oliver says Canada won’t make major changes to CMHC, housing finance CMHC could force banks to pay deductibles on mortgage insurance Housing rush scrutinized by bank watchdog Mr. Siddall is sure to enrage that crowd, but he says while there may be more foreign ownership in some markets than others, he doesn’t think it’s a problem in general.

“Right now, based on what we know, based on information and analysis other people have done, we don’t think the level of foreign ownership in Canadian housing markets is excessive,” he said.

Mr. Siddall earlier told the Canadian Club in Toronto, in what was billed as a “conversation” with Terry Campbell, president of the Canadian Bankers Association, that his group decided to go ahead and release a study it had on the Vancouver and Toronto condominium markets even though it didn’t have any information on the foreign ownership in the sector.

“There’s no bogeyman in this, having foreign investment in the market, inherently there is nothing wrong with that. I owned real estate in the U.S. at one point and I’m not a bad guy,” said Mr. Siddall. “But we need to recognize the fact that when people don’t have direct connection to a country, when things go bad, they are more likely to take their cards off the table. If it gets too high, we become concerned.”

Tyler Anderson/National PostCMHC head Evan Siddall says while there may be more foreign ownership in some markets than others, he doesn’t think it’s a problem in general. In his conversation with Mr. Campbell, the CMHC head said his group continues to look at the idea of banks having some type of deductible, in case a consumer defaults on a loan.

“It’s kind of classic perspective,” he said. “It’s this idea of moral hazard that if you took risk away from the people who confronted it in the marketplace, it could lead to bad behaviour. The stupid example is if you insure someone who is driving a car, they won’t be a responsible car driver.”

Mr. Siddall agreed there was still a lot of discussion that would have to take place with the banks before any actual changes were made.

“In Canada, as you know and everybody in this audience knows, we did not have a housing crash like some other jurisdictions,” said Mr. Campbell, chalking that up to good risk management on behalf of banks when it comes it lending. “I think banks do have an awful lot of skin in the game if you look at the growth in their uninsured portfolio.”

As for who is driving the demand for change, Mr. Siddall left no doubt he answers to the minister of finance.

“Our responsibility is to give him and his department advice on this stuff. Rules changes like ‘skin in the game’ is for them to do,” said Mr. Siddall, who agrees with Finance Minister Joe Oliver that changes are more of a long-term project and cannot happen if it will destabilize the Canadian housing market. “He’s leading the

The new question for Canadian Snowbirds heading south: to buy or rent?

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When they got tired of trying to find the right rental property, Miriam and Bryan Gardner decided it was time to buy.

It sounds like the typical explanation you might hear from a Canadian buyer in today’s red hot real estate market but in this case it’s Florida where tight rental markets have made finding accommodation more difficult than ever, especially for those Canadians looking for short-term rentals for their winter home away from home.

“It just got so difficult to find a rental, that we wanted, the last couple of years. We had been thinking about buying down the road but the down the road just ended up coming sooner,” says Ms. Gardner, who bought a three-bedroom condominium in August near Fort Myers after five years of renting following her husband’s retirement.

We had been thinking about buying down the road but the down the road just ended up coming sooner

They were already paying about US$5,500 to US$6,500 per month, so buying a property for about US$550,000 made sense. The carrying costs will be equal to what the couple was already spending in rent for the three months of the year they wintered down south.

“Now, we’re probably going to be spending more time there and we have more flexibility,” said Ms. Gardner, who is from Aurora, north of Toronto. “We put the capital into it but the bills are about the same to maintain this place.”

She might be on to something. Even as the cost of U.S. housing has increased, abetted by a weaker loonie, low vacancy rates have driven up rental rates at a time when availability of homes is still very high in some states because Americans are still having trouble accessing credit.

Canadians continue to be the top foreign buyers of real estate in Florida and have purchased about US$2.2-billion in the past year, according to the National Association of Realtors for Florida. And, unlike Americans, they don’t need a mortgage. The same survey found 89% of Canadians use cash for a purchase, something analysts have speculated is coming out of their Canadian home equity.

Michael Dolega, senior economist with Toronto-Dominion Bank, said the dollar fluctuation and rising prices could put a damper on home-buying in Florida where 500,000 Canadians already own property.

Related 5 questions to help you decide whether to rent or buy a home Housing still cheaper in popular U.S. snowbird states than 2006 peak levels, new report shows Border shakeup could have tax consequences for snowbirds “But again, affordability is still relatively good,” said Mr. Dolega, noting prices in Florida are about 30% t0 35% below where they were when the market peaked. “Ownership is much more favourable than it was during the mid 2000s.”

At the same time, the economist notes monthly rent in the U.S., including the snowbird states like Florida, California and Arizona, is rising as consumers who can’t buy housing are forced to let.

“The rental market is a strong market, vacancies are low and falling,” said Mr. Dolega, noting construction of rental family housing is actually rising to fill the gap but not quickly enough.

There is no direct overlap between rental properties for Americans living in the U.S. full-time and snowbirds looking for part-time residences, but Mr. Dolega said there is still a degree of competition between the two for housing.

“People who live in those cities still need a place to live and given Americans can’t find a mortgage, if they can’t find a home they will crowd out some of these vacation property [prospective renters],” says the economist, adding the argument for ownership is not as strong in Arizona because home prices have risen higher.

FotoliaIn the 128 counties in the three U.S. sunshine states, it was cheaper in 107 to buy than rent. Daren Blomquist, vice-president of Irvine, California-based RealtyTrac, said on a national basis it’s better to buy than rent. In the 128 counties in the three U.S. sunshine states, it was cheaper in 107 to buy than rent.

RealtyTrac compares home ownership versus renting by tracking the monthly mortgage payment for a median priced home versus the average monthly fair market rent for a three-bedroom home. (RealtyTrac includes insurance and taxes when calculating costs for homeowners.)

There isn’t specific data looking at vacation property but one key consideration is that certain months cost more than others because they are considered prime vacation time.

“You could argue you’re only there half of the year but own it the whole year,” says Mr. Blomquist.

Naples-based realtor Pierre Fregeau, who originally hails from Montreal but has been selling property south of the border for three decades, said he’s found it very difficult to find short-term rental housing for snowbirds and will only bother looking for it for certain clients.

“What happened here is a lot of people lost their homes during the housing crisis. Well, these guys still need to live someplace so they started taking a lot of the rentals that were available and some of it was being rented for Canadians who want to just escape the winter,” says Mr. Fregeau.

He says you can easily spend US$3,000/month to rent a two-bedroom apartment in Naples that isn’t even that luxurious and nowhere near the beach but you can buy the same property for US$200,000.

“I get calls three or four times a week from people saying ‘I’m looking for something for January, February or March’. I tell them ‘good luck’ because everything is booked,” says Mr. Fregeau.

All of this is why Ms. Gardner felt like she had to pull the trigger after half a decade of renting. The price was important but timing the market less so.

“We realize we didn’t get the bottom but that’s not what we were all about. This worked for us psychologically even more because we just couldn’t get what we wanted [renting],” she says.

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