We're continuing to post new US housing information to help Canadians who are planning to buy vacation homes in the US sun-belt.  The following is a summary of Standard&Poors (S&P) Case Shiller Index ending October, 2009.  For complete and detailed index report results, head to www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/

The Standard & Poor's/Case-Shiller home price index (covering 20 top US cities) released Tuesday (December 19) edged up 0.4 per cent to a seasonally adjusted reading of 145.36 in October from September. The index was off 7.3 per cent from October last year, nearly matching expectations of economists surveyed by Thomson Reuters. The index is now up 3.4 per cent from its bottom in May, but still almost 30 per cent below its peak in April 2006.

For US sun-belt areas, prices in Las Vegas were down -.1%, Miami down -.4%, Tampa down -1.6%, Phoenix up +1.3% and San Diego up +.4% from September to October

“Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip,” David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement. That happened in the early 1980s, he said, and the current housing recovery appears more solid.

The federal government has stepped in with an extraordinary level of support this year for the housing market. Home price gains since the summer reflect the rush of home buyers trying to close their deals before the original expiration date of a federal tax credit. The Nov. 30 deadline was extended last month to April 30.

Besides a credit of up to $8,000 for first-time buyers, Congress expanded the program to include homeowners who have lived in their current properties for at least five years. They can now claim a tax credit of up to $6,500 if they relocate.

The Federal Reserve is also buying up $1.25-trillion in mortgage-backed securities to help keep interest rates at historical lows.

Canadians considering a purchase of that “home in the sun” have much to consider given the conflicting data coming from various sources.  Buried in all the information coming at us is something called “the shadow inventory” which are homes in the process of foreclosure and not yet counted as available for sale.  Also, we should be aware that although sales volumes of existing homes are climbing from month to month, they’re being sold at lower prices. Below is a summary of what Standard and Poors (S&P) have recently reported.

The economic downturn appears to be over, but Standard & Poors think the recovery will be sluggish. Most importantly, however, the housing market appears to have stabilized. Home prices across the US have risen for five consecutive months, according to the S&P/Case-Shiller index and the number of homes sold also continues to rise. Home sales hit a 14-month high in October, though there are worries that the first-time homebuyer credit may have disproportionately fueled the rise.  And although S&P expect home sales and prices to fall off after November with sales decline more than normal in December and the first quarter of 2010, the worst appears to be over. The extension of the tax credit and its expansion to other than first-time buyers ease fear that sales could drop sharply.

But home sales have to be matched against the properties that are still in the process of foreclosure and could swell the supply of homes on the market. The supply of homes for sale dropped for both new and existing homes by 15% and 37%, respectively, reducing the unsold supply to only 6.7 months for new houses and 7.0 months for existing  homes(close to the rule of thumb of six months). However, S&P believes there is a large shadow inventory of homes in the process of foreclosure and homes that are being held off the market because of the weak prices. This inventory will likely limit any improvement in home prices. The drop-off in sales should bring home prices down, both because of the weaker demand and the likely shift in mix. We expect prices to drop about 7% from their expected November peak in 2010, which will bring the S&P/Case-Shiller index down about 35% from its July 2006 peak.

A recent post highlighted an article in the Globe and Mail focused on financing warm weather vacation properties.  This post is a companio to that article written by Roma Luciw.  Check out the LifePast50 "where to live" post category for more.  And, LifePast50 would sure appreciate responses from Canadians with actual southern buying experience – let us all share the benefits of your experience.

From an article by Lynn Adler published by the Globe and Mail Sept 29, 2009

For Canadians contemplating buying that “place in the sun” now might be the time. US home prices have started to climb for the third month in a row in July more proof a fragile US housing recover is under way.  The Standard & Poor’s/Case-Shiller home price index of 20 major cities rose 1.2 per cent from June to a reading of 143.05. Though home prices are still 13.3 per cent below July a year ago, the annual declines have slowed in all 20 cities for the sixth straight month.  For sun cities such as Phoenix, Dan Diego, Miami and Tampa, prices showed a small month to month (June to July)  increase.  Prices in Las Vegas continued to decline by an insignificant amount.

“We expected another gain but this is remarkable,” wrote Ian Shepherdson, chief U.S. Economist for High-Frequency Economics. He noted the index has risen at an 8 per cent annualized rate in the three months to July, the best performance since early 2006.

The index, however, is down about 33 per cent from the peak in mid-2006. Home prices are now at levels not seen since the third quarter of 2003. And, as noted, prices in Las Vegas as well as Detroit and Seattle are still falling, on a seasonally adjusted basis.

Prices in Las Vegas, one of the most speculative markets during the boom, are down more almost 55 per cent from their peak. In August, almost 80 per cent of home re-sales in Nevada were either a foreclosure or a sale below the value of the mortgage, according to a survey by the National Association of Realtors.

Foreclosures now are being driven by job losses, which are also weighing on the minds of consumers. The Conference Board said Tuesday that its Consumer Confidence Index dipped unexpectedly this month to 53.1 after three months of gains, down from the revised 54.5 reading in August. Nevertheless, there are clear positive trends in the housing markets. Home prices rose in 13 metro areas for at least three straight months.

The Case-Shiller indexes measure home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 per cent since the beginning of the index.

 We keep our readers and particularly those contemplating a purchase of a U.S. “place in the sun” up to date by replaying various media articles on the subject of U.S. home prices.  The focus will be on those articles related to prices in U.S. sun belt states.   Here is a recent article.

U.S. mortgage woes break records
J.W. ELPHINSTONE

11:32 EST Thursday, Mar 05, 2009
 
NEW YORK — A stunning 48 per cent of U.S. home owners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and that’s not the worst of it, new data Thursday showed.

The reckless lending practices in states like Florida, California and Nevada that were the epicentre of the housing crisis are no longer driving up the nation’s delinquency rate. Instead, the foreclosure crisis now is being fuelled by a spike in defaults in states like Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs.

A record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 per cent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported. That’s up from 10 per cent at the end of the third quarter, and up from 8 per cent at the end of 2007.

Prime and subprime fixed-rate loans saw sharp increases in the fourth quarter, a sign that the problem is now the economy.

“We’re seeing increases in fixed-rate categories and that’s where the problems are coming from,” said Jay Brinkmann, the group’s chief economist. “The foreclosure picture is more clearly driven by the jobs market.”

That trend highlights one of the biggest challenges confronting the Obama administration’s mortgage relief plan launched this week. While the $75-billion plan could help change the loan terms or refinance up to 9 million homeowners, unemployed borrowers will have a hard time qualifying.

On Thursday, the Labor Department said new unemployment claims last week totaled 639,000, lower than expected, but still at elevated levels. Factory orders also slipped for the sixth month in a row in January, the Commerce Department reported.

“There can be no doubt that employers continue to shed labour at a frightening pace, with no end in sight,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note Wednesday.

© Copyright The Globe and Mail

On Feb 28, 2009  we are given the following update on the US economy, consumer confidence and housing prices.

U.S. consumer confidence did a swan dive in February with the confidence index down 12.4 points to a level of 25.  According to the Conference Board, this is a level not seen since the survey began in 1967.  This is the third consecutive record low and clearly surpassed expectations by a long shot!

In a separate release, the Standard & Poors Case-Shiller house price index capped off a terrible year with more record moves down.    On a month to month basis and on a year to year basis the declines were the largest ever.  Prices in every city the survey covers remain below year-ago levels with Las Vegas and Phoenix neck-n-neck for last place.  The S&P Case Shiller Home Price Indices (for detailed information go to www.standardandpoors.com)  tracks changes in the value of  residential real estate in 20 metropolitan areas across the U.S.

How much further do prices have to fall to be enticing enough for a Canadian to step up and buy that place in the sun?  Affordability is at its highest in almost 4 decades (ignoring the recent fall in the Cdn $) and on average there is 9 months supply of homes on the market which is 3 months more than “normal”.

Summarized from a Globe & Mail article of Feb 20, 2009 by Thane Stenner of GMP Private Client LP.  Although the article refers to prices of  high end properties, the theme of the article should apply to moderately priced properties as well.

Last week Mr Stenner met with a client who had just returned from Scottsdale Arizona, where the client had been scouting luxury properties.  Like many, this client is interested in taking advantage of the housing meltdown in U.S. sun belt destinations such as California, Arizona and Florida.

The end of 2009 might be an ideal entry point.  U.S. housing prices have been falling for about  two and a half years; by the end of 2009, most of the bad news should be priced in and savy buyers should be able to snap up (high end) properties at a further 15% discount to today’s prices.  The possibility of a stronger Cdn $ is another reason to be patient.

This post is taken from a recent Globe and Mail article  “Don’t let the lure of recessionary bargains blind you to the risks” by MARLENE HABIB

February 11, 2009

Whether it’s for a vacation refuge, retirement spot or business dream, buying property in a foreign land has an exotic appeal. But while some experts say the current economic downturn is a choice time to buy, financial and tax advisers warn that venturing outside your home country can involve dizzying financial, legal and other problems.

“There’s a romanticism about having something in some other place – some exotic foreign jurisdiction. Or it may be related to an area of convenience for the family, where everyone can come together for certain occasions,” says Brett Simpson, a certified financial planner (CFP) with Rogers Group Financial in Vancouver.

Buyers may find bargains, but dollar signs shouldn’t cloud reason or reality, says Tina Tehranchian, a CFP and branch manager at Assante Capital Management Ltd. in Richmond Hill, Ont.

“I have clients who have been buying property anywhere from Florida to Dubai. You also have property bubbles forming in Spain and Panama,” Ms. Tehranchian says. “Some are looking for vacation properties and some are looking for investment properties.

 ”But you have to make sure you’re willing to make the commitment to go down there, do the due diligence, do your homework beforehand, take into account all the maintenance costs and hassles, [and] figure out who’s going to look after your investment when you’re not there,” she says.

The National Association of Realtors in the United States has reported a dramatic increase in buying by foreign customers in the past five years. Some real estate agencies are reported to be wooing foreign investors by paying their travel expenses and providing agents who speak foreign languages.

Despite the “buy now” message, Canadian investors must assess whether a foreign property investment  – fits into their futures.  “Your investment decisions should be evaluated in the context of an overall financial plan, not independent of it,” he says.  It would appear that too many people end up with a plan that is just a collection of stuff – their plan comes by default instead of, ‘Here’s what I want to have, here’s what I need to accomplish my objectives.’ ”

In the case of Sharon Hobin, a school trustee in Mississauga, Ont., buying a home in Florida wasn’t a snap decision. Ms. Hobin, 56, and her family took more than four years to find and buy their dream retirement home in Sarasota when the Canadian dollar was riding high over the greenback last spring.

“For years we would go to Florida on vacation and loved it in Sarasota, and we would say, ‘This would be the nicest place to retire.’ ”

Ms. Hobin says one of the smartest moves she and her family made was to consult a real estate agent who found exactly what they were looking for: a two-bedroom home with all the furnishings, in a gated community, for $300,000 (U.S.). Ms. Hobin recommends finding an agent with links to other legal and financial experts who can conduct title searches or find an insurer, for example. For a mortgage, she consulted her Canadian bank, Royal Bank of Canada, which directed her to RBC Centura in the U.S.

“We learned a lot about owning a place in Florida – for pest control, the home is sprayed outside and inside once a year because of the bugs in that area, and sand fleas. There’s a lot of research you need to do. For us, though, we probably had a little less to worry about because this is not a rental property for us: This is where we’re going to retire,” she says.

Whether you’re buying a property for retirement or vacation or as an income-producer, one of the biggest considerations for investing abroad is taxes, experts say.

For example, many countries levy a form of capital gains tax against property sellers, and buyers can end up paying more if they are non-residents. Some countries, such as Canada and the United States, share a double-taxation treaty that prevents foreign owners from paying taxes twice.

“Check the tax rules: Speak to a tax expert in that particular jurisdiction because there are withholding taxes for non-residents not just in the U.S. but in many countries,” Ms. Tehranchian says.  “There are also complicated tax rules when it comes to U.S. estate taxes,” she adds.

Those in the know stress that it’s important to have someone in the community  – be it a management company, a partner or someone you trust – looking after your property you’ve purchased.

Ms. Hobin’s experience with one aspect of her new Florida home serves as a warning that no matter how careful a foreign purchaser is, unpleasant things can happen.

For three months, she was unaware that cheques sent to the Florida power company for her water and electricity were not being accepted. The utilities “sent us notes to say your cheques are bouncing, and threatening to cut off water and electricity,” she recalls.

Her Canadian banker told her that other clients were in the same boat: U.S. banks were growing more cautious because of the economic downturn and suddenly began turning away cheques from foreigners.

“Now they just take the amount directly out of our bank account in the U.S.,” Ms. Hobin says. “That’s why it’s so important to have a U.S. bank account in these situations.”