2015 Florida Real Estate Market Report Predictions
Our firm published the 2015 Florida Real Estate Market Report at the beginning of March. The report provides a comprehensive analysis of the U.S. economy and housing market for Canadians interested in cross border real estate investment, with a particular focus on Florida, tracing U.S. housing market conditions from the crash in 2007 up to March 2015. The report also makes several predictions about how the U.S. housing market will unfold throughout 2015. Three of the report’s key forecasts are:
- If U.S. mortgage interest rates remain as low as they were at the start of January, they may help the U.S. housing market grow to levels similar to those seen in 2007, before the real estate market bubble burst;
- Fannie Mae and Freddie Mac’s Home Possible Advantage lending program, which offers a 3% down payment option on home buys and refinances if certain criteria are met, coupled with the Federal Housing Administration’s rate cute on annual mortgage premiums for first-time homebuyers and refinancers, will similarly contribute to the expansion of the U.S. housing market; and
- Young homebuyers will begin to enter the housing market again, which will also stimulate U.S. housing market growth.
2015 Florida Real Estate Market Report Predictions Confirmed
Our key forecasts have now been confirmed. Recent reports released by Freddie Mac and Case-Shiller show that home prices in the U.S. are indeed on the rise, due in part to mortgage interest rates, which have remained low since January. The Fannie Mae, Freddie Mac and Federal Housing Administration programs have also played a significant role in assisting Americans in qualifying for mortgages, which in turn boosts the overall housing market.
Young adults in their mid-thirties and younger are also starting to enter the housing market on a larger scale. In the majority of U.S. markets, owning a home is even more affordable than renting one, which may be encouraging millenials in the fairly early stages of their careers to purchase rather than rent. Additionally, housing prices have risen because of generally low inventory; rising home prices generally make the market more robust.
What This Means for Canadians
Canadians who purchased U.S. real estate when the dollars where at par may expect an increased capital gain if they choose to sell their U.S. property now; in addition to rising home prices, the current exchange rate is at about 25% and particularly favourable to Canadian sellers. However, the different treatment of capital gains under the U.S. Internal Revenue Code and Canada’s Income Tax Act requires consideration though the Canada-U.S. Tax Treaty often provides relief to Canadians subject to U.S. income tax in the form of foreign tax credits. When Canadians sell U.S. property, they should also be aware of potential obligations under the U.S. Foreign Investment in Real Property Tax Act, or FIRPTA, which requires that the Internal Revenue Service withhold 10% of the gross sales price in certain circumstances.
Canadians buying property in the U.S. in the current climate may benefit from the expansion of the housing market down the line; as property values increase, investment in cross border real estate may pay off in the future. Purchasing U.S. real estate, however, is best done after consulting with cross border experts who can help you analyze your current situation and determine how best to minimize future potential cross border tax obligations like the ones mentioned above. Owning U.S. real estate with a proper plan in place is the best way to take advantage of the current U.S. real estate market’s upward trend.