Can the Fed’s Interest Rate Cut Benefit Canadian Buyers? Possibly

avatarthumbnail.jpgWhether the decision by the Federal Reserve to cut the prime interest rate to near zero has any impact on Canadian buyers looking to purchase Phoenix Real Estate depends largely on what following actions take place in Ottawa.

With a weaker American dollar, the window of opportunity for Canadians who wish to purchase property in Phoenix or elsewhere in the states widens. Such a scenario prompted this 16-month-long parade of Canadian buyers here south of the border – the Canadian dollar reached parity on the strength of skyrocketing oil prices (exceeded it, actually) and Canadian buyers discovered purchasing power that had not existed.

Of course, with oil on the decline and the Canadian economy also suffering, the Canadian dollar had fallen off at the same time that the American dollar was rallying against other major currencies, including the Euro. At the beginning of October, the loonie was at about $1.07 to an American dollar. Within three weeks, it was down to $1.28 and change. There was a minor rally in the interim and then it settled in around 80 cents.

At least, until yesterday’s Fed announcement. Now the pendulum is beginning to swing the other direction and the window of opportunity is widening again.

So what can a Canadian considering Phoenix real estate do? If you’re serious …

1) Convert some cash at a rate you consider favorable before the pendulum snaps back.

2) Consider a forward contract. Globex out of Edmonton offers this service to its clients, where you can lock in a set rate. If the Canadian dollar appreciates, you’re hooped, but if it doesn’t you’re protected. Consider it some insurance against volatility.

3) Get serious about the move. Talked to someone the other day who figures the bottom is two to three years out. Cool. I’m not going to argue against it, even if I don’t believe it, because I don’t have a working crystal ball. But seriously, why even look now if there’s no plan to purchase for years?

4) Realize the bottom only can be seen in your rear-view mirror. No one’s going to hold up a sign and say “this is it! We’ve hit bottom!” Truth is, you won’t know it happened until long after it has.

Got questions? Contact form’s up top.

[tags]Phoenix real estate, Canadian buyers Arizona real estate[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

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