Average price of Saskatoon home will be $300,000 by next spring: Percy
Dwight Percy has an interesting article in the business section of today’s Star Phoenix titled, “High local housing prices are still below average” which is definitely worth reading.
Percy points out that while Saskatoon house prices have seen sharp increases over the last quarter, local homes are still trading well below the national average of $294,880 reported by the Canadian Real Estate Association at the end of February. The average selling price of a Saskatoon home topped $200,000 for the first time in March.
He asks, “Does it make any degree of sense that this market sits at only about two-thirds of the Canadian average?”
Check his article out here. He makes some interesting points. If his prediction is accurate, the average price of a Saskatoon home will have doubled in just two years. The idea may have seemed outrageous just a few months ago but one now has to wonder given the momentum which this market seems to have. Consider that the averages we’re seeing now are likely skewed down by the large amount of activity in the entry level condo and house market and the possibility seems even more realistic. It seems to me that there are a large number of pretty “average” homes trading at or above the quarter million dollar mark already.
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
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Norm Fisher
Royal LePage Saskatoon Real Estate
72 comments so far. We'd love to hear your thoughts.
April 3rd, 2009 at 4:34 PM
This market seems completely over inflated. At some point, with all the people from Alberta, purchasing, and not necessarily moving here, the people that have moved to Saskatoon and plan on staying are going to get hurt. The inflation in Saskatoon has not kept pace with affordability. Therefore, although, historically the prices have been affordable in Saskatoon, the affordability relates to average incomes as well. People have always said that its okay that you earn less in Sask, because of the low cost of living. It appears that is no longer the case. It seems to be a bit of a frenzy with no teeth, if the high paying jobs don’t come in as well.
April 3rd, 2009 at 4:35 PM
Thanks Kathy. Investment activity is primarily fueling the low end of the market including condos and smaller houses. This activity leaves me concerned for renters and entry level buyers without a doubt.
There is plenty of activity in the $200,000 plus range and those buyers are mostly people who want to purchase a home. Only time will tell if these prices are sustainable but I have a funny feeling that prices are going to increase some more before they show any sign of leveling out or dropping. For many, many years the Saskatoon real estate market has been able to absorb about 300 homes a month. Even if demand was not accelerating, it would take a three month supply, or about 900 active residential listings to really balance this market. Right now, at the current rate of sales we probably have about a one week supply of inventory available in our market. There’s not much going on that will change that in the short term.
April 3rd, 2009 at 4:35 PM
I agree with Kathy 100%.
How can house prices rise to $300,000 when the economy here won’t sustain it? Who makes those sorts of Salaries in Saskatoon? Not me. In any of Canada’s major cities, it makes sense. We are not even considered one of the major cities.
And out of curiousity I wonder how many of the $200,000+ buyers are first time buyers? I’d bet not many. Looks like my age, something I have no control over, is on the verge of pushing me out of the market.
What kind of a place do we live in when a young couple with a household income of almost $90,000 per year can’t get into this market? Because that’s where I’m standing right now. The reason I chose to stay in this province and this city doesn’t even exist anymore.
April 3rd, 2009 at 4:35 PM
Anon, unfortunately there aren’t any statistics available to me from my sources which identify ages of buyers. We do occasionally see stats from the Canadian Real Estate Association or some of the major lenders but given that this run up in prices is fairly new I imagine it will be some time before we have anything meaningful on who is buying right now.
You have a household income of $90,000 and you feel that you “can’t get into the market?” I expect that you’re in far better shape financially than many of the buyers who are currently active and buying homes. With that kind of income, you shouldn’t have too much trouble servicing a mortgage on an average home in Saskatoon.
April 3rd, 2009 at 4:35 PM
Jeez ya, I’d expect an income of $90k would go a long ways in Saskatoon…. I guess the problem is lack of inventory at the moment, but if you did find a place for say $250k with 10% down and a mortgage of 5.5% (might be able to get lower rate) your monthly payment would be $1373 plus taxes of $200 or so a month, heating (not sure, my parents seem to pay a heckuva lot). So that’s approx $1700/mth in housing costs (Norm can correct me if my math is all kafluey). Your after tax income is approx $5k/mth. Seems like a pretty good situation to me. Heck you could buy something for $350k easily.
April 3rd, 2009 at 4:37 PM
sdude, your math is pretty much bang on. Thanks.
April 3rd, 2009 at 4:38 PM
Sadly, $250k will only get you a major fixer-upper on Colony and Temperance (assuming you win the bidding war).
April 3rd, 2009 at 4:38 PM
Hmm.. you might think its affordable but how many starting homeowners have $25,000 in cash. For some even 5%, or $12,500 might be a barrier.
I bid $25,000 over on a $225,000 house this weekend and didn’t get it. Should I have bid $30,000, $40,000 or $50,000 over? This house was slightly less than 1000 sq ft, had 3 bedrooms and no garage. I’m just really disheartened by this market. It’s hard to even enjoy living in this city anymore when the prices have just leaped into the stratosphere. I might have to end up just staying in my townhouse in the end.
April 3rd, 2009 at 4:38 PM
Ignore my last comment. I’m just bitter from the weekend action.
April 3rd, 2009 at 4:39 PM
Jeff, did you see that place on Colony that recently sold over $250? Unbelievable! Not even 900 square feet and it needed lots of upgrades. Having said that, I’m sure you’ll agree that Nutana is a pretty impressive area for a first time buyer. At one time, entry level buyers were happy to be in mid-range area. You’re right about one thing, if $250 is the upper end of the budget you can pretty much strike that area.
April 3rd, 2009 at 4:39 PM
Todd, I feel your frustration man! My only point was that you’re far better off than many with the income you have and if you don’t have a lot of debt you qualify for a pretty large mortgage. A downpayment of 5% on that amount will increase your monthlys by about $100.
Were you after the one on Murphy? I heard it went 50K over.
It sounds like you’re still in the game if you can just find a place before things go up further.
Heads up: I have a nice bungalow with a single detached on Drinkle coming on Friday at $239,900 and a cool little bungalow (approx 900′ and needs some work) with a double detached on Trident for $169,900 coming around mid-week. Keep an eye on my featured listings at http://www.normfisher.com and then give your agent a call. They’re both good houses for the cash. They will likely sell over like everything else but hey, you gotta keep trying. It’s like hitting your thumb with a hammer. It hurts like hell at the beginning but after the initial burst of pain it just feels so damned good. You’ll get there.
April 3rd, 2009 at 4:39 PM
Yup, I was after the Murphy house. It’s just amazing to me that a house can sell $50 K above price. I’m happy in knowing that I wasn’t even close to the offer but even more disgusted with the market where that can happen on a ‘middle class’ house. I guess the lesson learned is that if there’s something I like, bid huge ridiculous amounts of money, even if you go over by $25 K on the next highest bid.
As for houses, I’m getting new listings from my agent every day. Will look at yours when they come up.
April 3rd, 2009 at 4:39 PM
Thanks Todd. I have to agree that these prices seem absolutely obscene. Ultimately, you’ll have to decide where you think this market is going. If you feel confident that prices will continue to rise then make an aggressive offer. Even if you pay “too much” it might catch up before you even move in. I remember at the beginning of this run one of my listings in Silverwood sold $28,000 over list for $187,000. Every agent I spoke to said the buyer should have his head examined. Low and behold, by the time he moved in similar homes were selling for well above that price. He got out of the market two months before many others did and paid what turned out to be a pretty reasonable price. I wish you the best of luck on the next one.
April 3rd, 2009 at 4:40 PM
Thanks Norm. I have a townhouse right now so I’m one of the lucky ones who actually have an appreciating asset instead of a first time buyer.
April 3rd, 2009 at 4:40 PM
Todd, that’s good to hear. Townhouses have done very, very well. The second leg of your journey will much easier than the first.
April 3rd, 2009 at 4:40 PM
Hi Norm,
Yes we looked at that house on Colony. It just was not what we were lookihg for. Doors that didn’t close, a kitchen that belonged in a 1950s museum, a slanted basement wall, a badly weathered floor in the main bedroom and wiring that would give an electrician nightmares. This is so ‘February 2007′ of me to say, but that kind of money really should get you a decent home in a decent neighbourhood (I’ll admit that Colony St is in a more than decent neighbourhood).
We are reluctant to put our condo on the market, because we envision a scenario where we are priced out of everything we offer on and are forced to rent when the possession date comes due.
April 3rd, 2009 at 4:41 PM
Jeff, you have a great sense of humour given the circumstances.
Selling your condo should be the absolute last thing on your “to do” list. You’re right, doing that could find you shut out completely. Besides, like Todd you own one of the best commodities in the Saskatoon real estate market. They seem to be going up close to $20,000 a month.
Good luck this week!
April 3rd, 2009 at 4:41 PM
It really feels like a Catch-22 though: We fear making a no-condition offer (practically a requirement of a winning bid these days), and then losing our deposit if we cannot obtain final approval of financing (which would be conditional on our condo sale).
Our thoughts on this just keep going in circles: I actually called my agent last week to tell him we wanted to go ahead and list, but before I even got around to that, his answers to my initial questions (Is $5000 enough of a deposit? Not anymore. Is ‘Subject to financing’ an acceptable condition? Not anymore) just scared us off again. I am wondering if we have become to timid in the process.
April 3rd, 2009 at 4:41 PM
I refuse to make an offer without a home inspection. I’ll stay in my townhouse rather than pay 250 – 300 K for something that could need structural foundation work in a couple of years.
Here’s something our realtor suggested to us. If we can find a place we like early on (and keep in mind that things seem to list and sell in like 3 days right now), we can get a home inspection guy in there to look at the place BEFORE we place an offer. Yes, this means an added expense at $300 – $400 a pop, but if you really like the place, this is a way to buy yourself some piece of mind. This assumes the homeowners are okay with you doing this.. if they aren’t, I’ll pass it by and won’t have a regret.
For financing, I say wing it. Things are so hot in this market, that there is a high likelihood you’ll be able to sell your place for a good price unless there are major things wrong with your townhouse.
As for downpayment, I’m not sure why $5000 isn’t enough. How many people really walk away from the sale after it has been signed? My realtor said she can only remember one in her memory meaning that it really seems to be low risk for the seller.
Norm, any comments?
April 3rd, 2009 at 4:41 PM
PS, I also wouldn’t list before buying. With the way the market is, you could very likely end up with nowhere to live or be panicky and buy something you’ll regret. Really consider buying a place first and then selling.
April 3rd, 2009 at 4:42 PM
I see where you are coming from on the home inspection Todd. It would be great if sellers arranged an inspection themselves for potential buyers to view prior to making an offer, but of course, they don’t have to do that to secure the sale, so they don’t.
April 3rd, 2009 at 4:42 PM
Norm,
You might have seen the article in Star Phoenix today,
if not just take a look. Here is the link.
http://www.canada.com/saskatoonstarphoenix/news/story.html?id=00feec18-1217-4a8a-bd64-7e90684f5d49
This gives a flavour of days ahead of us. Good luck to all those who are still in the run.
Best regards….Kabir
April 3rd, 2009 at 4:42 PM
Jeff and Todd, good discussion guys.
The biggest problem you face is the reckless behavior that many buyers are displaying out there. People are waiving inspections and other conditions without much thought. Six months ago, they wouldn’t have even considered doing that.
I agree that a home inspection is good peace of mind. Here’s a thought. The inspectors are sitting on their hands right now because there are so few conditional deals. What about contacting one of them and asking if they’d do “mini-inspections” which are focused on the more major items. Foundation, windows, roof, wiring. They could probably blast through that stuff in 30-45 minutes. Maybe they charge you $100. You get the peace of mind knowing that there’s nothing significant wrong with the house. You’re not going to get anywhere trying to re-negotiate on the little stuff anyway. Of course, you do this before making an offer and you might be able to afford three or four goes for about the price of one complete inspection. Maybe I’m out of my mind but it wouldn’t surprise me that you could find an inspector that will do it.
“Subject to sale of my home” isn’t going to fly out there today guys. Sorry. It doesn’t work in any market which favours sellers. I have purchased on two occasions where I went without that condition and took the risk myself. I wouldn’t have been able to complete the purchase in either instance if I hadn’t sold my existing home but I figured that the risk should be mine and not the sellers. You won’t have much trouble selling unless the market takes a sudden and nasty turn, or your the most unreasonable person alive.
I am still seeing lots of offers which include finance conditions.
$5,000 is plenty of deposit at most times but again, the next guy often throws in $10,000 and the sellers feel better about having a higher deposit.
April 3rd, 2009 at 4:43 PM
Kabir,
I did see the paper today and the story you referenced. I just can’t wait until all of the western investors get that bit of news. I’m already getting about 10 contacts a day from Alberta and BC.
Thanks for the comment.
April 3rd, 2009 at 4:43 PM
Hi Norm – I’m betting this is the longest comment thread in the history of this blog. I wanted to ask you to clarify something:
You said “I am still seeing lots of offers which include finance conditions.”
How many of those are being accepted by sellers?
April 3rd, 2009 at 4:43 PM
Jeff, I think you’re right.
I currently have 8 closings which are pending where I acted for a buyer or a seller. 5 of those transactions had a finance condition. I know for a fact that all 8 buyers needed a mortgage because I got the “we need an appraisal call” after the fact on the other three. I don’t see much benefit for the seller to get a “no mortgage condition” offer on a deal that actually requires financing except that they pocket the deposit if it doesn’t go. That’s not normally at the top of their list of goals.
If I receive 10 offers on a listing there will normally be one or two which contain no conditions. Unfortunately for the competing buyers, these people are rarely conservative on price and deposit which makes their offers very attractive.
Only 2 of those transaction had a home inspection condition.
April 3rd, 2009 at 4:43 PM
Thanks for that info Norm. That’s a very useful and reassuring piece of info.
April 3rd, 2009 at 4:44 PM
That’s reassuring indeed. But can we take that a step further?
Say you’ve been pre-approved for a mortgage (with written confirmation from the lender) as a first-time buyer for $230,000. You find a house you really like, and stats show you’ll have to bid in the mid-220′s to have a shot at it. You’re considering your offer, and are willing to waive the home inspection, but are hesitant to forego the financing condition, even with the pre-approval.
Now switching to the seller’s perspective:
If two offers came up, within a couple of thousand dollars of each other (lets say Offer A is 225,000 and Offer B is 227,000) – and Offer A had NO conditions with a $7,000 deposit and Offer B also had a $7,000 deposit BUT a finance condition – which offer would you say is more likely to be accepted by the seller in your opinion?
It is reassuring if you say the finance condition shouldn’t matter, but I’d hate to lose a house because of it. Does a pre-approval allow you to waive that condition? Have you, so far in this crazy market, seen someone LOSE a house due to the financing condition?
April 3rd, 2009 at 4:44 PM
I managed to buy in February and feel so greatful I had an offer finally accepted. It was $21,000 over the asking price and my deposit was $30,000. I came in with NO conditions. I’d had a friend who is in the home building industry go through the home before my offer went in.
Whenever I look at updates on the housing prices I am glad I am out of the rat race.
I feel for you guys as I went through the same feelings when I was looking.
I don’t take possession for a couple months and time will tell if I got a good deal or not.
April 3rd, 2009 at 4:44 PM
Is financing the same as appraisal? I’m pre-approved for a decent mortgage but it is subject to bank appraisal. So if I bid 250,000 but the bank appraises the house at 220,000, I would somehow have to come up with 30,000 to make up the difference. In this market where prices are so inflated, I’m really worried about the appraisal part of the mortgage. When a house that I was looking at went for over 50 K above asking, I wonder what would happen if I bid that much over myself… will I get stung by the bank afterwards and told that’s a no-no? I’ve been told by my realtor that they haven’t seen this happen, but I’m still not entirely convinced it couldn’t happen in this inflated market.
April 3rd, 2009 at 4:45 PM
I’m interested to know the answer to that too Todd.
For what it’s worth, my realtor has told me the same thing yours is telling you, that lenders were balking at a few appraisals when the market first started taking off, but now that they’ve “gotten used” to the way things have been out here, they aren’t even blinking at some of the appraisals/sale values. Which makes sense, because have you seen some of the stuff that’s selling for a half-million in Vancouver? You’d think the area’s real estate market would have to factor in somewhere.
But I’ll let the expert answer now.
April 3rd, 2009 at 4:45 PM
Catsmeow, you really went all out with a $30,000 deposit. I’m guessing you have a bit of a wild side to you.
Congratulations on finding your way in. This is just a guess but I’ll bet that comparable homes are selling for $20,000 – $30,000 more than you paid by the time you pick up the keys.
Good luck.
April 3rd, 2009 at 4:45 PM
Todd and N/A, I also think that the liklihood of a deal failing because of a low appraisal is low right now, but sooner or later it’s going to happen and someone will be left in a very bad predicament. I see it as a low risk, but it’s not entirely out of the question. At some point, lenders are going to start to feel uneasy about the amount of cash they’ve got riding on this bull market.
Here’s another angle you could try if you decide to write without that condition. Try a smaller deposit with a provision to increase it within a few days of acceptance. If the offer is accepted get you butt in gear and get your mortgage approved. If you are rejected, bail quickly and give up the initial deposit. If you’re approved, pay over the additional deposit. It might work and minimize potential losses.
April 3rd, 2009 at 4:46 PM
Hi Olivia, thanks for joining the discussion. You pose an excellent question.
Let me start by saying that while perhaps “financing shouldn’t matter,” it is obviously playing a role out there right now. I indicated that the largest majority of offers still contain a finance condition and if there are ten offers on one property it’s not unusual for one of them to be “unconditional.” Many agents and sellers will view those unconditional deals favorably. If there is one or two unconditional offers, and the other elements of the offers look good (price and terms), these offers will be difficult to compete with, unfortunately. What I meant to convey is that it’s not entirely out of the question that all other offers on a property you’re interested in may be “subject to mortgage approval.”
Your question regarding offer A and B is a tough one to answer and there are a number of variables which could come in to play and lead a seller in different directions. Who are the buyers? Who is representing the buyer and what kind of a reputation does that agent have? Who is representing the seller? Does the buyer actually have the resources to pay “cash” for the home or do they still need to be approved for a mortgage? There are many other considerations and almost every agent will have a different take.
Let’s assume that all other things are more or less equal. We have two sincere buyers. Both buyers actually require mortgage approval, though one has chosen not to include a mortgage condition in the hope that her offer might be favored by the seller. The important thing to realize is that both of these offers are actually conditional. One buyer has been clear and up front about that, the other buyer is engaging in illusionary trickery. In other words, even though Buyer A’s offer does not contain a mortgage condition, if she cannot secure a mortgage the home is not sold. In this case, I prefer offer B. My seller nets a little more money and within a few days time we can all feel reasonably confident that the buyer has properly arranged financing and that the transaction will complete on time.
The allure of an “unconditional” offer should be the immediate certainty which it provides for the seller. The buyer is able to write a cheque for the purchase, and there is nothing which is outside of the buyer’s control which can prevent this transaction from moving forward. That’s worth something but it’s not the case in most of these situations.
Let’s take a quick look at where the scenario you present could go if everyone is reckless.
Chances are, Buyer A will be happy to come up to $227,000 to close on this house. He gets a counter offer and happily signs off. He goes to the bank to tidy up his financing. Some change in his situation causes the lender to reject his mortgage application. He thinks to himself, “boy, I’m really in a pickle here but I do have two full months before possession date. Perhaps I can come up with another solution.” Over the next few weeks he visits numerous lenders and all of them punt him out the door.” Mean time, the seller closes on their new home and they are happy, until the closing date on their original home arrives and Buyer A has no money. The seller now clearly owns two homes and in all likelihood, two mortgages.
The contract states that the seller shall be entitled to retain the deposit but Buyer A’s integrity starts to show signs of weakness when he realizes that he has likely cost himself $7,000 so he objects to the surrender of the deposit saying, “don’t you dare release my deposit to that seller!” The Saskatchewan Real Estate Act states that his broker is obliged to hold a deposit which is in dispute. Buyer A then sees a crafty lawyer who tells him that if he’s ugly enough the seller may refund the deposit. He suggests that they file an “interest” on the title of the seller’s property which would prevent the seller from selling it until the situation is resolved.
You can see how the seller “is really in a pickle here.”
The larger the deposit, the more likely it is that the buyer will object to its release.
There is a definite advantage to the seller to deal with a buyer who has carefully and thoughtfully done some due diligence. Unfortunately, all of this won’t likely amount to a hill of beans when you’re out there trying to compete. Most often, people will be sucked in to thinking that they have something which doesn’t actually exist when unconditional offers are presented.
Comment edited for clarity.
April 3rd, 2009 at 4:46 PM
Just read the article in the Star Phoenix in which you are interviewed, Norm. I’d just like to say Thank You, from the bottom of my heart as a young, first- time buyer, for standing up for us “little guys”.
Whether Premier Calvert is willing to believe it or not (and wow did his comments make me angry), you were 100% right. It’s so nice to have someone on our side, who doesn’t just see dollar signs.
Thanks again.
April 3rd, 2009 at 4:47 PM
Thanks Appreciative,
The Premier must be living in a bubble. When this reporter contacted me yesterday and told me “how great” Mr. Calvert thought this was for Saskatchewan I almost flipped. You’re not the first one to tell me they are angered by his attitude but hey, let’s agree to give the Calvert government much of the “credit.”
This is a tough issue for me because I do most of my work with sellers and I take my responbility to them seriously and I want to do my very best for my client in every instance. At the same time, I feel very bad for buyers. There are a lot of hurting people out there right now; people who are would be happy to pay an outrageous price for a home, if they could just have a chance to get one. I have a 21 year old daughter and an 18 year old son and I’d like to think that they might be able to afford a home here someday.
I don’t see what’s happening as a “good thing.” The only ones who are really benefiting are those who are leaving Saskatoon and those who are sending investment dollars hoping to resell what they buy for a huge profit in the future.
Good luck to you.
April 3rd, 2009 at 4:47 PM
What I can’t figure out are the investment buyers. They’re buying up properties to resell them to… who? Salaries haven’t kept pace with the cost of housing, so very few people will have the income to buy these “flipped” properties! I think a lot of these investors are in for a nasty surprise when they’re stuck with properties that no one else can afford to buy.
April 3rd, 2009 at 4:48 PM
Daryl, there’s already been a fair bit of “flipping.” Maybe the smart ones will start thinking of selling their properties to other “investors” soon.
There is probably some amount of pain which is inevitable for those who miscalculate.
Having said that, whether you’re an investor or a potential home owner, everyone is essentially a speculator right now. Wannabe home buyers are also banking on a continuation of this frenzy for some time.
April 3rd, 2009 at 4:48 PM
Hello from Calgary! I am a realtor in Calgary, and it’s like Deja Vu reading this. Last year at this time, there seemed to be no end in sight of the dramatic monthly price increases, and shortage of listings. Let me tell you what happened. People were reluctant to put their home on the market when the prices were increasing so fast. It reached a point where people had to list their homes because they couldn’t wait any longer. It happened in June. I expect some were listing because they expected a crash, and wanted to get out with their big profits. As it became apparent that active listings were growing, the floodgates opened. The active listings rose from 1693 in April to 3825 by July, and reached a peak of 6800 in October. Prices took a $10,000 tumble in July, and for the remainder of the year, it was a buyer’s market. The actual day where prices started falling was June 12. The thing to watch is your active listings. As soon as they start to move up, I expect you’ll see the same thing happen in Saskatoon. You can read a play-by-play on my Archive at http://www.DailyStats.ca. It started all over again in January this year, but we’ve already cooled off, albeit with a 17% price increase this year. By the way, I grew up in Saskatchewan and went to University in Saskatoon. Beautiful city.
April 3rd, 2009 at 4:48 PM
Hi Bob, thanks for the visit and the comment. It’s nice to have some input from someone who has lived and worked this kind of a market.
I’m sure that the prospective buyers who are reading this post are crossing their fingers that some kind of a “cooling” will happen at some point in the very near future. I had a chat with Jay Thompson from Phoenix who told me a very similar story. I was very struck by his description of the turn. He used the word “suddenly” and indicated that you could feel the change on a specific day. You have actually pinpointed a date. Wow!
It is hard to imagine that what’s happening here could end suddenly. There seems to be such great momentum with prices moving upwards. Thanks again for the input.
By the way, I’ve visited your site and your blog many times. You are even more of a numbers nuts than I am.
I’m very impressed by the depth of the information you have posted on the Calgary market. You are obviously very much on top of what’s going on in your area. Have a great spring.
April 3rd, 2009 at 4:49 PM
I am potentially up for a job in Saskatoon, loved the city when I was there for schooling, and would love to come back, and make it home for at least a few years. After reading this however, and based on what my salary will most likely be, I don’t think I have a hope of being able to buy property, at least something that is ready to move into! What is it exactly about Saskatoon that the prices are being driven so high? I was always under the impression that a good paying job was hard to come across. Is there any hope for a single person hoping to buy their first home?
April 3rd, 2009 at 4:49 PM
Jamie, this is the view from the ground here, as another would-be buyer…
I just took a new job in Saskatoon this January and have started looking at the market for a decision to buy perhaps a year from now.
I moved here from Winnipeg and I’m still in shock. I was under the impression that Saskatoon’s cost of living was slightly lower than that of Winnipeg.
There are several reasons why house prices have gone up – and anyone is welcome to add to or disagree with my points…
The first one is for sure supply and demand. We have high demand because people like you & I have Saskatoon in our sights.
The second is just pure foolish spending on the part of house buyers. Everyone is BELEIVING that they have to pay such high prices for houses, and they don’t realize the sellers aren’t going to stop them from thinking that – why would they?! House buyers are literally giving all the power away to the sellers right now by accepting that these high prices are fair and representative of the TRUE VALUE of the house. Is a dilapidated home in the West End worth $90,000 to you? I’d check the floorboards for a hidden fortune at that price!
So, because you can’t coordinate an effort amongst complacent buyers to demand prices drop, the odds of prices properly reflecting the value of the house – it’s true value, not the perceived, inflated value – are slim.
Lots of really shabby new homes are being built and sold for way too much. I wish people would stop this rush rush nonsense and take a bit of that buyer-power back. We would all benefit in the end…
The third reason is that there are a lot of people out there who know there is an opportunity to make a buck in Saskatoon. Scarfing up the houses has driven the supply even lower, in some cases these houses are just being horded.
Fourth (this ties into the first), the governments (municipal and provincial primarily) don’t appear to care and have no empathy for young or less wealthy buyers. Probably because they can’t relate to us and thus don’t perceive a problem. Their mentality is “well if I can, why can’t you?”
I’m having a hard time really understanding what’s going on in their thought processes though. Saskatchewan appears to have politicians asleep at the switch, completely unprepared for nurturing this growth. Their approach is more to feed the mutation.
There’s for sure some myopia going on though as they continue to let this problem get worse.
A distant last point is honest home owners who have no intention to sell but still love to see the value of their properties go up. Obviously they aren’t inclined to see a problem with what’s going on, several turn into starry eyed sellers every day.
I still maintain that something big will have to happen in the future. Not sure exactly when, but at some point in time, there are going to be a lot of houses for sale, and a lot of defaulted-on-debt.
Again, many home buyers, new owners, old owners analysts etc.. will disagree with me. But you have to evaulate the incredible amount of risk people are getting into buying a house right now. You can’t build a stable society on debt.
A lot of people are buying houses when they shouldn’t and that is doubling the injustice by artificially inflating demand. Thus pushing prices out of reach of people who can afford houses.
Do yourself, me and others like us a favor: Don’t buy a house right now. You’ll get incredibly ripped off and you’re just enabling the market to continue to spin out of control.
I hope Norm can maybe confirm, correct, support or counter my perspectives.
April 3rd, 2009 at 4:49 PM
Alex, thanks so much for your thoughts! I’m just getting to the point where I’d like to settle in somewhere, own a home and have the freedom you don’t get in an apartment. Seeing the market like it is in pretty much all of Alberta and much of B.C, and now Saskatchewan getting to the same level, it’s very disheartening and makes me think will I ever be able to own a home anywhere?? How can anyone? With my salary and the student loans I am still having to pay off, I wasn’t approved for much of a loan when it came to getting a mortgage, and seeing the Saskatoon market it sure wouldn’t get me much.
April 3rd, 2009 at 4:50 PM
Alex and Jamie,
I wish I had more to offer as far as where this market will eventually end up. From one week to the next I think “how much longer can this go on,” but somehow it seems to persist. I get a half dozen calls from Alberta area codes every day. Most are “investors” interested in Saskatoon. I turn them all away and usually tell them they’re nuts to look at investing here at this point. Most of them think that I’m blind. Maybe I am. They say, “Saskatoon is on the same path as Calgary.” They also say that “affordability” has a way of working itself out. Could they be right? How do so many people afford to own in Vancouver, Calgary, Toronto, etc. I know that incomes are higher but can we expect them to rise here as the cost of living goes up?
Alex, I think your first point about “supply and demand” is the primary factor at play here. This market will require about a thousand active listings to be considered “balanced.” While our MLS shows 267 listings today, many of them are already conditionally sold. Unfortunately, there will be little relief until something happens to raise inventory levels.
The government’s current attitude kind of pisses me off. They actually want to “ramp up” the advertising effort to bring more people to Saskatchewan and that seems like a ridiculous approach right now. I’m not sure though if we can hold them responsible for not seeing it coming. Seems very few did. Almost every fall forecast I read last year called for “cooling” conditions and slower increases than what we saw in 2006. If “economists” couldn’t see it coming, who could? We have limped along as a province for so long that nobody ever expected it would turn around so dramatically and so suddenly.
It’s a tough question whether one should buy, or wait. We are all speculators to some degree and we each need to make the call on what we want to do. I am thankful that I am already in a home and I wouldn’t enter this market for anything but if I didn’t own a home I think I’d be looking for a way to solve that. I don’t really think it will be any easier to buy next year. Tough call.
Thanks for speaking up. I appreciate the visit.
April 3rd, 2009 at 4:50 PM
Hi Norm,
I’ve been checking out the MLS listings and have seen a few older homes in the 70-80,000 range that really don’t look too bad(at least in the photos!)and seem suitable for a first time buyer. Are there still a few bargains out there? Is it the 3-4 bedroom/2 bath/larger family homes are the ones that have skyrocketed in price? I am in Prince Rupert, B.C and the housing market here has had a large spike as well, due to a container port being built here and assumption of a “boom” here. The older and smaller homes for sale here seem to be sitting without much activity though.
April 3rd, 2009 at 4:50 PM
Hi Jamie, all price ranges have been impacted pretty substantially. It started at the lower end but has worked its way up, even to higher end homes. Digital photos can be somewhat deceiving. Given that the “average house price” is probably in the $230,000 to $240,000 you can expect a $70,000-$80,000 house to be far below average in terms of condition. I have shown some homes in the $125,000 range over the last few weeks and haven’t seen much that didn’t require a great deal of work. Thanks.
April 3rd, 2009 at 4:51 PM
I recently was offered a position with a firm in Saskatoon and my wife and I are considering the move. We are in BC and the housing market here in the interior is rising insanely fast. My townhouse has nearly doubled in value in 1 year, with my previous condo selling in 3 hours; even before the agent had finished listing in on MLS. This has left us with a sizable equity to spend, however I am leaning toward building instead as the market seems to be overheated at the moment. What are the average square footage costs of building at?
Example of increases here in the interior of BC:
Condo over 5 years: $80,000+ increase
Townhouse over 1 1/2 years: $130,000+ increase
In a town of 27,000 a post-war house with a small yard in town that you would tear down to build is going for close to or for 500,000. (Many are being replaced with multi-family dwellings.)
April 3rd, 2009 at 4:51 PM
Hi Allan, sounds like another wild market.
New builds which are currently listed MLS are priced from 220-280 per square foot including land. The challenge will be getting your hands on a lot as there is a pretty big shortage. I understand that there is a lot draw coming. Here is some info from the City on land.
http://www.city.saskatoon.sk.ca/org/land/index.asp
P.S. Don’t let your agent sell your current place before it is “finished listing on the MLS.” In that kind if market you want everyone to know it’s for sale before it sells. Good luck.
April 3rd, 2009 at 4:51 PM
Ok, hold up here… 300K avg??? come on. How can people compare Sask to Alberta or BC? BC has been a hot market for decades, steadily rising because of a strong and diverse economy, not to mention one of the largest sea ports on the NA west coat… hmmm, that helps. And I don’t even have to describe what’s going on in Alberta. Calgary is growing by over 65,000 people per year, most of whom are young professionals finding jobs and a good salary. Obviously the demand is solid and, therefore, housing costs will continue to rise with demand.
Now you look at saskatoon… where’s the mass migration? Where are the jobs? Where’s the rocket boom single market economy (AB) or the established strong and diverse economy (BC)? I believe in saskatoon, I love saskatchewan, I believe it has the potential and the foundation to be a solid and economically diverse economy but it’s not there and there’s no record cash influx due to oil (or whatever high demand commodity) coming in or even on the horizon.
What’s happening in saskatoon is a tragedy. The buyers are speculative investors that don’t live in saskatoon but want to flip-flip-flip looking for a quick buck. Banks are happier than pigs in pie locking in 40 and 50 year mortgages. Realtors… don’t even get me started… ofcourse reports from are going to read “300K avg by next spring”. And then everyone follows like sheep thinking they’re missing the boat. Debt, debt, debt, that’s all that’s being created here and the avg Joe family is paying for it with their futures.
This speculation is destroying my motherland.
J.
April 3rd, 2009 at 4:52 PM
J, thanks for the comment. The beautiful thing about a free and open market is that rising prices must be supported by income. If incomes don’t go up prices can only rise so far. Market values are ultimately dictated by buyers. If you don’t have buyers who can afford housing, prices must come down. I guess we won’t know for sure until closer to next spring.
By the way, there’s a crazy rumour floating around that the Saskachewan economy is diverse, resource rich and firing on all cylinders. Some actually say that people are moving back to the province and that there are lots of jobs for them.
April 3rd, 2009 at 4:52 PM
Next spring indeed. Thanks for your response Norm. I do want to mention that, even though you’re in real estate, your opinions do seem objective and informed… rare.
I agree, the province is firing on all cylinders. Relatively speaking, however, it’s still in its infancy. My comments were in response to all who base their projections by cross-referencing avg price in major canadian cities with avg price in sask and then articulate their projections in ways to imply the buyer will be missing out if they don’t buy now. Saskatoon is not a major canadian city. Neither its economy nor its job market are even close to the stride of the major canadian cities. That is what I love about saskatoon. It seemed to me that growth was being planned and managed responsibly and strategically. I’ve always been impressed with Sask’s R&D incubation and subsidies. affordable housing used to be the greatest selling feature when lobbying businesses to consider sask.
So now what? What has all of this speculation and over-extension/leveraging (40 year mortgages) done to saskatoon’s future? Remember calgary in the 80′s?
Anyway, I’m just very concerned that the government has not done their DD and considered how this boom/potential bubble might impact the market in the future. Interests rates? Oil prices? Grain prices? etc. I don’t mean to be a fatalist but I do hope that what seems to be unsustainable growth doesn’t impact or offset the progress we’ve made thus far.
J.
April 3rd, 2009 at 4:52 PM
Truthfully, I’m hoping for a crash. I don’t want to see all my friends who own homes suffer for it…But who can afford a home in this market?
Who is doing all of this buying, where are their jobs? I see a lot of Alberta plates lately, but what are their jobs?
There are no new buildings, expanding downtown cores, suburban IT offices… Something has got to give, the current state of Saskatoon is an unbalanced equation.
April 3rd, 2009 at 4:53 PM
J, thanks…I think.
I agree that “affordable housing” has always been one of many things that makes Saskatoon the great city that it is. I’ve also always appreciated the slow but steady growth that we’ve seen in this area over the years. I favour a market which is predictable and I start to feel rather uncomfortable when things change so suddenly and so rapidly. I recognize that there are consequences when housing prices increase so much quicker than incomes. I see that people are hurting and I don’t like it either. I’m also troubled by the fact that I feel uncertain about where this market is going and I long for the days when I could feel confident in advising a client. I wish there was some end in sight, but I’m not really seeing that right now.
Thanks again J.
April 3rd, 2009 at 4:53 PM
Dwight Percy’s response as read on CJWW radio this morning. Dwight emailed a copy of the text to me.
Friday, May 11 “Which Economy Do You Want?” – broadcast on CJWW Radio 600 at 8:34 a.m. – Dwight Percy
There is a great hue and cry out in the market right now about rising house prices. Most of this is coming from people who are lamenting the fact they cannot get into the housing market because it has become very expensive.
What I find really bothersome is that many of these same people are looking for someone to blame. They say “Pin it on the premier. Blame the real estate community. Give the blame to Alberta investors.”
Here is what they should be asking. Which would they prefer – a strong economy with lots of jobs and higher house prices, or an extremely weak economy that, as a result, has cheap houses?
There are only two things that can sustain a housing market at a particular level – incomes and equity. There is no doubt that incomes have not moved as fast as house prices in Saskatchewan in recent months. That just isn’t possible. But if prices get too far out ahead of either the incomes people earn, or the equity they have available, the market corrects itself – prices come down.
But here is the second part and I will offer these examples. In New Brunswick, the average house price is $137,000. In Prince Edward Island, the average price is $114,000, down from last year. In Newfoundland, the average price is $137,000, down from last year.
Guess what else these places have in common? Weak economies and higher than average unemployment. It is those weak economies that make houses cheap, because people don’t have the confidence, the incomes or equity to bump them up. This is attractive? I don’t think so.
April 3rd, 2009 at 4:53 PM
Dwight, thanks for further contributing to the discussion, but shame on you for not wanting to blame the Premier.
Please turn in your Sask Party card.
April 3rd, 2009 at 4:53 PM
I don’t get it, how do you, mr percy, equate the “strong sask economy” to high housing and incomes. High housing, yes, obviously. High incomes no. Avg income in sask has not increased dramatically. And where are all of these jobs? You’re an analyst, give us some stats on avg income increase and then do a real comparison between the markets of the major metropolitan cities and saskatoon… cross reference that with avg housing price increases for both.
If anything, high housing is hurting the economy (as discussed above)… so what do the two have in common? Usually the high incomes come first, then the demand for housing. That doesn’t seem to be the case…
something tells me that you, Mr. Percy, might have a chunk of change in real estate and a vested interest in this type of nonsensical promotion of these high prices.
I’m not blaming the Premier, he’s merely an opportunist. I’m not blaming Albertans, they’re merely investors reacting to a speculative market. I am, however, blaming you and those like you for your irresponsible analysis of the saskatchewan economic situation. It is this type of analysis that feeds a frenzy, increases speculation, creates a bubble, and causes undue harm to an economy with an extremely high degree of potential.
It’s not sustainable Mr. Percy… and an unsustainable market typically has a domino effect when correction hits… we can’t dismiss the negative impact a market correction will have. I am worried.
J.
April 3rd, 2009 at 4:54 PM
The Star Phoenix published an interesting follow up written by Dwight Percy today in which he further explains his view.
http://www.canada.com/saskatoonstarphoenix/columnists/story.html?id=90c79b6e-602b-4496-8713-6cce6714948b
April 3rd, 2009 at 4:54 PM
Johny, I fully agree with you and see it exactly the same way.
Dwight definietely sounds like he has something to lose in a real estate crash. I would gladly take an affordable home over the despair I experience knowing I can’t afford a home. When you think about it, he is arguing for nothing in my case – thanks but no thanks.
The market won’t self-correct and this theory based confidence has got to end. The market is finding the price point at which it can get the most money for as little as possible. No self-corrected market is affordable to the majority of people.
This “growth” is speculation and and artificial stoking of impressions. People are being mislead into thinking the high prices are in some way fair. Look at where they are now. $200,000 for GARBAGE! Junky apartments converting to condos for such high prices. Since when did renting out apartments become worse than selling them, think about it. This is just lots of greedy people cashing in at the expense of others, and the politicians – defend them if you will – are still sleeping.
Who do they represent? Those most like them.
April 3rd, 2009 at 4:55 PM
Yeah,
I don’t really know what more to say about Percy’s comments. I guess he showed us “frustrated first-time buyers”… hmm, I’ve been a homeowner for almost 10 years. I’m a frustrated saskatonian mr. percy, frustrated at the fact that I’m going to have to watch saskatoon struggle through the “correction” that will result from this speculative market.
Yet again, he didn’t show us anything in the form of concrete fact that was relevant to our economy. He basically said if we can’t compare the saskatoon real estate market to Toronto, then we’ve got to compare it to st. Johns…. huh? Good analysis Percy… we’d hate to actually see a comparison using statistical data (outside of housing prices from the extremes of the spectrum). It’s typical propaganda and very indicative of Percy’s motivation. The only crumby thing is that he’s got an audience in the starphoenix. He should feel a certain degree of responsibility to be analytical and objective. Instead he’s shamelessly pumping… when’s the dumping Percy? Maybe you could write us all another article telling us when you dump your stock in real estate and I’ll dump mine too. Nice manipulation.
People of saskatoon, and surrounding area, are the suckers in a very artificial and out of control scam.
J.
April 3rd, 2009 at 4:55 PM
J and Alex, it’s one thing to disagree with a guys opinion and another to rip him apart for having one. You guys use words like “fair” and “objective” and then you proceed to attack Dwight’s character based on nothing more than speculation? You incorrectly call him an “analyst.” I believe he’s actually an Op-Ed columnist. This piece is clearly an op-ed. You unfairly assume that he’s some kind of real estate mogul with evil motives and a desire to artificially inflate the market. I can only find his name appearing once on the local tax roll and I suspect the property is his family home.
Frankly, I hope that Dwight is wrong about the average reaching $300,000 by next spring, buy c’mon, having an opinion which you don’t care to hear doesn’t make him the devil.
April 3rd, 2009 at 4:55 PM
Agreed, things did get personal but an example has to be made. Considering his audience he has the responsibility to be objective. You can’t compare apples to oranges and then say the apple will be an orange by next spring without significant analysis as to why. Don’t forget, he is accusing the skeptical of vilifying individuals and trying to put a negative spin on the growing market. It’s strategic propaganda.
J.
April 3rd, 2009 at 4:56 PM
I find what Dwight said to be rather arrogant and blithe. It’s no better than what we hear from our premier.
If it wasn’t so politically un-correct, I’m sure he’d just accuse us of not making enough money. There’s a nice “hey, if I can do it why can’t you?” mentality going on amongst a particular class in Saskatoon.
No, I don’t think Dwight really had the right to say what he said, accuse people like myself of stirring up nonsense and claim that I should be happy for the current state of things.
A trip to http://www.policyalternatives.ca/ and their sibling site http://www.growinggap.ca/ does lots to identify the sorts of people Dwight is inclined to deny exist.
The fact that he has the ear of a newspaper and the way he abused that to make his point only makes it worse.
It’d sure be nice to see what people would tell him if Star Phoenix allowed comments on their news articles.
Thankfully Norm, your site seems to be collecting some opinions – which remember, not everyone comes forward with. Remember, if there are even a few people talking, how many aren’t?
April 3rd, 2009 at 4:56 PM
The value of this forum is the sharing of opinion, the obvious focus on the local real estate market and its’ subsequent mitigating factors. I just want to remind us all that Percy’s article appeared in print media, not a peer-reviewed journal. Controversy equals increased sales. And funny, all this pot-stirring just in time for election…
I’m a recent U of S grad and single parent buying first-time in this market–fresh from my crawl up from the “gap.” I’ve been consciously ignoring the perspectives of “Percy” and flame-fanners like him all my life.
Norm, thanks for opening the informative dialogue ;O.
April 3rd, 2009 at 4:56 PM
A. Thank you for your contribution.
April 3rd, 2009 at 4:57 PM
Having lived through the hysteria of the Penticton BC market, then the Calgary AB scene, my wife and I are only too familiar with rising markets and their potential. I think that this is only just the beginning. If experience counts for anything, we are banking on this continuing for at least the next 5 years (not necessarily at this pace but close to it) and are leveraging everything to buy rentals. We haven’t missed yet and think that Sask/atoon/atchewan will see the same, if not better growth than our neighbors to the west…ya ya…you think I’m nuts, I hear it at work…but that’s ok, perhaps we can compare bank accounts in 5 years lol….god I hope I’m right….
April 3rd, 2009 at 4:57 PM
$300,000 is nothing in Alberta or BC. In Downtown Vancouver, you might find an old, one bedroom apartment for that price – and salaries are not all that higher here than in your province. You guys have a long way to go. I’m reading posts complaining of young professionals with family incomes of $90,000 having to stretch to buy a decent $300,000 house in Sask – try the same salary in Vancouver stretching for a $600,000 townhouse or starter home – that’s what happens here!!
April 3rd, 2009 at 4:57 PM
That’s really a lie. In Vancouver, the earning potential of most famillies is much higher than $90,000.00. I don’t think you can compare the market from SK to Vancouver. I agree with the above comments – beware a house that jumps a $100,000.00 or more in a few months. This is ridiculous. I would love to see the stats on income and migration to this province to support these types of increases in price. That has Never happened in Vancouver, and even Calgary prices krept up slower than they did here. I see greed greed greed all over what has happened here. The people I feel for are the poor suckers who buy now and have to foreclose next year or two when the interest rates keep rising.
April 3rd, 2009 at 4:58 PM
Kathy,
Thanks for your comment. I have no idea what the “earning potential” is in Vancouver but there’s no question that Saskatchewan incomes have not increased anywhere near the rate that house prices have increased here. I know of no wage earners who have had a 50% increase in pay.
April 3rd, 2009 at 4:58 PM
Hey Tupper. According to my calculations if the market continues at half the rate that it has moved at over the last five months an average home will cost $1,186,749 in 5 years.
Yikes!
You sound like a gutsy guy. Best wishes with your investments.
April 3rd, 2009 at 4:59 PM
Saskatoon has always been a city that thinks it’s something it’s not. It is not a big city, so I don’t understand the ‘big city’ mentality that so many people seem to have. I had planned on staying in Saskatoon to work when I finish school, and will have a very nice income to support myself. BUT, the housing prices in this city are too outrageous. I will most likely be moving to a smaller center where I can own a beautiful house for $250,000 ish dollars, not a shack. I am not one of the crazy people that has to buy now. I laugh at the fact that the mayor of this city is all of a sudden making an issue about where students are going to live because there are no rental properties, affordable rental properties available. Give me a break. Students without housing is not going to be the only problem, there will be a hell of a lot more people without a place to live in the future.
If I lived in Vancouver, at least there would be something there to offer in that city. Saskatoon is a joke, and so is the housing market.
April 3rd, 2009 at 4:59 PM
K,
How do you really feel?
Hopefully by the time you finish school homes will once again be “affordable.”
“If I lived in Vancouver, at least there would be something there to offer in that city.”
Yes, you’d be close to the mountains and the ocean (though it would probably take you 2 hours to get out to either one). For 250K you’ll be lucky to find a bachelor suite (my friend paid 280K for one which is about 500 square feet and that was last year), it will take you hours to get to all those great places, and you won’t see the sun for weeks on end.
Best wishes and thanks for the comment.
April 3rd, 2009 at 4:59 PM
Funny to read K’s comments equating a supposed “big city” mentality to rising real estate prices. I do agree with one thing – definitely go back to your small town, K. The world will probably make more sense there, and you’ll have a great time shaking your head at the way the world (and Saskatoon real estate) is going crazy.
But seriously – Would you call Kelowna or Fort McMurray “big” cities? Nope, but their housing prices are waaay up there. Conversely, do a Google search on Detroit real estate. More than three times the size of Saskatoon – but in crime-ridden, economically depressed Detroit, you can find houses for less than the price of a brand new econo car (and mansions for the price of a run-of-the-mill Saskatoon condo). Face it, house prices are a function of a) people wanting to live somewhere, and b) those same people having the income and optimism to fuel what is (probably) the largest purchase they’ll make in their lifetime. While you may or may not agree, many people think Saskatoon is a great place in which to live. Clean, safe, beautiful…and hey, some even like winter! Plus, if you ever think Circle Drive gets backed up, try driving in Calgary.
Oh, you might also be shocked to learn people are even moving here from other places – maybe returning from Alberta/BC, or moving from the US or Europe because of a great job at the university or Innovation Place. Which leads to the other tipping point for real estate prices – income (i.e. jobs). We actually have a good, diversified economy and low unemployment in Saskatoon. And the wages here (I’m talking real jobs, not retail cashiers, etc.) are only about 15 per cent lower than, say, Vancouver or even Calgary. Any wonder Sasaktoon real estate prices have risen a little?
Anyway, I’m getting dizzy up on my soapbox, so I’ll wrap it up pretty quickly. If anyone hasn’t already guessed, I think it’s great that we’ve seen enough optimism in Saskatoon to support a quick little bump in house prices. But I do want to pose the question – if a low income family can’t afford to rent or buy a nice 1,200 sq.ft home in Nutana or City Park, is it REALLY a housing crisis? I would argue it doesn’t. We should be glad this isn’t the kind of city where a couple of shacked-up retail clerks can afford the kind of house that, anywhere else, would take a much higher education and income. We should be glad things are going well – and if your own low income prevents you from living your desired lifestyle, well, there’s always university. Or, you could go to Detroit…