October residential home sale market continues correction: SRAR
This is the release just issued by the Saskatoon Region Association of REALTORS® (SRAR) for the October sales month. It covers sales in the entire residential category that includes single-family homes, condominiums, semi-detached properties, duplexes, vacant lots and mobile homes. Our “Closer Look” will follow by the end of this week and in it, we’ll take a look at October’s market for single-family homes and condos providing a thorough overview of activity in each category.
The Saskatoon housing market continued to soften slightly in the month of October with 215 residential units selling, that number down 23% from October 2007 when 280 homes were purchased. Year to date 3,182 homes have been purchased, that number down 19% from 2007 when 3,918 homes had been sold. Year to date Saskatoon REALTORS® have sold $920,867,000.00 of residential real estate, that number up 2% from 2007. Total MLS® sales exceed 1.1 billion dollars down 1% from last year at this time
The average residential selling price for October remained strong at $285,310.00 that number up 12% from October 2007 when the average selling price was $255,739.00. Year to date the average price stands at $289,399.00 up 26% from last year at this time. The average price verifies significant activity in the mid to upper price range homes.
October 2008 inventory levels continued to provide buyers with excellent choice. Saskatoon REALTORS® listed 695 homes in October that number up 30% from October 2007 when 535 homes were placed on the market for sale. Year to date REALTORS® have listed 7,467 homes. At month end, home buyers had 1667 homes to select from. This number represents more than double the properties available to purchase at this time last year.
The significant increase in listing inventory is due to several factors. The market frenzy of 2007 saw much speculation with many investors purchasing numerous properties to renovate and flip. Many individuals built several new homes to sell. Local investors and builders also stepped up to the plate and purchased homes and apartment blocks for conversion to condominiums.
Some local buyers, who traditionally would have sold their current home and then bought a new one, bought a new one but did not sell their existing home speculating that the market would go up. These and other reasons are why so many properties have been placed on the market at this time. It will take a few months for this inventory to return to a more normal level. In the interim some property owners are renting their homes with the intention of placing their homes back on the market in spring.
Home sale numbers and prices will soften for a short period of time during this correction period and will likely begin to increase again in 2009 at a much slower rate than experienced in the last two years.
As we go through this correction period, home owners will have to recalculate their expectations when pricing their homes and expect a longer period of time for their home to sell.
Consumers should be reminded that markets are cyclical. When we look back at markets that we have been through, we can look at the late 1980’s when we had roughly the same number of properties on the market. We had fewer buyers as our population at that time was only around 185,000 people. We also had roughly the same number of REALTORS® in the industry.
An additional factor to consider during the 80’s was we had double digit interest rates versus single digit interest rates that we enjoy today. For example in the 80’s a $50,000 mortgage at 19¾% had a $934.00 PIT payment. Higher interest rates made servicing the debt somewhat difficult. Markets are cyclical and we are again going through a correction period and following that the market will resume, maybe not at the exact same level but it will rebound again.
Saskatoon and all of Saskatchewan will be impacted by the recent global financial situation but when compared to other areas in Canada or North America going through this period of time in our history, Saskatchewan is likely to be one of the best places to live.
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.
Follow our daily updates on Twitter @SaskatoonHomes.
Norm Fisher
Royal LePage Saskatoon Real Estate
50 comments so far. We'd love to hear your thoughts.
April 26th, 2009 at 11:48 AM
It can’t be easy writing these releases. Comparing the 80′s to now is probably not a good thing. In the 80′s people had a better chance to make it through the downturn. Interest rates had no where to go but down. Now, with the money printing presses at full speed, expect double digit interest rates again sometime in the next 10 years. Sooner than later. Imagine a 350k mortgage at 10%. That is $35,000 just on interest per year not including other debt. This time consumers can not spend their way out of the downturn. A slow recovery.
If sellers think that prices will go higher come spring, all I am gonna say is that this is the best they will see, it is all down hill from here.
Calgary had correction releases as well last year. Many had hoped for a spring bounce, it never happened. Now its crashing even though the industry won’t admit it.
http://www.greaterfool.ca/2008/11/03/calgary-crashing/
Calgary house sales plunge in October
http://www.canada.com/calgaryherald/story.html?id=ade7c1e1-ee75-45be-94c1-800d6e27e901
Calgary stats
http://www.findcalgary.ca/
April 26th, 2009 at 11:49 AM
“In the 80′s people had a better chance to make it through the downturn. Interest rates had no where to go but down.”
Huh?
April 26th, 2009 at 11:49 AM
Norm,
The comment made in the release regarding the amount of REALTORS in the industry intrigues me. Is this comment supposed to read as if there are too many REALTORS now, or that there were too many back in the 80′s?
Just wondering because it seems like during the boom becoming a REALTOR was the ‘it’ thing to do, at least that’s how it appears in Regina at least and I was wondering if the same think happened in Saskatoon who had a longer boom period.
April 26th, 2009 at 11:49 AM
George said:
“Calgary had correction releases as well last year. Many had hoped for a spring bounce, it never happened. Now its crashing even though the industry won’t admit it.”
Crashing? Really? As far as I can tell, prices have been soft, but pretty steady for the past several months. Condos off a little more, but average price for a SFH pretty much on part with ten months ago, and the median price off only 3 or 4 percent.
http://www.bobtruman.com/Weekly_Stats_Update/page_1947259.html
I’m not saying prices are going to stay where they are in the months ahead, but right now they seem to be sticking pretty good. Calling it ‘crashing’ right now seems like the kind of spin, though mirror opposite, that many on this blog so dislike from realtor’s releases. It’s a soft market, sure, but no evidence yet it’s heading into freefall.
April 26th, 2009 at 11:50 AM
“The average residential selling price for October remained strong at $285,310.00 that number up 12% from October 2007 when the average selling price was $255,739.00. Year to date the average price stands at $289,399.00 up 26% from last year at this time.”
Norm, could you tell me what the year-to-date average price is? I’m not sure how this piece of data should be interpreted relative to the YOY average price. Is this type of data typically released? It doesn’t look familiar to me.
Regarding the SRAR release- to give them credit, this release did mention some factors contributing to the past market “frenzy” (i.e. speculation and overbuilding, etc.). I’m not sure I’ve seen this in the past.
“It will take a few months for this inventory to return to a more normal level”
I’d argue with the timeframe, but there’s no denying that.
“Saskatoon and all of Saskatchewan will be impacted by the recent global financial situation”
At least this is being admitted, now. Not so six months ago.
“but when compared to other areas in Canada or North America going through this period of time in our history, Saskatchewan is likely to be one of the best places to live.”
I would agree with this and have argued this in the past. Even with the price of oil at it’s current level, this area of the country has a lot going for it. The people who live here will also continue to be a fantastic resource in the future. I’ve lived in many places, and the sense of community, industriousness, resourcefulness and practicality are second ton none, IMHO. This will serve the province well in any economic climate.
“Home sale numbers and prices will soften for a short period of time during this correction period and will likely begin to increase again in 2009 at a much slower rate than experienced in the last two years.”
I completely disagree with this timeframe. I do believe that we’ve just started to see the economic and employment effects of the global economic turmoil. The employment numbers are going to be horrendous for the US for the next couple of quarters at least, and this is bound to have consequences for our economy. I’m also sure that there will be many unintended consequences to all of the financial deleveraging and the trillions of dollars being thrown at the problem by world governments. Some will be negative, and some may be positive. Hey, I’ve been surprised before.
The following link is one that tracks “spin” throughout the backdrop of the US housing correction. Although I realize there are certainly differences between the depths of the deviation away from historical averages in Canada and the US, there are similarities. I’d peg Canada has reached about number 7, possibly heading into number 8:
http://tinyurl.com/69oy35
I do agree with Mark that extreme and emotionally-laden language should be avoided on the way up and the way down. Extreme and emotional decisions are clearly not a good idea in any market.
April 26th, 2009 at 11:50 AM
“It will take a few months for this inventory to return to a more normal level”
This is the sort of thing that keeps us unbuzzers employed! With the amount of spec homes still being built, and with a slower influx of migrants I doubt the inventory will be at “normal” levels by spring, that’s extremely optimistic.
April 26th, 2009 at 11:51 AM
Cory F,
I haven’t got the foggiest idea why that little tidbit was included in this release and I’m not sure I understand the message it was intended to convey. I have to think that it’s targeted at the REALTOR population. Perhaps a way of saying, “we’ve been through this before and survived.” I haven’t got the numbers with me but it seems to me that agent numbers increased from around 380 to 420ish over 2007. I expect that we’ll see that drop faster than house prices. During tough times, an inexperienced agent is going to have a hard time finding clients willing to give them a go. Remove 15-30% of the transactions for any given month and it’s a pretty tough go.
Mark,
I think the “crashing” reference is related more to the drop in transactions than price. 21% fewer transactions makes for a pretty different market.
Crikey,
The year to date average is the average selling price of all homes sold in 2008. At one time this was a okay number for tracking trends but I’m not sure it’s really relevant in a market which is experiencing rapid change.
Heather,
“With the amount of spec homes still being built, and with a slower influx of migrants I doubt the inventory will be at “normal” levels by spring, that’s extremely optimistic.”
I’m hearing that builders aren’t busting ground on anything new right now. Obviously there’s some building in progress but many builders have been giving lots back to the city. There are tons of permits which have been issued that won’t be utilized until, and only if there is a buyer for the home. In fact, I think there are quite a few properties listed on the MLS which don’t yet exist and may not exist any time soon. I have a couple of those listings.
April 26th, 2009 at 11:51 AM
Norm,
my point was that once home owners were able to make it through the peak of high interest rates, affordability improved. This happened to my parents.
Now we have a time that if interest rates hit 10%, many people will be in trouble. Judgeing from the financial mess from banks, governments and others have created, I don’t think they can stop crazy inflation from happening again.
Mark,
I think Edmonton and Calgary are the biggest bubbles in Canada. They have seen the biggest average price drops from the peak which were last summer. Sales have plunged even according to the Calgary Herald. Listings are still sky high. Absorbtion rate is about 7-8 months. Some condo developments have been delayed and others cancelled. And they weren’t little dinky 3 story ones either.
Yes, average price is around the same as last year. Last year there where 1944 sales condos and houses, this year there where 1442 sales with both.
Tonnes of supply, low demand, still unaffordable. 60k from the peak and the bottom is still nowhere to be found. Nevermind the financial crisis or the no more 0 down, 40 years, Calgary’s market is very very unhealthy, and yes, it is crashing.
April 26th, 2009 at 11:52 AM
Norm,
Averages are falling out of favor. This is perhaps more obvious on this side of the hump where one $3 million to $10 million sale aggressively skews the numbers. More of us boys on the street prefer to sit on the “median” for a realistic perspective.
April 26th, 2009 at 11:52 AM
Okay George, but I have a feeling that once we make it through “the peak of high interest rates” affordability will improve for us as well.
Seems there is little concern in the short term but it’s probably a good time to be plucking away at that mortgage balance for those who are able.
Larry,
Interestingly, the median remained stable at $270K through September and October. It makes little sense to me as prices are without doubt, lower. I suspect this is an indication that people are still spending the entire amount they had budgeted, just buying a little more house? Does that make sense?
October 2007 – $241,000
January 2008 – $253,000
June 2008 – $299,000
September 2008 – $270,000
October 2008 – $270,000
April 26th, 2009 at 11:52 AM
Was pointed at this article while reading over another website. As usual, it pertains mostly to the US housing market, and it covers a lot of ground that people who have actually been following RE will already know, but it does give a warning that as bad as things may look, they could get worse… and explains why.
http://www.moneyandmarkets.com/the-great-american-housing-nightmare-next-phase-27880
“The most important lesson of all: Don’t underestimate the potential depth, speed and duration of the decline. As the debts are unraveled, the economy comes unglued and the deceptions are uncovered, home prices could continue to plunge much further.
If you are able and willing to sell your properties, do so now. Don’t wait.”
April 26th, 2009 at 11:53 AM
For those following the Regina Market, details released today show the average price came down in October to 234,600. That’s at least 10,000 down from previous months, although you’d never guess it from the actual release and byline. I really think the realtor’s association would be better off stating the obvious, and point to the slight correction, as I feel many buyers are waiting for this. Stating prices are as high as ever only keeps buyers away longer.
http://www.canada.com/reginaleaderpost/news/business_agriculture/story.html?id=ce326136-1f9b-46ab-b8ac-90e836d48b11
As an owner of revenue properties, I’ve had calls from prospective tenants, most from out of town, arriving from Alberta to work in the Bakken, or Ontario for city jobs, even a few from England. Some have stated they want to rent for six months and then buy when the market softens a little more and they can get a deal. As a realtor’s association, you might want to point out the fact that houses are cheaper now than they were in July and August. I know from a revenue perspective, there seems to be a lot of good buys in Regina these days. I’m putting in a couple of offers this week.
April 26th, 2009 at 11:53 AM
Mark,
a couple more things about Calgary. In the last bubble in the 80′s, a SFH went from 130k to 65k. Granted they had to deal with an oil crash, slowing economy and high interest rates.
Here is a graph of Calgary prices in 06 dollars
http://photos1.blogger.com/blogger/4027/164/1600/History%20of%20Calgary%20RE%20prices%20-%201973%20to%20today.jpg
A history of US home values graph
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Notice how they both spike around the same time as cheap and easy credit was given away in the last few years. Both are inflation adjusted. The worldwide housing bubble!
Cutting home prices key to sales success
http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=ea85262e-fccb-4ba6-aab9-f69bd4939661&p=1
“The ratio, which compares sales to the active inventory at the end of each month, stood at one single-family home selling for every 6.74 on the market in Calgary metro, according to MacLean. In May 2007, the local market was selling one house for every 1.86 homes on the market.”
April 26th, 2009 at 11:53 AM
Mark,
sorry, when I mentioned that Calgary and Edmonton had the biggest declines from the peak with 60k, I was wrong. It is Vancouver, with about a 70k drop from the peak. Sales have crashed as well.
Greater Vancouver saw MLS sales of 1,364 units in October compared with 3,028 in the same month a year ago.
http://vancouvercondo.info/
April 26th, 2009 at 11:54 AM
George, thanks for the info. If I had time, I’d show you how each of those links is fallacious. Kidding. You’re really trying to cramp my ability to live in denial aren’t you?
Now get back to work and stop posting so much.
April 26th, 2009 at 11:54 AM
Mark,
this is my work. Norm pays me under the table while I am in my parents basement surfing online. Still have not went to bed from last night. Late night of Dungeons and Dragons. I love that game:)
April 26th, 2009 at 11:55 AM
Bookrat,
Interesting link. Thanks for sharing that.
Mark,
Excellent points on the release spin. I think you’re exactly right about the importance of being forthright with these kinds of changes. The “prices still sky-high” approach gives sellers the wrong impression and slows the correction which is ultimately necessary.
George,
“Greater Vancouver saw MLS sales of 1,364 units in October compared with 3,028 in the same month a year ago.”
Ouch! That is pretty ugly. I guess I should count my blessings hey?
BTW, you are doing a wonderful job.
April 26th, 2009 at 11:55 AM
This excerpt was written by a realtor in Victoria a while ago, and I’d like to get others’ take on it. It perhaps explains why averages may be looking to some as they are merely “softening”. It may also have implications for those that are pulling listings to relist in the spring in the hopes there will be a bounce up then. It appears to make sense- let me know if you see any flaws in the logic.
“Let’s say 100 houses sell in a bubbly real estate period. Fifty sell for $500K. Another 50 sell for $400K. Avg is $450K. Only the people who saw those houses know their condition, but I can tell you that in a bubble almost any manner of junk sells at full price.
By “full” I mean a listing price arrived at by comparing the listing with recently sold houses in the vicinity with similar attributes (sq ft, # BRs, # baths, etc.). Upgraded fixtures having absolutely nothing to do with anything, by the way. That’s HGTV fantasyland.
Then let’s say we enter the post-bubble phase. We get 120 listings. 60 at $500K and another 60 at $400K.
Of the 60 at the higher price, only 30 sell, but they’re the 30 that have been properly maintained over the years. The other 30 falling-down pieces of junk do not sell and the vendors, not wanting to believe the market has tanked, cancel the listing instead of reducing their price.
At the lower end, of the 60 listed at $400K, 30 sell to first-time buyers because in recent times $400K has represented the floor in prices and these houses are still better than living in a leaky condo or rat-infested basement. The other 30 falling-down pieces of junk do not sell because there aren’t enough buyers engaged in panic buying anymore. The vendors, who bought for a quick flip, cancel the listing and rent out the dump instead of reducing their price.
Avg: Still $450K.
So, we have listings up, sales down, but a steady average price that the board can spin in the media.
As the bubble completely deflates, quality property still sells, albeit at reduced prices, and junk doesn’t sell. So the average sale price goes down. But that STILL doesn’t tell the whole story.
What the public doesn’t see (but I do, having access to all listings for the past 20 years) is the number of cancelled or expired listings, where vendors reduced their price time and time again but could not unload their property.
These de-listed properties do not show up in any average because they aren’t counted as SALES. But the attempt to sell those properties was no less real for those vendors.
So an average sale price of $450K in a boom is not the same animal as an average price of $450K in a bust. One average represents the price on everything including junk that never had a dime put into it. The other represents the average price of houses that required an enormous amount of renovation and maintenance.
An average price decline of 40% (say) tells you that the BEST properties are off at least by that much. What it doesn’t show is that the average price decline for crappy houses can be infinity (no sale, no market value established). Look at the $1 house listings in Michigan for an example of what I’m talking about.
If the board wanted to publish numbers that offered a more honest insight into market conditions, it would publish the average LISTING price.”
April 26th, 2009 at 11:56 AM
Norm said: “Interestingly, the median remained stable at $270K through September and October. It makes little sense to me as prices are without doubt, lower.”
Norm, I don’t have access to the numbers you use to generate your medians, unfortunately. While I agree that one huge sale can skew a mean, that doesn’t mean that it’s useless. Take for example these two sequences of numbers:
4,5,6,6,6,7,8,10,10,12,15
3,4,5,5,6,7,8,8,8,12,23
Are these two lists different? The median value is 7 on both charts. The mean (average) is the same on both charts (~8.1). The difference is that the bottom chart ‘feels’ lower, because match-for-match every single value is equal or lower than the corresponding place on the chart above it *except the highest outlier* which sucks it all up.
If you made that highest outlier a 12 without changing the median value at all, but you would skewer the mean.
In a situation like the lists as displayed, a bar-and-whisker/quartile representation might be of some assistance in seeing that the market has shifted downwards… but you can’t do everything on one website. Sometimes we just need to hear it from you that the numbers and the gut don’t match up.
Hope that helps. Thanks again for your fabulous resource and open responses.
April 26th, 2009 at 11:56 AM
Crikey,
good post, I can see where listings and DOM are skewed under the present system and do not reveal the whole story of the market. Averages and median only give an idea of how a market is doing. There are others to look at as well to get the whole picture.
Last year, all a property needed was 4 walls and a roof to sell. Chances are, it was in a bidding war.
Now, each property needs to stand out somehow and right now it is a property in great shape with a lower price than comparables.
April 26th, 2009 at 11:56 AM
Curious if anyone knows the average cost per sq.ft for the Saskatoon area, or more specifically Martensville? Or can direct me to similar stats on this or another website.
April 26th, 2009 at 11:57 AM
Somehow I missed this from Macleans. Less D&D for me tonight!
No subprime crisis here? Not so fast …
http://www.macleans.ca/business/companies/article.jsp?content=20081022_87658_87658
It’s often said that Canada doesn’t have a subprime mortgage problem, but there’s mounting evidence that’s no longer true.
Subprime loans with no government insurance, typically given to those with poor credit histories, represented about four per cent of the industry. That sounds small, but it still represents hundreds of thousands of now potentially overextended homeowners.
April 26th, 2009 at 11:57 AM
Crikey,
That makes sense to me as well. With no shortage of options, it’s true that buyers are for more selective and less willing to take on a project than they were last year.
Bookrat,
Thanks. That also makes sense.
George,
I’m told that SRAR will soon be implementing a new “rule” and some processes whereby listings which are cancelled and re-listed within a few days (I’m hoping to get that stretched to a couple of weeks) will not be counted a second time and days on the market will continue ticking. It will take a few months to get more accurate days on the market stats, but numbers of new listings should be straightened out soon. SRAR reports 695 new residential listings from October 2008, up 30% from 535 last year. According to my calculations, at least 188 of the 695 were counted for a second time when cancelled and re-listed. Guess how many times that happening in October 2007. Not one single time. New listings actually declined nearly 10% year-over-year.
LJ,
Our monthly “Closer Look” includes some cost per square foot info for Saskatoon, but nothing for Martensville. I may try to do something on that if I can find the time. I’m curious myself as to how the bedroom communities are comparing to Saskatoon.
http://tinyurl.com/5uadkv
April 26th, 2009 at 11:57 AM
I must have been thrown by the line “The average residential selling price for October remained strong at $285,310.00.”
I just realized that’s down from $297,836 in September.
Also, when you break it down to single-family and condos you do see a change in the median as well suggesting that other units in the residential category provided some support to an overall stable median. More on that in the October Closer Look coming soon.
April 26th, 2009 at 11:58 AM
Thanks for the link Norm, appreciated!
April 26th, 2009 at 11:58 AM
LJ,
My pleasure. I’ll be doing that same report for October over the next couple of days and I expect to see some changes. If you drop back towards the end of the week it should be posted.
April 26th, 2009 at 11:58 AM
Don’t have a new car and new home? Get both with one purchase! Not only are prices dropping, there are more and more incentives for buyers as we move forward
http://www.yourhome.ca/homes/article/530671
This is in Ontario, where the “experts” do not expect much of a drop.
April 26th, 2009 at 11:59 AM
Norm,
I too look forward to your report. You call em as you see them and this allows buyers, sellers and agents to get a clear picture of what is happening in the Saskatoon RE market.
When SRAR puts the numbers in their stats machine and sets it to “spin cycle” you don’t get useful output.
April 26th, 2009 at 11:59 AM
Toronto Housing Plunges 13% (prices now below Oct 2006 levels)
http://www.financialpost.com/story.html?id=935307
April 26th, 2009 at 11:59 AM
Does anyone remember the infamous Merrill Lynch report where they proclaimed Saskatoon was 50% overvalued, but the Toronto market was “balanced”?
“(NATIONAL POST) City of Toronto existing home prices plunged 13% in October from a year ago and are now even lower than two years ago, the Toronto Real Estate Board said Wednesday.
The average price of a home sold in the city was $376,896, down from $434,022 in 2007. But the figure was also down from the 2006 average October sale price of $386,807.
In the greater Toronto area, the average price of a home sold in October was down 10% from a year ago to $352,974. GTA average prices were off 1% from October, 2006.”
Average price in the GTA is now below where it was in October of 2006.
Ouch.
April 26th, 2009 at 11:59 AM
Crikey,
Ouch indeed. A 38% decline in units can’t be easy to take. Not quite as bad as Vancouver but a pretty big hit.
April 26th, 2009 at 12:00 PM
Calgary, Edmonton, Vancouver, now Toronto. Prices, sales are tanking while listings are close to all time highs. Saskatoon is on the radar.
I think it is safe to say there are thousands in this country who are underwater in their mortgage and this is just the beginning.
On another note, something I was thinking about when making comparsions to other times like the 80′s.
Growing up as a family in the 80′s, we had a 19 inch tv with rabbit ears, a VCR and one telephone.
Now think about the monthly electronic bills people have.
40 inch LCD, ipod, iphone, surround sound, security system, computer, internet, cable, playstation etc. Real income has not changed since then. Actually I think we are poorer compared to then.
This is one more reason why people do not save and are in debt so much.
http://www.greaterfool.ca/wp-content/uploads/2008/10/debt-to-income.jpg
April 26th, 2009 at 12:00 PM
It is wrong I didnt sell my house and i worked almost 4 weeks now 60 hour workweeks and put it all in the stock market? If the world doesnt end I guess I will have quite a huge jumpstart on my retirement. My prediction is from this point on Sask and Alberta will stand head and shoulders above the rest and house prices increase slightly more than inflation.
April 26th, 2009 at 12:00 PM
Saskatchewan Realestate makes no sense on so many levels other than that the market is bubbly. The corrections occuring in Vancouver, Edmonton, and Calgary have now reached us. Everyone thought it would go on forever. It has not. People have nothing saved for retirement and those that did have lost it in the stock market downturn as of late. Pension funds are now facing underfunded territory.
I don’t feel bad for anyone that bought a house for investment purposes or bought too much house. A house is a place to live not an investment.
Demographic trends here are terrible, and across Canada for that matter. It just makes no sense to buy here. Where are all the people going to come from to buy these houses.
Armoth,
It is interesting that you think housing will outpace inflation slightly. Can you tell me what inflation is going to be?
Housing is dead as an asset class. Dead money just like the Nasdaq. Dead money. Anyone buying a house now is crazy.
Nix
April 26th, 2009 at 12:01 PM
A while back I was at TD bank and they had a draw for a Homedepot gift card. To enter all you had to do was fill in a form. The form included questions such as do you rent or own yout house. Your income bracket ect.
I filled it out and took it to the lady to get the slip to fill out my name for a chance to win.
She looked at the form and said I see here that you are a renter why would you throw your money away everymonth.
My head was swirling of different ways to tell her off. Instead I sucked it up like a usually do and said “I am not ready to buy yet.” She followed it buy saying that home prices were going to rise by 12% this year. I just said I was willing to wait. As I was walking away I heard her use the same thing on somebody else. Except they were like “REALLY?” They bought into the B.S. The pressure people face to buy is brutal. My wife and I save and invest like crazy. We pay 915 dollars a month in rent. We both walk to work and only drive the car on weekends for groceries or entertainment.
I see all of my 20 something friends buying houses and then having no money but justifing it by saying their house is going up in value. They have no retirement savings a maxed out credit cards, they owe on their T.V., fridge, stove, freezer, couch, bed, and kitchen table. They have a credit line that is maxed out. They have 2 car payements. It is crazy and not sustainable.
My wife and I on the other hand buy only when we have cash for it. I don’t have 50 inch plasma T.V. Do I want one yes, but I am willing to wait. The housing bubble is just getting started. People are in denial. Afterall housing is just a ponzi scheme.
April 26th, 2009 at 12:01 PM
George,
I know what you mean everyone wants everything now. I am only 26, but grew up in a house that if we did not need it we did not buy it. If we did not have the cash for it we did not buy it.
I personally look forward to seeing all of the baby boomers working a McDonalds and serving me my hamburger and fries. I guess when you rape the earth for 40 years that is the price you pay.
Babyboomers still think that there pensions will be there for them and that they can cash out on there houses. They will not be able to.
Pathetic really.
April 26th, 2009 at 12:01 PM
Armoth! How is my favorite contrary indicator?! Nice to see you back.
Regarding real estate outpacing inflation, I think you might need to define what time frame you’re talking about. Someone in Vancouver who bought homes at the market top in 1980 had to wait approximately 26 years just to recover their inflation-adjusted principal back.
It’s all in the timing, hey?
April 26th, 2009 at 12:01 PM
Since income was brought up…I worked in a firm, I’m an architectural drafter guy. When i got out of school in ’99, i had the honor of cleaning the architecture firm’s basement. I came across paystubs. At the time, I was making 1900 a month before taxes. I thumbed thru things, and saw that my teacher I had in school, in college, worked at that same firm in the mid 80′s. His pay? 2000 a month…
This is evidence I’ve seen with my own eyes. When people tell me oh ti’s just becuase you have this or that when i don’t…I think back to that fun moment of cleaning the basement that opened my eyes of what it’s like to work in the province here… fast foreward, I’ve worked my BUTT off and have paid debt down, still pay ever increasing rent here, ever increasing bills, and just can’t manage to save much. It’s not that i’m overspending, or that i’m frivolous…when you take exact examples of incomes, factor in all the bills one paid, costs, etc…we’ve fallen and fallen and fallen. At least to me.
April 26th, 2009 at 12:02 PM
Norm,
I don’t know that it’s possible to tell how many new spec homes are currently under construction. I’m just stating what I’m seeing. Drive around Willowgrove and there’s a GAZILLION “for sale” signs in windows of partially finished and complete houses. It’s also pretty interesting that on Point2Homes Willowgrove has the most listings above and beyond all other areas, sitting at 144 – almost triple to Specubridge! I’m sure some of the listings are homes not yet built, like you say. The city is sure going to have an OOGLE of lots on their hands come next lot draw! (new AND returned) Anyone who can afford to build will have their pick of the litter.
April 26th, 2009 at 12:02 PM
Jesse,
It’s a tough gig, no doubt.
Heather,
Have a look through the Point2 listings in Willowgrove. You’ll find at least 20 properties that appear there three times. Yes, same address, same exterior photo, same property.
I’m not saying that there isn’t lots of property for sale. I heard one builder has over 50 spec homes at various stages of construction. Ouch! I’m saying that the guys who dig basements probably have time to dig one next week, where you might have had to wait two months at this time last year. These builders don’t have their head in the sand. Nothing new gets started without a purchase agreement and a hefty deposit.
On MLS, there are 76 single-family homes in Willowgrove, 46 in Stonebridge, and 49 in Hampton Village. It appears that about 20% of them are just bare lots at ths time. Total sales across the three areas in the past 60 days is 46. Around seven months of inventory, six if you don’t count the ones which are not started. Not great, but not a catastrophe.
April 26th, 2009 at 12:03 PM
” I heard one builder has over 50 spec homes at various stages of construction.”
Hey Norm, curious is this a condo or townhouse project?
April 26th, 2009 at 12:03 PM
Hi Norm and all,
We’ve been considering building new rather than buying – Not a McMansion – but our family has some unique needs that we are struggling to meet with an existing home. Any comments or suggestions from anyone? Has anyone built new and have words of wisdom to share with us?
Thanks,
April 26th, 2009 at 12:03 PM
Pam,
Building is a better idea now compared to the last 2 years. Prices are coming down and trades won’t be as hard to get as the last 2 years.
I would suggest not going into too much debt though. And if you expect to use the equity from your house, budget for at least 10% less than the value of it now.
Building or buying a home is going to be the biggest financial decision you will make. So it won’t hurt to shop at some of the builders in town. See what you like or do not like. Take your time. Ask for references. Negotiate the price. Things are slowing down big time, some builders will possibly offer encentives for your business. Good luck
April 26th, 2009 at 12:03 PM
As prices tumble, homeowners best prepare for the long haul http://www.theglobeandmail.com/servlet/story/LAC.20081106.BARBER06/TPStory/Comment
Reasons for the slow down in housing:
First, it was the land transfer tax, then a big dump of snow and now “Ms. O’Neill blamed media reports from the United States for “unduly” affecting confidence in the local market.”
No mention of houses being unaffordable.
April 26th, 2009 at 12:04 PM
Thing the markets are bad now?
Collapse of automaking industry would crush U.S. economy: study
http://www.canada.com/vancouversun/news/business/story.html?id=3ee58fb8-577c-495b-afda-3bc9ada52b6e
In a report released Wednesday, the Center for Automotive Research in Ann Arbor, Mich., outlined what would happen in two separate scenarios if General Motors Corp., Ford Motor Co. and Chrysler LLC were forced to scale back or shut entirely.
If all three Detroit manufacturers were to cease operations, the U.S. economy would lose 2.95 million direct and indirect jobs in the first year. Governments would lose at least $156.4 billion US in taxes over the first three years.
GM’s U.S. auto volumes dropped 45 per cent in October. The automaker, burning through more than $1 billion US a month.
Chrysler U.S. sales fell 35 per cent in October. It is “very likely” the company will file for bankruptcy protection if it does not find a buyer or alliance partner,
April 26th, 2009 at 12:04 PM
Thanks George,
We have met with several builders and they are SLOWLY adjusting their prices. We are debt phobic and so are very, very cautious about what we are willing to spend (no consumer debt, only 1 tv in the home – and it’s not a big screen) I see nothing wrong with having the things you want – but only if we can pay for it with cash. We have been watching the house prices drop and maybe we will be able to buy rather than build and still be able to afford what modifications we need.
April 26th, 2009 at 12:04 PM
Adrian,
Seems I am confused. The person whom I thought I had heard this from said this builder is carrying over $30 million in mortgages. They build houses and condos and may have well in excess of 50 units for sale between the two categories.
April 26th, 2009 at 12:05 PM
Victoria (VREB) just released their October numbers. Sales *plummeted* 38% from September and almost 56% year-over-year from last October. This in a market that is normally insulated (or so they say) from market trends everywhere else. There were only 184 home sales (in Saskatoon we saw 162 by comparison). That’s a fairly scary comparison, considering respective areas, population, etc.
http://vreb.org/mls_statistics/current_statistics.html
April 26th, 2009 at 12:05 PM
Nix,
3-4% like it has always been historically but I think house prices for Saskatoon will increase at 5-6% because of lowering taxes and increases in the median wage but who knows maybe ill be wrong =o)
April 26th, 2009 at 12:05 PM
Norm,
It is nice how trades people are now suddenly available! Our house possession date is March 30th, and the basement just got dug last week. I heard in 2007 some people were waiting 2 years for a completed house.
Pam,
My advice is don’t get into any contract right away. Many of the larger builders are overpriced ($220/sq ft before lot) and it may take them a while longer to feel the need to compete for business.