91 comments so far. We'd love to hear your thoughts.

• Gilbert
  October 7th, 2008 at 12:28 AM

  One has to be careful of statistics and averages (as reported in the Royal Lepage survey). You have to go and look at houses in comparable neighborhoods in different cities. My house in Winnipeg (1700 sqft) would sell for about 270K (last month at least), I would have to pay about 450K to get the same place in a similar neighborhood in Saskatoon. I saw houses in Saskatoon that were listed at 400K that were about 1000 sqft that would sell for 200K in Winnipeg.

• Gilbert
  October 7th, 2008 at 11:59 AM

  The article reads:

  “the rising house prices appear to have reached a cap; after lagging behind much of the country, house prices in Saskatchewan have caught up and are now on par with other comparable cities.”

  A house in Saskatoon that is priced in the 450K plus range can be purchased in Winnipeg for about 300K. I think that Winnipeg and Saskatoon are similar (salaries and inward migration). I’m considering a job in Saskatoon and the only thing at this point that will make me refuse the offer is the price of a house.

• guy_in_regina
  October 7th, 2008 at 12:08 PM

  No doubt, Gilbert.

  I guess it’s true if you consider Calgary a “comparable city.”

• Bookrat
  October 7th, 2008 at 1:16 PM

  ———————

  “Many buyers are sitting on the sidelines right now, waiting for prices to drop; however, this is likely not going to happen,” said Mike Duggleby, manager, Royal LePage Regina Realty, Regina. “Our economy is the best it’s ever been, and I anticipate that it’s only going to get better. … Now is a very good time to invest in Regina’s real estate.”

  ———————

  Had to laugh at this. Is there a rule somewhere that every single RE piece has to have this sentence/sentiment (“It’s different here/this time”) embedded somewhere in the text?

  The guy might even be right… but when you hear the same thing all the time, regardless of whether it’s a rising market or falling market, an intelligent person has to begin to wonder if the person writing it even believes it any more.

• Pat
  October 7th, 2008 at 1:32 PM

  “Many buyers are sitting on the sidelines right now, waiting for prices to drop; however, this is likely not going to happen,” said Mike Duggleby, manager, Royal LePage Regina Realty, Regina.

  I pity the job of the real estate PR person. Tough to spin. We had considered putting our house on the market in the spring an agent came out and said we should ask $319,000 – the same agent came out 2 weeks ago and told us we should be asking $280,000. He also told us that prices were dropping every day – So – seeing this kind of Publicity makes me laugh – and a little angry – the whole “buy now or else” never seems to go away!

• Laura
  October 7th, 2008 at 2:23 PM

  Gilbert;

  Either my understanding of Winnipeg neighbourhoods is way out of whack, or your understanding of Saskatoon neighbourhoods is off. My inlaws live in Charleswood. Their neighbours 1400sq ft house sold last month for $310,000. This is 3 blocks south of Roblin, on a block where cars get broken into routinely, and kids rip off anything in the front yard that isn’t nailed down. They are a few blocks from low-income housing. My inlaws keep ‘the club’ on their car at all times, lest it be stolen like many of their neighbours cars in recent years. I know car theft in Winnipeg is disproportionately high, but I don’t know anywhere short of The Barry parking lot where I’d worry that much about my car. In the 10yrs I’ve been in Saskatoon I think I’ve locked it a dozen times.

  Perhaps Charleswood, like many Saskatoon neighbourhoods is highly overated.

  For that kind of money you could definately find an equivilant house in an equivalent neighbourhood in Saskatoon, if you know where to look.

• Mike
  October 7th, 2008 at 2:30 PM

  Yes, I wonder how the people who bought in the spring feel about that statement, “now is a good time to buy”. The ones who read, “buy now or forever be priced out”!

  Canada’s following the world into a recession, first time homeowners are virtually non existent, unless of course if they use the bank of “mom and dad”. Interest rates are climbing, and there is more and more inventory hitting the housing market everyday. just wait until the builder’s catch up and cash out. now is the worst possible time to buy!

• Gilbert
  October 7th, 2008 at 2:43 PM

  Laura

  I’m not that familiar with Charleswood except that many of the property lots there are large with many of them near the river – sort of feels like country living. Maybe thats why the prices are a little higer there. I’m refering to homes near the universities. My house in Winnipeg is near the U of Man (I purchased 2 years ago and very familiar with that market) and I looked at 12 houses near the U of Sask and Broadway (I realize that’s a rather desirable area). But I was very disapointed – 400K did not buy much. My point is, not too many people can afford a 400K home and I expect that you one should be able to buy a very good house for that amount in a small prairie city like Saskatoon, Winnipeg or Regina.

• Norm Fisher
  October 7th, 2008 at 2:44 PM

  Laura and Gilbert,

  There are 113 Saskatoon properties for sale on the east side which are between 900 and 1100 square feet. The average asking price is $316,466. The median is $315,000. Certainly one can pay $400,000 for a 1,000 square foot home if one has rocks in their head. I’m betting you could do the same just about anywhere.

  Here’s a sample of something that actually sold in September for $400K.

  1408 square foot Lakeridge bungalow. Fully developed basement and a double attached garage with a direct entry.

  “Immaculate bungalow in prime cul-de-sac location. Hardwood and ceramic tile flooring. Cathedral ceiling, garden doors to deck, manicured yard. Fully developed basement with surround sound and fireplace. All media components and big screen TV to stay. Upgraded furnace and water heater. Central vac, underground sprinklers, GREAT street appeal with brick/stucco exterior and cedar shakes.”

  I showed it myself and it was an excellent property. It’s probably an example which is as far out as Gilbert’s “1,000 square foot home for $400,000″ but it’s an example of the kind of opportunities that exist out there right now.

• Cory F.
  October 7th, 2008 at 2:54 PM

  I live in Regina and the front page of the Leader Posts Business section included an article titled ‘Study says Regina housing market stable’ ( http://www.canada.com/reginaleaderpost/news/business_agriculture/story.html?id=366b7393-b7e2-46bc-8867-bd98d3152339 ).

  The article focused on the same Royal LePage report Norm but with more of a Regina focus. The article included the following quotes from Mike Duggleby who is listed as broker-manager for Royal LePage Regina Realty:

  “I expect that once the federal election is done and we get done with Christmas, (in) January and February things should step up again,” he said. “It won’t be as dramatic as 2007, but I do expect somewhere between five- and 10-per-cent price appreciation through 2009.

  “The people who decide to sit on their hands and not buy now are going to be sorry six months from now.”

  I am certainly no expert on the market, however as I’m looking to get in the market in the next year in Regina I’ve followed it closely enough and personally when I read Mr.Duggleby’s comments the emotion that would best describe my reaction was anger. Why is it that a realtor would resort to such blatant fear mongering? Maybe studies have been done which find that this is an effective strategy to drum up business in a slow down, however I know it does exactly the opposite with me and with several friends I’ve spoke to.

  I wanted to post this because I read your comments Norm about Saskatoon and noted how much more balanced and conservative they appeared and I thought that you should know that your approach is one that is appreciated. Unfrotunately I cannot say the same for your colleague in Regina.

• Gilbert
  October 7th, 2008 at 3:16 PM

  Norm, thanks for the information and very useful blog.

  My problem may be that I was looking for a property between 8 Ave and U of Sask. In that area, 400K does not buy (small house, older windows, often older kitchen and bath) much compared to Winnipeg. Maybe if I look further away I can find something more reasonable.

• Laura
  October 7th, 2008 at 3:27 PM

  Gilbert,

  I see where you’re coming from. Part of the trouble may be that the U of S has more renters than U of Manitoba. Most of the people who go to U of Manitoba are already from Winnipeg, where as only (just a guess) half of the students at U of S are from Saskatoon. The University of Manitoba is only a little bigger population wise than U of S, while Saskatoon is much smaller than Winnipeg. I think that would add up to more kids renting for school in Saskatoon than Winnipeg. Couple that with the far superior bus service in Winnipeg, and proportionately the demand should be higher for a place close to the U of S if all other things were equal.

  That being said, what people are asking around Broadway is laughable. Some of those old places are really nice, but I looked at some real dives when I was renting.

  Funny enough, I met my husband because he didn’t like U of Manitoba and came here instead

  I remember going though some $500,000 mansions a few years ago when the Childrens Wish Home Lottery was on. I laughed at what they were charging then. Never would I have dreamt that housing here would cost so much.

  I sincerely hope the move turns out to be a good thing for you. When you do find a place, Bur oaks do alright here. In my opinion, oak trees are the one thing that Winnipeg has over Saskatoon.

• Norm Fisher
  October 7th, 2008 at 3:42 PM

  Gilbert,

  Thanks for the feedback. That part of the city typically comes in as one of five of the most expensive areas of Saskatoon.

  Cory F,

  Thanks for the comment. This is excellent feedback that agents would be wise to take note of.

  I know Mike personally and he is a kind and decent man. Perhaps he is “drinking the kool-aid,” but I have no doubt that he believes what he has said. He made similar comments directly to me just a couple of weeks ago when I spent some time with him at a conference. My experience with this blog has taught me a lot about how our comments can be perceived and I’m thankful for that.

  There are no studies which suggest that pumping sunshine is a good strategy. Clearly, we are living in a time when every statement is subject to scrutiny and our credibility is at stake each time we speak. This is a lesson that the real estate industry needs to learn if we hope to be taken seriously.

  Further, I really believe that we will find our way back to a healthy market faster if we do our best to deal in truths. Buyers will buy if the price is right. Sellers are more likely to price realistically if they understand that the market is tough for them right now.

  Thanks again for the feedback.

• Jason
  October 7th, 2008 at 3:48 PM

  Just wondering, but should a recession take place will Saskatchewan not be in a worse position than most of the other provinces being as our new “booming” economy is so dependant on the construction industry and commodities? A lot of people have been saying that we are going to weather the storm much better than the other provinces because of our strong commodity markets, but when you read through the news these are some of the biggest industries taking a hit right now. Plus, many of the new jobs created in the city have been in the contruction and trade fields, and if a housing slowdown takes place, what are all these people going to do? In the meantime, as we have seen on the blog here it seems that high rents and record high home prices now seem to be working to push out working professionals and young graduates who otherwise would have chosen to stay in a affordable pre-boom Saskatchewan. Wages have not kept place with the staggering cost of living increases, and it has now become a no-brainer for young people to once again look elsewhere like Alberta where they can find a better paying job, and far cheaper accomodations than here in Saskatoon. It seems like we gambled, choosing to put all of our eggs in one basket by focussing solely on commodities and the housing industry, and now it beginning to look like the bottom is going to fall out of these markets.

  Or am I just needlessly worrying, and is everything hunky dory as the local media would suggest?

• Laura
  October 7th, 2008 at 4:34 PM

  I learned two things in Agriculture 111. The first was don’t buy a house in Erindale or anywhere north east of it, because you’ll have foundation issues. (Its sitting in the heavy clay from a glacial lake)

  The second thing, is that potash is used as fertilizer in soils lacking potassium, namely tropical soils like those of India and China. Does everyone think that suddenly because the Americans are having issues, that these countries are going to step twenty years backwards agriculturally? Once you start ‘mining’ the soil by using industrial farming techniques, its hard to give up those yields. Just ask any farmer in Saskatchewan. Its addictive. I think potash is one commodity that will weather well, mostly because the US wasn’t buying it. Regardless of the stock price, if the Chinese want it, we’ll be digging it out of the ground. In those communities based on potash, having a job at the mine is seen as similar to having a government job, in that its as secure as jobs get in rough times. Even back in the eighties when potash was in a slump, the mines were a big employer in Saskatchewan.

  I think we’ll be Ok, not great, but Ok. At least with this economic catastrophe we don’t have to deal with the dust bowl.

• Norm Fisher
  October 7th, 2008 at 4:57 PM

  Laura,

  Interesting comments on potash. I could be wrong but I’m also under the impression that our producers have already sold pretty much everything that they can take out of the ground over the next year to China and India. Those contracts were struck somewhere towards the peak of prices.

• Gilbert
  October 7th, 2008 at 5:18 PM

  Laura

  Good point about the need for rentals near U of Sask. I understand your comment about your husband not liking U of M, I’m going through the same process and considering a job at U of Sask. I was certainly impressed with the University and I will likely take the position. Plus the people I met in Saskatoon were very friendly.

• guy_in_regina
  October 7th, 2008 at 5:46 PM

  Interesting take on the potash situation.

  http://blog.macleans.ca/2008/10/02/potash-under-attack-from-short-sellers-yeah-right/

  http://macleans.ca/article.jsp?content=20080827_54739_54739

• Ringo
  October 7th, 2008 at 7:19 PM

  Gilbert – Please be very cautious buying anything too close to broadway. Particularly between broadway and the river. My husband lifts home for basement/foundation replacements. The homes in that area were all built during realitively the same time, and the concrete mix they used at the time was very poor. 75% of his house lifting is done in that specific area, as a lot of the basements have water intrusion issues, some are simply crumbling (visibly from the inside if you can see the wall, as well as from the outside). This certainly isn’t the case in ALL homes in that zone, but do make sure you have a home inspection, and perhaps consider a seperate inspection of the basement foundation. Also, I’m unsure of the commute time you have in winnepeg, but there are LOTS of areas in saskatoon that’d get you there in under 10 minutes. Even my home turf (lawson/silverwood) is a very short drive – could take a bit longer – maybe 15 minutes – at supper hour though. Do you have a decent realtor?? I’m sure Norm or someone in his office (who has a good knowledge of the lay of the land and approximate commute times) would be happy to show you some homes. Norm’s listing on Girgulis (above) is a very reasonable property – and is still a very reasonable commute to work for you. Also, it’s in a great neighborhood. I hope you consider taking the position – new faces in saskatoon are an excellent thing! Good luck to you!

• cyn_d
  October 7th, 2008 at 7:37 PM

  Norm,

  “Further, I really believe that we will find our way back to a healthy market faster if we do our best to deal in truths.”

  How brave are you feeling today? As one who falls in the first-time buyer (beware) category, I am very curious what your take is on the market. I realize you likely have never seen RE in quite this situation before, but with all your experience, what is your gut telling you about the prices?

  How much do YOU think they are going to come down (if at all)?

• Crikey
  October 7th, 2008 at 8:22 PM

  I hate to interrupt the suspense, but I had to post this one for Sam, who hails from the UK if I remember correctly:

  British taxpayer to be tied into £50bn bank bailout

  http://tinyurl.com/3uw22w

  “Taxpayers will be committed today to providing more than £50 billion to bail out high street banks in an attempt to avert a cataclysmic failure of confidence.

  Alistair Darling was due to tell the City in an early morning announcement today that the sum will be available for “investment” in banks that have demanded help from the Government. The drastic rescue move is designed to help to reassure savers and to kick-start the paralyzed credit markets by encouraging banks to lend to each other again.”

  Sorry. If it’s any consolation, it looks like a marginally better deal for the taxpayer than the US bailout.

• Pam
  October 7th, 2008 at 8:28 PM

  Gilbert – Lots of advice for you. I live in the Queen Elizabeth area, very close commute to University, reasonably priced bungalows, and the biggest plus for us – if you have a young family – we are within walking distance to a library, public swimming pool and within an easy bike ride (for a 4 and 6 year-old) to several paddling pools and spray pools. Also some very nice schools.

  It seems like we all want you to consider a move here. Really – Saskatoon is an absolutely beautiful city with many great events and we are getting more and more world class entertainment here.

  Good-luck.

• Bookrat
  October 7th, 2008 at 8:50 PM

  cyn_d, you’re asking Norm to have a crystal ball, and that’s really not fair. None of us can see into the future, and that includes Norm.

  Furthermore, your question poses a no-win situation for him. If he says it’s going to go down another 20 and it only goes down 10% before it bounces back, people are mad because they were waiting for 10 and now are losing money. If it goes down 30%, then people who bought at 10 are mad at him because they bought too soon. The only thing he gets credit for is if he gets it exactly right… and what are the chances of that?

  Specific numbers are for fortune tellers and charlatans. Expertise and honesty are all you can ask of anyone, and Norm is providing those in spades.

• Dirk
  October 7th, 2008 at 9:24 PM

  Norm shame on you for all the year over year!

  Prices are down a decent bit and houses can be had for a pretty penny cheaper than a few months ago.

  This article still makes it sound like prices are on the way up!

  Also, doubt that Regina’s prices will go up from now, but we always hear about fundamentals. Regina has significantly lower average house prices. Regina has significantly higher average wages. Regina isn’t as susceptible to the dip in resources, with more government employment.

  If Regina house prices stay the same, Saskatoon should drop 10 or 20% to meet them.

• Norm Fisher
  October 7th, 2008 at 9:54 PM

  Dirk,

  While I am quoted in this release, I did not write it and I would likely have avoided some of the comments if I had. That said, and with all respect, one would have to be fairly dense to read the first half of that release and conclude that “prices are on the way up.”

  “The combination of rising inventory levels and a decrease in buyer demand in both Saskatoon and Regina have positioned the real estate markets in both cities in the buyers’ favour.”

  “However, the rising house prices appear to have reached a cap”

  “the recent run-up of house prices has finally come to a tipping point, where buyers have become reticent to enter the market.”

  “The combination of cautious buyers, and the recent activity of many speculative sellers has led to a surplus of inventory and a decline in prices during the third quarter. The housing market is now tipping towards the buyers’ favour – for the first time in several months.”

  “Buyers and sellers both need to understand the current market conditions before taking any action; sellers need to be aware that the market has changed significantly and must list their homes accordingly.”

  And finally, Dirk, there is the little chart that actually shows price comparisons to last quarter and last year.

  So Dirk, shame on you! You are one of a few people who come around here attempting to paint a picture that serves your own selfish purposes. This is just more of your endless spinning but I won’t be bullied by you.

  cyn_d,

  I will take a crack at your question tomorrow.

• Laura
  October 7th, 2008 at 11:00 PM

  guy_in_Regina:

  The Macleans article was neat. It would seem to suggest that as long as agricultural advances out pace the worlds requirement for fertilizer, the demand for fertilizer will remain comparatively low. Since the sixties, advances have made crops more efficient at using added nutrients, so less is needed while the volume of food produced increased. Keeping in mind that the volume of fertilizer sold is much higher now, so they are still making money hand over fist.

  Yay technology! Making valuable stuff worthless since the dawn of time.

  I wonder if there will come a time when the efficiency of agriculture hits a ceiling. If we ever get to that point before the world fixes the population issue, then we’re all hooped.

  My parents farm is within 10 miles of three potash mines. When IMC opened up the first shaft in the early sixties they said that the mine would last 25 years, tops. They are still there, now merged with Cargill. The amount of money that they spend fighting water problems in those mines is mind boggling. It must be worth it to them. Mosaic sponsors a lot of stuff in this province, just to keep the peasants happy while they cart great gobs of money down to Chicago. Sometimes it makes me sad to see so much wealth leaving the province and the country, but what are ya gonna do?

• Dirk
  October 7th, 2008 at 11:41 PM

  Norm stop being such a drama queen, you keep talking about year over year when prices are clearly down. Sounds like you’re glossing over the whole thing.

  The chart averages are nice.

  “”House prices in Saskatoon are still up year-over-year, but the frenzy has definitely worn off compared to what the city experienced in previous quarters,””

  I would have said, “but prices are well off (you could say somewhat off) what we saw earlier this year”

  Same reassuring point, prices still better than last year, but less beating around the bush.

  I don’t think that’s bullying at all, just some one who disagrees with your statement

  Don’t be the Gormley of real estate blogs

• Heather D.
  October 8th, 2008 at 12:15 AM

  “Many buyers are sitting on the sidelines right now, waiting for prices to drop; however, this is likely not going to happen”

  Hasn’t it already begun? We’ve all heard endlessly how great SK’s economy is, like this will somehow stop house prices from dropping. IMO it sounds like more BS for first time home buyers to eat up.

• Norm Fisher
  October 8th, 2008 at 7:24 AM

  Dirk,

  The implication in your comment was crystal clear. You didn’t simply “disagree” with my comment, but rather, you accused me of attempting to mislead. Your specific accusation was, “This article still makes it sound like prices are on the way up!” Again, I will stand by my initial response that anyone with an ounce of brain matter in their head could not have concluded that prices are on the way up in Saskatoon from the comments I made in this release.

  Further, the comment is factually accurate and year-over-year comparisons have been used in analyzing real estate stats as long as people have been analyzing real estate stats. Why do you have a problem with people knowing that homes are still more expensive than they were last year at this time? Do you have the same issue with Royal Lepage’s reporting that prices are down year-over-year in Calgary or Edmonton? I’ve never heard you complain when I report that unit sales are down from last year?

  I think, if you did a little research you would find that most statisticians would tell you that a year-over-year comparison is the only valid way to examine price trends. Take the National Association of Realtors for instance. First, understand that both the average price of a home and the median price of a home in the United States went up for four consecutive months between February and June of 2008. http://tinyurl.com/4955ht Every monthly media release that they put out during that period reported prices as being down year-over year. They didn’t even mention the fact that prices had risen from the previous month.

  “Don’t be the Gormley of real estate blogs”

  Dirk, that’s very cute.

  I noticed that you spent a fair bit of time trolling around here last night dropping *** bombs. I’m not obliged to provide you with a forum to spew your bitterness so I will clean up after you when required. If you have an intelligent argument that you’d like to make you’re always welcome to make it but your little one line sarcastic statements are not welcome.

• Norm Fisher
  October 8th, 2008 at 7:49 AM

  Heather,

  “Hasn’t it already begun?”

  The data seems to suggest that it hasn’t already begun in Regina. I see that prices are up, or stable compared to the last quarter and their year-over-year numbers are substantially higher than ours. This is not only clear in the Royal LePage House Price Survey numbers but also in their month to month averages as reported by their real estate board.

  Jan – $204,000

  Feb – $222,162

  Mar – $235,000

  Apr – $256,000

  May – $246,000

  Jun – $250,000

  Jul – $253,000

  Aug – $253,000

  Sep – $245,000

  Further, they only have 1141 active listings there.

  My gut tells me that Regina eventually follows the trend experienced through most of Canada, but with an average selling price that is still $50K below Saskatoon they are in a completely different position.

  Mike is not the only one who believes that Regina is ideally positioned to take advantage of the opportunities which are present in Saskatchewan right now. In all likelihood they are about to become a fairly major transportation hub. The new “CP intermodel facility” promises to brings some real possibility for growth in that city.

• George
  October 8th, 2008 at 9:39 AM

  Norm,

  Dirk doesn’t know what he is talking about or just jumped the gun when he wrote.

  Even being a real estate agent you were very truthful in that article. Even the sentence that it is tipping more into a buyers favor( still not there until prices drop more)I would mostly agree. Compared to the other RE agent you are the bear’s angel. lol

  You know I follow many realtor blogs, a few even in the States. And I not saying this to suck up, but I believe you are the most level headed RE agent who blogs. If you weren’t, I’d be scrapping with you:) You see the market from both sides; as a homeowner but also as someone with kids who you don’t want to see being a slave to their house for 40 years either. You have taught many of us on here but you are also not too stubborn to learn from us either:)Thanks.

  On another note: Regina’s numbers look so much like Saskatoon’s last year.

• Norm Fisher
  October 8th, 2008 at 10:13 AM

  George,

  This comment from a fellow realtor best sums up my feelings about the value of this little community and the opportunity that it provides for me to learn from others.

  “… While no one has a crystal ball, as agents we all have access to valuable data. And intelligent interpretation of this data leads to truth about local markets. Truth is a process of discovery. I have found that sharing market data on my blog with anyone who cares to read it has created a conversation about the market (and) a collective intelligence, which leads to greater understanding for anyone who reads. Though I may not have fully foreseen the enormity of the mess we’re in, there were some on my blog who did, and they’ve been talking about it for two years, which means recent events haven’t been entirely shocking to my audience as a result.

  “People need to know the truth about current market conditions so that they can make intelligent choices. Our industry needs to drop the spin and explore the truth, no matter how difficult that may be.” — Diane Cohn – Reno Realty Blog

  I sincerely appreciate the “collective intelligence” that can be found here. Unfortunately, every once in a while someone wanders in who is simply focused on trashing the opinions of others, or trashing Saskatoon in general. This is not the first time that this poster has taken me to task without examining the context of my comments.

  I sincerely appreciate the perspective that people like you, Crikey, guy_in regina_, bookrat and others bring to this party. I welcome all opinions on the real estate market but I don’t feel obliged to lay down and take accusations of dishonesty.

  “On another note: Regina’s numbers look so much like Saskatoon’s last year.”

  Funny. I thought exactly the same thing when I was reviewing the Regina numbers. I didn’t say so for fear that it might be perceived as an attempt to incite a rally.

• Pungo
  October 8th, 2008 at 10:13 AM

  Laura: interesting to know that about Erindale. I just sold my townhouse there (built in 88). What would be signs of foundation issues? It seemed fine to me. At what age would the foundation issues occur?

  There is a big problem in Erindale with maintaining asphalt. Maybe that’s due to the clay base? I know from doing work in my little back yard there that the ground is definitely clay. You don’t dig, you peel back layers.

• Mark
  October 8th, 2008 at 10:17 AM

  Just another note on Regina – along with the “intermodal facility”, and huge upgrader upgrade, the Bakken oil field is growing very quickly these days and is within commuting distance. Previously, most oil patch stuff in the south was well over 2 hours away from Regina. The Bakken, however, is based around Stoughten, less than an hour away. I personally know of a few houses here last week that sold to oil workers originally from Calgary now commuting from Regina to this field. There’s a lot of oil there, and they’ve only just begun.

• The Villager
  October 8th, 2008 at 10:26 AM

  Hi to Norm and all here at this great site! I live in a resort village in southern sask. We built a new home in 2003 cost $153.000 lot and services were free. Last fall a realtor asked if we would sell it and build a bigger home next door. He looked the place over and said list it for $310.000.He has to be nuts we thought until the house 2 doors down the block sold for $329.000 it was built in 2004. We should have sold but the cost to build in 2007 had doubled since 2003. Just this spring a 1900 sq ft home 3 doors down the block built in 2007 sold for $500.000 I never though I would see this in my town. This place is were they used to build 1 house or 1 garage in a year but not now it’s just gone CRAZY !

• Gilbert
  October 8th, 2008 at 10:54 AM

  Laura, Pam, and Norm

  Thanks for all the advice. I will be watching the market over the next few months.

• George
  October 8th, 2008 at 11:17 AM

  Villager,

  don’t worry, in a bubble, resort towns get hit the hardest. The pool of buyers that can get enough credit for two homes dwindles the quickest when markets contract. Things are on there way back to normal there. Don’t believe me, take a look at many of the resorts in Ontario, BC, Alb such as Canmore.

  Mark,

  I hope for the best for this province and I love the idea the debt to be paid off and economic growth for years to come. But this market turmoil does scare me. There is no magic bullet to fix this mess and Saskatchewan will not be immune. We have not felt the effects of years of continued job losses and negative growth in the States and Central Canada which I believe will happen. We are just starting to enter a time of at least a global recession maybe more for 1-5 years.

  Only a few years ago (04) oil traded at $30 a barrel.

  Potash corp traded at $30 a share just two years ago. The last year or so we have had a commodity bubble, and many analysts from Cramer and others are saying get out now. Buffet said in 06 be wary a commodity bubble.http://seekingalpha.com/article/10162-warren-buffett-warns-on-commodities

  I am not trying to be pessimistic, just looking at reality. What Saskatchewan has going for us, is great. But outside influences will definitely hurt us, how much though, is anyones guess.

• Soil Science
  October 8th, 2008 at 12:24 PM

  Laura,

  I’m concerned that your wording in your post about not purchasing a home in Erindale because of the soil was a little strong. You said “… don’t buy a house in Erindale or anywhere north east of it, because you’ll have foundation issues. (Its sitting in the heavy clay from a glacial lake)”

  You are correct that east and north of sutherland the soils are a clay texture deposited from a glacial lake (glacio-lacustrine deposits). The topography is very flat and the soil very uniform a perfect place for a research farm! However, there are many different kinds of clays and some swell with water while in others the bonds between the clay particles are too strong for swelling to occur. The type of clay is important not just the quantity. The soils in the area are not classified as vertisols which is characterized by large cracks when dry and swelling when wet. I know that is alot of info but I believe it is wrong to say “don’t buy a house in Erindale” when there is alot more too it than that.

  The area I would be more concerned with is Lakewood Suburban Centre and the proposed Rosewood. My guess is that there is a reason they are builing a huge park in one area rather than putting homes. A quick look at google earth will show that that area is a water discharge area with lots of sloughs.

  If you are interested in accurate info about soils in the saskatoon area see http://sis.agr.gc.ca/cansis/publications/sk/sks4/intro.html#sheet2

  MSc in Soil Science

• Cory F.
  October 8th, 2008 at 12:25 PM

  Re: Regina

  So when you say that Regina looks like Saskatoon a year ago, what were the driving forces for the increase in the Saskatoon market that caused the prices to escalate to where they are?

  I’m just wondering because personally I feel Regina will see a pretty stable market for the forseeable future. I am one of those unfortunate souls who is trying to break into the market after having finished my degree and my first round of professional exams in the past 2 years and slowly building a downpayment from my paycheques.

  I’ve been closely following the market for a year or so now and it seems like the inventory level here has risen significantly in the past 6 months. I am friends with several young realtors, all who have told me each month since May that I should “buy now because its starting to take off again”. It really has been stable (in my estimation anyway) so that is why I am skeptical of a rapid run up again like Mr. Duggleby predicted yesterday.

  Unfortunately I have yet to find a realtor in Regina that publishes a blog like this which includes actual stats for the Regina market so I’ve been intently following along on the Saskatoon market. And with the recent comments of Norm and George I was just hoping one of you could elaborate on the similarities, and maybe what to watch for in case a run up in prices is set for Regina so I can recognize it before hand.

  Thanks

• Crikey
  October 8th, 2008 at 12:42 PM

  George,

  “The last year or so we have had a commodity bubble, and many analysts from Cramer and others are saying get out now.”

  That’s got to mean the bottom is in

  Dirk,

  Don’t I recall you saying that you had been banned from a newspaper’s comment section?

  Got insight?

  Norm,

  You offer a fine and balanced view of the housing market and the forces that affect it, and don’t let anyone tell you any differently. You certainly should be proud of your business and this site. As much as we may see things differently sometimes, I learn things from you, and other posters, continually.

  Btw, the coordinated interest rate cut by the central banks led to a prime cut by most of the banks by half a percentage point.

  Banks trim prime but lag BoC cut

  http://tinyurl.com/45r8wp

  Good day, all!

• George
  October 8th, 2008 at 12:56 PM

  Cory F.,

  The average prices in Regina this year have followed the average prices of Saskatoon from last year. It is just a coincidence. This in no way means Regina will see increases in the spring. Each real estate market is localized but also affected from outside influences.

  The driving forces for Saskatoon real estate in the past couple of years were easy cheap credit, low supply, high demand, bidding wars, fear, (of being priced out by real estate industry and media),greed ( speculators, builders, etc.) economic boom of province and city which included good wage growth.

  Going forward, we have credit being ratched up, but hopefully mortgage rates do go down. Supply will remain high so there will not be anymore bidding wars to push prices 5k a month. Many speculators are getting burnt by low demand, and nobody can cash flow a property at the moment. Builders are offering incentives of up to 20k to get rid of growing inventory. Expect more incentives and reduced prices in the coming months from builders. Our economic boom seems to be slowing with lower commodity prices. Add in market turmoil and a good chance of a global recession it does not look like house prices anywhere will go up.

  There may be a spring bounce, but it won’t be in prices, it will be in sales and more listings. There is a wealth of info on this website. Buying a home will be your biggest money and family investment. Good luck.

• Jesse G.
  October 8th, 2008 at 12:58 PM

  I think the wage info is going to be what will force housing prices down. Plain and simple. Everyone SAYS wages are up up up…but when you go out and do a job search you find differently. For instance, everyone says construction trades are WAY up…in my endless hunt for a job, I found this on the homebuilders association website….describing how much trades can make in the many fields to do with construction…check out the wages….

  http://www.homebuilderscareers.com/listing.php

  the Jist is they list most of them as $8-25 an hour with one or 2 exceptions being managers, contractors, etc.

  Is that a viable wage range for someone to afford a place to live?

  my 2 cents

• Mark
  October 8th, 2008 at 1:00 PM

  Cory F.

  I don’t think George was implying that Regina was going to face any more run up going forward, but more a correction like Saskatoon is feeling.

  I live in Regina and watch the market very closely. I don’t think you have to worry about prices rising quickly anytime soon. If they do rise above 250 average, it won’t likely be until next year sometime. I’d watch inventory. We have 1100 houses on the market. If for some reason it drops to 300 by spring, and the financial storm clouds have passed, and our population is still growing, then you might see it move upwards a bit. But that’s a lot of ifs right now. If you get close to having the means, and you don’t think the world is falling into a depression, this winter might not be a terrible time to make a strong low offer on a property you like. High inventory worries sellers, and if a property is around for quite a while, the owners might take a lot less than what they were first asking.

• Norm Fisher
  October 8th, 2008 at 1:01 PM

  Cory,

  I agree with pretty much everything that George said. There are far more differences than similarities. It’s also worth noting that inventory in Regina, while not out of this world, is much higher than it was before we took off for our second run. I don’t think we got to 700 before the end of last year. That will be the thing to watch. Current inventory levels probably mean stability. If it declines significantly, it could be a different story.

  Crikey,

  Thanks. I wonder if mortgage rates will be affected?

  I don’t see a “rapid run-up” and I don’t think that Mike predicted that either. If I were ready to buy and decided to wait in hopes that prices might come down, and they actually crept up 5%, I would probably be sorry. I would also be sorry if I bought and they went down 5%. This is the very tough call that only you can make because at the end of the day you have to pay the bills. I would say that there is no threat of significant increases in the short term.

• George
  October 8th, 2008 at 1:22 PM

  Crikey,

  thanks for the link. I honestly think that commodites have abit of a ways to go yet. Going forward, I expect to see many junior oil, gas, mining companies who rely on credit to fold.

  As for Potash corp and others, these are solid companies with very good income statements. If you bought earlier than two years and are long term, you will do great. If you bought in the last year for short term, a loss in gauranteed, unless you shorted the stock.

  In a recession people will need to buy stuff, but just the necessities. I think companies that provide cheap goods will be ok.

• George
  October 8th, 2008 at 1:31 PM

  Soil Science,

  you got lost in the Regina market talk. Thanks for the post. I had wondered why it may be bad to buy north east of Erindale, but it was just misinformation.

  I do feel it is kinda goofy to have a neighborhood (Rosewood)built on a slough and planners are recommending to have raised basements in fear of flooding. Why not dig a big hole and wait for it to fill with water and build a little Venice there?

• Norm Fisher
  October 8th, 2008 at 4:42 PM

  Cyn_d,

  “How brave are you feeling today? As one who falls in the first-time buyer (beware) category, I am very curious what your take is on the market. I realize you likely have never seen RE in quite this situation before, but with all your experience, what is your gut telling you about the prices?”

  My apologies for the delay in responding to your question. I do intend to answer it, but before I do, let me expand a bit on bookrat’s observation.

  I have, on many occasions, attempted to offer a prediction on where I felt the market was headed. Over the past two years I’ve become more aware of what a fool’s game it really is.

  To prove my point, let’s go back to fall of 2006 when Century 21 predicted increases between “3 and 6 percent” for 2007. Remax chimed in with a 4% price growth forecast. CHMC predicted that prices would increase by 7% over the course of the year. In March of 2007, RBC released their Housing Forecast for 2007 in which they predicted that Saskatchewan house prices would “continue to cool.” By the time the dust settled, we were up about 50%. At some point I realized that the vast majority of the predictions being made were seriously off. In my opinion, Dwight Percy was the only one who came real close when in April of 2007 he predicted that house prices would hit $300K in Saskatoon by the spring of 2008. A large amount of crap was heaped all over Dwight’s head for saying such things. You can’t win if you’re right. You can’t win if you’re wrong.

  Last year, around this time, I learned a valuable lesson that has stuck with me. I was invited to visit a young couple who had moved to Saskatoon from Europe. They are both hard workers and were settled into an apartment. They didn’t have much for savings but really wanted to buy their own home. At the time, I suggested that they might want to wait until spring. I reasoned that it would give them some time to save a little more money, and at that time, I was absolutely convinced that prices would be lower in the spring. Inventory had started to climb at the time and there were seven or eight units for sale in the townhouse complex that interested them most. Thankfully, they chose not to take my advice and by November we had them settled in a brand new unit that they bought for $240,000. By spring, these units were trading in the mid-280’s. One actually topped $290K before things started to change. Prices are now coming down on them but I have my doubts that they’ll be available below $240K again. If there are, it probably won’t be much lower and it probably won’t last for long. I don’t know that, but I have my doubts.

  Take everything that I say and what the economists say with a grain of salt. In all likelihood, most of us will be wrong, at least to some degree.

  I would say that I think the current market provides some pretty good clues as to what we can expect over the short term. Inventory is at an all time high and demand is softer then we’ve seen in several years. Negative economic news is a bit of a catalyst but poor affordability is the root cause of the diminished demand.

  None of us really understand the full extent to which speculation has affected our market. This is a bit of a grey area that could produce some unanticipated surprises over the next year. Are there many people out there who have bought two or three properties in the hopes of turning a profit? Will they panic and attempt to bail? We do know that some 2,000-apartment rental units were approved for condo conversion last year. Total condo sales, year to date are at 963, and that includes a fair number of re-sale units marketed by single unit owners. There is a ton of these units that are still out there and have not come on the market. My sense is that most of the single-family homes which were bought by speculators are either sold or currently on the market. That segment is probably not nearly as bad as the condo market could be. I think that this will lead to a bit of a return to some proper price spreads between apartment condos, town homes and single-family dwellings. Apartments will go down the most. Single-family homes will come down but to a lesser degree. Town homes will be somewhere in between the two.

  Back in December, or January I angrily proclaimed, “If this market rallies again all of the gains that we see through the spring will be lost in a correction which will follow.” I’ve adjusted my thinking a couple of times since then but I’m going to guess that I was probably about right the first time. That would take us back to the $255-$260K range which I think is sustainable. Based on estimated income gains over the past two years we can probably work with those numbers by most measures of affordability. Median income for “couple families” was $76,600 at the close of 2006. I suspect that we’re probably somewhere above $80K at this point. If we manage a 10% increase between 2006 and the end of 2008 ($84,200), a $250,000 average is “affordable.”

  I am convinced that values have already declined 10% since things started to slow down. That might not be apparent from the House Price Survey numbers but you have to keep in mind that these numbers are based on averages across the whole third quarter and don’t necessarily reflect what’s happening by the end of the quarter. While average prices have been a bit all over the place, the median price has been sticky at around $270 over August and September, falling from $285 in July and $298,500 when it peaked in June. I think the sales that I’m looking at on a day-to-day basis support this estimate. In other words, this specific property sold for $270K but it would have sold for $300K in June.

  If you buy my thinking that prices have declined by 10% in three short months you probably have to agree that this is a pretty remarkable correction over a short period of time. It’s taken Calgary and Edmonton nearly a year to shed those kinds of numbers. This suggests that there is some pretty significant downward momentum in our market. I have no doubt that this kind of pressure could carry us back below the $255-$260 mark (momentum will do that), but I think if we get much below $250K our market starts to look reasonably attractive again and demand picks up considerably. If, in the mean time, inventory has thinned out (down to 1,000-1,200 units) it’s possible that prices could start to rise again, hopefully not faster than inflation.

  “My gut” tells me that the “average” could reach $240K through the winter months and work back towards $255-$260 through the spring.

  I see those 800 square foot apartment condos being available in the $140-$150K range. A decent town house will run you $200-$250K. Single-family homes will average around $280K with a decent entry-level east side bungalow being available around $250K. That same home will be available in the far west for around $210K.

  I would also say that “my gut” is based on a number of assumptions. That is not to say that I assume these things will occur, but that most of them will need to occur for these predictions to be reasonably accurate.

  The global economy doesn’t completely go to hell in a hand basket

  Buyers continue to have reasonably good access to credit

  Interest rates don’t increase substantially

  Saskatchewan continues to see some positive migration numbers over the next year or so

  Incomes continue to grow at the rate we’ve been experiencing over the past couple of years (roughly 5% a year)

  We continue to see some growth in jobs in our area

  Vacancy rates remain on the low side

  Current rental rates prove to be sustainable

  Warning: These predictions are my “statistical wild ass guesses.” I wouldn’t recommend taking them to the bank. They are subject to revision as new information comes available.

  Bonus prediction: Further to the earlier discussion about Regina, the average price of a home will be higher in Regina than it is in Saskatoon by the end of 2009. Not huge, but somewhat higher.

• old Calgary boy who loves Saskatoon
  October 8th, 2008 at 4:54 PM

  First Id like to say, Norm I love this blog and Ive been reading it religiously for the last 6 months even while living in calgary.

  In my continued readings of this blog Ive noticed not very many people seem concerened about the end of the 40 year mortgage and the return of at least 5% down payment to buy a house effective Oct 15.

  I personally believe, that along with the booming economy we’ve experienced, a big part of this housing bubble nation wide was caused by the introduction of 0% down and 40 year mortgage introduced a few years ago which made everyone all of a sudden believe they could afford a house worth half a million dollars. (introduction – housing boom) Once they take that away Im predicting the market is going to stall right out. I think this is much the same as when the gov raised the rates in the 80′s to bring down the out of control housing inflation, which worked (a little too well)

  Anyway I see some people are predicting the housing prices are going to go back up again after the new year, but without the main catalyst that formed this boom I dont really see how that could happen.

  I hope this isnt the case as I bought high and so did my neighbors and friends, and would like to see the prices stablize but Im realist not an optimist, and would like to know if anyone has some predictions on what Oct 15 may bring.

• guy_in_regina
  October 8th, 2008 at 5:14 PM

  Thanks for that post, Norm.

• Ringo
  October 8th, 2008 at 5:38 PM

  Calgary boy – you have a good point. I’d just like to mention that when we bought our first home in ’03, the down payment was required also. The bank said it didn’t really matter – we got around that ‘rule’ on our (44K apartment condo – the last one I noticed sell in that building was listed at 179K) place by utilizing their ‘innovative’ product – a cash back mortgage. Are there also going to be no cash back mortgages as of Oct 15th?? I am unaware of the details of the new rules. I’m sure the banks will find new ‘solutions’ so that first time buyers can squeak around the rules in order to buy homes. Just a thought . .

• Norm Fisher
  October 8th, 2008 at 6:41 PM

  Calgary boy,

  There has been some chat about these changes and several people agree with your thinking that it will “stall” the market.

  I agree that 0 down – 40 year mortgages couldn’t have come at a worse time. We really didn’t need to do anything to stimulate real estate sales and this package opened the door for additional (unqualified) buyers at a time that demand was already strong.

  I tend to agree with Ringo that the impact of turning it back will be fairly modest. As she points out, it’s been fairly easy to buy with little money down for quite a few years and brokers have already made it clear to agents that $0 down is still an option. The change from 40 year to 35 years isn’t real significant. A half point interest adjustment has more of an impact on monthly payments than this will (on an average priced home).

  Obviously these changes will impact some people but again, I think it’s fairly marginal. Most of the work I do is with sellers so I don’t recall ever writing an offer with $0 down. I have sold 80 listings since this “innovation” was introduced in late 2006. Off the top of my head, I can’t think of more than two that sold to a $0 down buyer.

  Thanks for the comment. Appreciate you visiting.

• callum
  October 8th, 2008 at 9:03 PM

  Surprised no one mentioned this (unless I missed it above, in that case sorreeee)

  Saskatchewan to lead Canada in economic growth in next few years: RBC report

  http://www.canada.com/saskatoonstarphoenix/story.html?id=5b7d099d-f87a-4d83-b20a-49fcc28ebac1

• Norm Fisher
  October 8th, 2008 at 9:38 PM

  Thanks Callum,

  Appreciate you getting right to the point.

  RBC makes pretty much the same case as the chief economist from the Conference Board.

  Here’s another interesting link sent to me by Jay Thompson, the Phoenix real estate guy. It’s a story about Saskatoon that appeared in the Wall Street Journal today.

  http://online.wsj.com/article/SB122342036252013101.html

• Nick
  October 8th, 2008 at 11:23 PM

  Regina I was surprised by the Potash Corp article in Macleans. A drop wasn’t too surprising, but it makes some pretty good arguments about some weak long term fundamentals for potash.

  Callum there is always some study that says Saskatchewan will lead Canada in growth, always a prediction, in the end, always seems to be Alberta that keeps “widening the gap” economy, surplus or wage wise as I think I heard coined first on this very blog. We should probably stop worrying about predictions, which was a hot point on this blog in months past, and look more at the current situation.

  That said, I think I predicted a 10% drop by Jan 2009, I’d like to down grade that to 20% drop, or $240,000 that was a more fun prediction game (gain or loss). Did anyone write all those down?

• cyn_d
  October 9th, 2008 at 8:16 AM

  Norm,

  Thanks for responding to my question.

  Your integrity shines through the honesty and candor of your post and I think most (if not all) of us value your insight and expertise.

  Having said that, I also think most (if not all) of us have our own opinions on the market direction and won’t hold you accountable either way it turns out.

• Crikey
  October 9th, 2008 at 9:40 AM

  “won’t hold you accountable either way it turns out”

  What??? You’re not responsible for housing prices??

  Well. I’m shocked.

• Roger
  October 9th, 2008 at 12:12 PM

  Jason.

  You are correct in your assessment of the media and the opposition parties stirring the pot and adding to the general unease of the population. But that is what a large segment of the population wants. When the stock and real estate markets were climbing anyone who talked about restraint and prudence was scorned. Now that they are falling, which is natural in all markets, people want a quick fix because instant gratification is the hallmark of today’s society. A quick turnaround isn’t going to happen but many want to listen to politicians tell “fairy tales” and pin blame on someone for their misfortune.

• Jason
  October 9th, 2008 at 12:25 PM

  As a bit of an aside, is anyone else getting very upset at the media and opposition parties saying that Canada is in a severe economic crisis? When we are still posting positive growth, don’t you think that it is very risky for these groups to be touting economic doom and gloom, trying to instill mass hysteria and panic in the public for cheap political gains? Obviously, Canada is going to experience some sort of slowing in because we are tied to a global market, but from listening to the media headlines and some of the rhetoric coming from the opposition, you would swear we are in a worse position than the United States. Like some others on the blog here, I would love to see a correction in the Saskatoon housing market to bring it more in line with local wages, but I don’t think anybody here would want our country to enter a depression-esque recession and I fear that all this “sky is falling” garbage coming from the liberal friendly banks, media, and politicians only serves to harm peoples confidence in the economy. I would even argue that it borderlines on treasonous.

• Crikey
  October 9th, 2008 at 12:29 PM

  You make a good point, Jason: extreme news sells papers, boring news doesn’t. Knowing what kind of economic news you’re looking at helps, though. Please excuse me if you’re aware of this already.

  Economic indicators generally fall into three categories.

  “Leading” indicators indicate which way the economy is headed. Example: Initial Claims for Unemployment (not complete but as current as we can get)

  “Concurrent” indicators show economic changes occurring right now. Examples: Gross Domestic Product, Employment

  “Lagging” indicators reflect past economic events. Examples: Unemployment Rate, Outstanding Commercial and Industrial Loans

  We need to be especially careful when looking at lagging indicators, as they tell us where we were, as opposed to where we are. No one can really tell us where we’re going, but the health of the financial system is a biggie. If credit doesn’t flow, people have a harder time getting loans (which can have huge effects of the economy), and businesses have a tougher time rolling over debt and possibly even making payroll. I’m not sure most of the media is trying to incite panic. I think being so near the Canadian and US elections are having a bit effect: politicians and others love throwing these stats around to heap blame at whatever political party they don’t like.

• guy_in_regina
  October 9th, 2008 at 12:41 PM

  Jason,

  Seems to me the most “depression-esque” talk was coming from Republican law-makers south of the border when they were pushing for the bail-out. Hardly “liberal friendly.”

  “Rhetoric coming from the Opposition” eh?

  I’d say there’s plenty of rhetoric being thrown around from all sides.

  Treason, eh? Things are turbulent, people are worried – many have seen their investments decimated; their retirement’s pushed back. Harper’s seemingly lax approach got him in a bit of hot water with these folks. The Opposition sensed that and added their weight to the fray. Seems to me that the Conservatives were caught a little off gaurd with the depth of the current situation, and have been on the defensive because of it.

  I wonder what you would have us do – tell the media and opposition what they can and can’t say? You know, there are countries where that happens – not the nicest places to live.

  When you say “some sort of slowing,” I’m assuming you’re talking about GDP? Because, in terms of the TSX, we’ve seen a major retraction – not a mere slowing of growth.

  All the best.

• guy_in_regina
  October 9th, 2008 at 12:53 PM

  From:

  http://www.cbc.ca/news/canadavotes/story/2008/10/09/flaherty-economy.html

  “Finance Minister Jim Flaherty acknowledged on Thursday that the “unprecedented” economic turmoil is “getting worse” while repeating his recent warnings that Canada could be hit with international spillover sparked from the U.S. credit market collapse.”

  “Flaherty sought to reassure Canadians that the government understands their growing fears and that their financial system is “well-positioned” to weather the global turmoil. While Canada is better placed than other economies, we are not immune,” Flaherty said

  The finance minister said he personally shares the growing concerns of Canadians seeing dramatic losses in their savings and retirement investments, as well as their fears over their job security and ability to keep their homes.

  “Let me reassure Canadians, our government has been acting to steer our economy through these challenging times,” he said.

  Flaherty also said he has “absolutely no concern” about the health of Canada’s financial institutions and added the government was not looking at any plan to bail out banks, as have other countries such as Britain, Ireland and Iceland.

  He’s kinda squirming on this one.

  I think Dion has been calling this a “financial crisis.”

• Crikey
  October 9th, 2008 at 1:03 PM

  Good post, guy_in_regina. Trillions of dollars have been lost from retirement funds in North America- hardly “fear-mongering”, I’d say. Lucky for me I have about 25-30 years until retirement. Meh. Now I’m depressed.

  And now, for a beacon of hope:

  Canadian banks are tops.

  http://tinyurl.com/3q8sgk

  “Reuters reported on Thursday that Canada’s banking system is considered to be the world’s soundest, based on the latest Global Competitiveness report from the World Economic Forum.”

• George
  October 9th, 2008 at 1:41 PM

  Norm,

  I have not seen a post that long for months from you. Well thought out for a “wild ass guess”:)

  A couple of points I would like to add about speculators is that one of the reasons why there will not be many new single family homes sold by speculators going forward is the 50k mortgage rule. I think this has turned off many. And I did not know there were 2 thousand condo conversions with only 963 sold. Not all will sell and there is the fix to the rental problem.

  As for average and median prices I would go lower. I don’t agree with the 3x income for a house. That was fine 10-15 years ago but not now. True inflation (not CPI) has risen higher than incomes over the last decade. Money left over after housing expenditures buys you less gas, groceries, clothes etc than it used to. The banks GDS and TDS is seriously outdated.

  I have done this before for anybody that cares. This is not my situation but I have an average house on the east side, so we will use the bills I have. Using the average price of 250,000 over 25 years at 6% ( five year term) with 12500 down. This is two people, no kids, with $400 loan.

  Using the average household income of $84,000/year is about a net income of $4600/month.

  Mortgage payment, insurance, proporty taxes takes us to $1859

  saskenergy $100

  utilities $125

  phone/cbl/internet $125

  cell phones $100

  so far we are at $2309

  2 vehicles ins/gas/main $600

  food include going out $500

  loan of $400

  miscellaneous $500

  takes us to $4309

  This couple are now left with about $300/month cushion.

  Can a couple who buy 250,000 house with a household income of 84,000 make ends meet? Definitely, would I recommend it? definitely not, unless they enjoy being house poor.

  In this example, I did not factor in household furnishings, reno’s of a older house or completion of a new house, landscaping, deck, etc. Nevermind a car breakdown. And these things are not cheap.

  They should save each month. Do they like to take a trip each year?. How about coffee, drinks or sports?

  What happens if interest rates rise? One of them loses a job or has to take a lower paying job?

  And the big whammy is that when they start having kids, kids are a huge expense and that will increase while income may decrease.

  I know that these and other questions were not on buyers minds the last year. The only thing was being priced out, but it was not there fault. I feel sorry for them, but I don’t blame them.

  I believe if buyers go 2.5 x income with no debt, this will give them the cushion they need to save or pay for unexpected costs.

  That is why I believe Saskatoon’s average price should be around 210,000 right now. I don’t think it will go that low but outside influences ( markets) may push it even lower.

  That is my “wild ass guess”:)

• Norm Fisher
  October 9th, 2008 at 2:12 PM

  George,

  Interesting.

  When David Wolff of Merrill Lynch was interviewed following his “overvalued” report he also said that the 3x income metric was probably “dated.” In his opinion, the average Canadian could probably spend more. He said interest rates were much higher when this measure was developed.

  I think you could probably revisit your income numbers as well. I would assume, based on current trends that the majority of those “households” would be producing $84,000 through two incomes. Assuming that they’re more or less equal you’d have about an additional $926 a month to work with.

• George
  October 9th, 2008 at 2:16 PM

  Oct. land sale for oil, gas rights in Saskatchewan pushes revenue to $1B mark

  http://finance.sympatico.msn.ca/investing/news/businessnews/article.aspx?cp-documentid=11035603

  With TSX about 9,500 and the Dow about 8,500 down from the peaks of 15,000 and 14,000 respectively, these are huge losses in a short time.

  Maybe a person should have invested in Saskatoon real estate? sure, it is highly illiquid and we will at least see a 20% drop from the peak

  But unlike a stock you can live in it, or burn it to collect insurance:)

  It does seem like stocks are more volatile than real estate right now. I did not think this would happen.

• Drake
  October 9th, 2008 at 2:21 PM

  George,

  First point. With all due respect, I think some of your numbers are a bit high. For starters, you’re quite a bit off on your after-tax income. Assuming a split of (or close to) $42,000/each per year, I get a total (net) monthly income of closer to $5,525. And this excludes any consideration for dependents, etc. (and no deductions for work or commission expenses, under which vehicles, cel phones and possibly home-office-related expenses would apply).

  With interest rates being (recently) reduced 0.5%, I think you can get a 5-year variable rate mortgage for closer to 4.0% (it was around 4.25% prior to the rate reduction). I think $1,650-$1,700 with your mortgage payment, insurance and property taxes is propbably more realistic. Not sure where the loan for $400 (student loans?) and miscellaneous $500 comes into play, but that’s close to a $1,000 difference. All things considered, I think it’s closer to about $2,000 in disposable income before things like maintenance, child care, miscellaneous expenses, RRSPs, student loans, vacation, etc. (if any of those apply, which they certainly could in some instances — but not in all).

  Second point. I also think you’re off (and perhaps too optimistic?) on the average/medium home price, and the simple reason for this is we have not seen *any* decline in construction costs despite a slowdown in new housing starts. Nor have land prices seen any reduction. The reality is that used home prices are going to remain slightly less (but still comparable and tied to) new housing construction.

  I’m going to be a bit of a bear here (and less conservative than Norm) and predict a correction by the end of 2009 more in-line with $275,000-$280,000.

• Drake
  October 9th, 2008 at 2:36 PM

  Norm, thanks (as always) for the continued updates and information. I did want to add one fairly important aspect that has not been covered or mentioned by the media (at all) with respect to the Alberta and BC housing markets (and to a lesser degree, the Saskatchewan market), and that is the direct effect the US housing market decline has had on buyers and investors in these regions.

  With prices in the USA being so unbelievably low and attractive, this has lured many prospective national (and international) buyers to markets in California, Arizona and Florida (in particular) for vacation properties, investment, etc.

  However, at some point the US housing market is going to correct, and when it does a lot of those buyers are going to once again be looking at properties in Alberta and BC (which may be relatively comparable or cheaper at that point).

  And not only that, but the anticipated health care issues facing the US in the next decade is going to dissuade a lot of baby boomers (who will be looking for universal and accessible health care as their first priority) from looking at the US as any kind of permanent or semi-permanent residence.

  Norm, I know it’s early, but are we seeing an increase or decrease in the number of (net) MLS listings this week? (guessing the latter)

• Bookrat
  October 9th, 2008 at 2:40 PM

  @guy_in_regina:

  “Seems to me that the Conservatives were caught a little off gaurd …”

  MHO is that they knew EXACTLY what was coming, and had no desire to be sitting in with a minority government when it hit.

  Intelligent people have seen this coming for a long time and known that it would be bad… and whatever I think of Harper’s policies or personal style, I do respect his intelligence. It was gonna hit, and it was gonna hurt; do you think that the fact that the election is called for the day BEFORE the 0/40 mortgage ends was a coincidence?

  Reasonable politicos would conclude, however, that The Powers That Be would not ‘let’ anything happen immediately before a US election, which is why Harper broke the law — the law about having election cycles every four years that he himself had campaigned on and put on the books — and broke parliament on the flimsiest of excuses to hold a simulcast election with the USA.

• Bookrat
  October 9th, 2008 at 2:48 PM

  @Drake:

  “With interest rates being (recently) reduced 0.5%, I think you can get a 5-year variable rate mortgage for closer to 4.0% (it was around 4.25% prior to the rate reduction).”

  You’d think so, but you’d be wrong. Variable rates have been floating at Prime – .5% for a few years now… this is no longer the case. The absolute *best* you’re going to find now is straight prime, and more common is Prime + .5 or even Prime+.75

  This all changed suddenly and dramatically within the last month or so. ING’s mortgage variable mortgage rate was 4.7 in late August… and 5.75 when I looked yesterday. BEST rate you could find there was 5.19 on a 1-year fixed.

  Banks aren’t lending. That’s part of what’s causing the crisis.

• George
  October 9th, 2008 at 2:52 PM

  Norm,

  the numbers I used were guesses. Last year the wife made 46,000/yr just under 4000/month with about 2500 net income per month, so I don’t think I would be out by too much, though.

  With 2.5 x income, this gives people a cushion for unexpected events in life, raise in interest rates, job loss, children, house repairs, money to enjoy life etc. One thing I failed to mention, is can they handle the possiblity of being underwater with their mortgage for a few years and not be able to borrow from their house to finance repairs etc?

  I believe there is no need to be maxed to the last penny each month and to be house poor for years.

  My numbers are probably off for many people. Many people have huge student loans, credit card, car loans, lines of credit that probably takes them higher than $400 a month in loan payments. For others they may have no loans or they don’t like going out, or they don’t want children.

  But it does give people an idea that there is more money to be spent other than a mortgage payment when buying a house.

  Each household is different in their spending habits, so they can adjust accordingly, but the questions I put out there are justified as they were some of the questions the wife and I came up with before we bought a few years ago.

• George
  October 9th, 2008 at 3:00 PM

  ok, I found an old pay stub from the wife. And the gross pay is $1832.88 (44K) and net pay is $1195.29. Union job and a pension plan (250 a month)which I should have stated before. So I was pretty darn close.

• Norm Fisher
  October 9th, 2008 at 3:09 PM

  George,

  Looking back here, my numbers probably aren’t accurate either. Using the Ernst and Young tax calculator for 2008 a $42,000 income should produce a net of $33,159 but I’m thinking it probably doesn’t account for CPP and EI premiums which could amount to an additional $2,500 on each of the two incomes. Still, that puts an additional $500 per month in the kitty.

  “I believe there is no need to be maxed to the last penny each month and to be house poor for years.”

  I don’t disagree with that, but we both know that this couple won’t make their decisions on based on our beliefs about personal finance. That’s why the 35 year mortgage will continue to be utilized and probably bring those payments down by another couple of hundred bucks.

  You do raise some excellent points.

  Drake,

  Actives are pretty much even at this point. I expect they’ll come in slightly lower by the weekend, but probably not by much.

• Jesse G.
  October 9th, 2008 at 3:20 PM

  For income crunching…

  Gross I get $3734 a month. Net? $2474.

• George
  October 9th, 2008 at 3:21 PM

  Norm,

  For some reason I forgot that people don’t have to go to 25 year mortgage, 35 year mortgages will still be available. Maybe the drop for demand won’t be as big as some think. The difference in 35 and 40 year monthly payments is very little.

• Norm Fisher
  October 9th, 2008 at 3:39 PM

  Today’s interest rates from TMG.

  6 mos. closed – 4.75%

  1 yr. closed – 4.49%

  2 yr. closed – 5.29%

  3 yr. closed – 5.35%

  4 yr. closed – 5.39%

  5 yr. closed – 5.4%

  Closed variable rate at prime – 4.5%

  Open variable rate at prime + 1 – 5.5%

  Huge premiums for an open mortgage. One year at 8.4%.

  From their website – “Variable rates spike.”

  http://www.mortgagegrp.com/site/SK/news.asp?id=166

• Drake
  October 9th, 2008 at 4:19 PM

  Bookrat, Bank of Canada rates just dropped 50 points yesterday and I suspect this has translated into a (small) reduction on rates at banks today (or will in the next few days). I see by Norm’s post they have… so a closed rate is around 4.5% (I wasn’t that far off).

  I know that banks in the US aren’t lending anywhere near what they used to. Then again, around that time even your dog could qualify for a sub-prime mortgage…

  But aside from raising the rates on open mortgages and virtually eliminating home equity lines of credit (or drastically altering the % ratio), I wasn’t aware that it had suddenly become increasingly difficult to acquire mortgages at any Canadian Bank? Aside from the higher rates on open mortgages, did the criteria change?

  ……….

  Norm, unrelated. Your data (or estimate) on the number of vacant MLS listings would seem to indicate that approximately 1/3 are somewhat speculative in nature (an out-of-province owner, local speculator, seller between homes or new construction).

  I would estimate that fully another 1/3 are occupied, somewhat (or completely) speculative in nature, and a combination of simply way over-priced and/or well… crap (either the house itself or the location). I’ll include private listings in this, too. The University area has lots of examples (crap). So does Briarwood (over-priced). And I’m not even going to touch on certain areas on the West side (I think those speak for themselves).

  So that leaves about 600 legitimate listings of which people may actively be looking at. Makes complete sense to me why housing sales are down. I don’t think it’s just a question of affordability (arguably that is a big factor), I think it has a lot to do with available inventory and more specifically… *what’s* available. While there may be a lot too choose from, the problem is that a lot of it is seriously questionable from the very outset.

• Drake
  October 9th, 2008 at 4:31 PM

  Norm, last post to bother you with today. I was curious as to your (or the groups) thoughts on the following:

  1. Land title transfer taxes. BC and the city of Toronto have these (not sure about anywhere else). Usually ranges between 1-2% of the final selling price. Certainly seems designed to provide a disincentive to speculate, and one could certainly make local residents exempt if similarly adopted in SK.

  2. Real estate listing fees on MLS, as in an actual fee to list, cancel prematurely or cancel and re-list your house. If there was an actual $ cost (even a small one) I can’t help but wonder how many houses would not be listed. A few people have also mentioned the inability to track days on market and price changes with one tactic in particular, and that would certainly solve that to a certain degree. Fees would be deductible from any final commission, so it seems like a win-win for both home owner and agent.

• George
  October 9th, 2008 at 4:39 PM

  Drake,

  a few reasons why sales are down.

  The pool of buyers is dwindling. Few investors and speculators getting in right now. First time buyers are still priced out or are waiting for prices to come down. Trade up buyers has also slowed.

  Market pyscology is starting to change. Even with price reductions there are less people buying now than at the peak in spring. This is a common theme that has affected the worlwide housing bubble.

  Prices are better than spring but the would be buyers perception of the market is not. Not too many people want to buy a house, then have the possibility of their downpayment wiped out in a few months.

  As for inventory, there is tonnes out there, good and bad. Most are overpriced, but that does not mean a buyer can not strike a deal with a seller that both feel is beneficial.

• Norm Fisher
  October 9th, 2008 at 5:04 PM

  Drake,

  No land transfer tax exists in Saskatchewan at this time, though land registration and mortgage registration fees can amount to a pretty tidy sum.

  Generally, agents would be opposed to just about anything that would increase the cost of home ownership, or the cost of selling.

  The primary responsibility of SRAR is to run our MLS system. Each agent pays an annual due, a monthly membership fee and a “small” listing fee to put a property on the market. As SRAR is a member run organization, one of its mandates is to work in the interest of its membership. I think it would be difficult to sell any idea which increased the cost of doing business.

  It’s pretty easy to get a few hundred dollars invested in a listing before you open the door for a showing.

  Every listing, even those which are “crap” are marketable at the proper price. If this carries on much longer agents will get better at saying “no thank you” to properties which just aren’t marketable.

  I spoke with the executive officer at our board yesterday about fixing our system so the cumulative days on the market can be tracked on listings which are cancelled and re-listed. They are looking into it and I’m hopeful that can be accomplished.

• jo
  October 9th, 2008 at 8:34 PM

  To all that think that Saskaboom is overpriced, you are wrong. We have an economy that is envy of the nation. We will see a minor correction, but not what Kelowna will experience.

  http://www.greaterfool.ca/2008/10/09/crashing-in-kelowna/#comments

• Norm Fisher
  October 9th, 2008 at 9:55 PM

  For crying out loud!

  “Canadian government assuming “certain” mortgages.”

  I could swear that I read that Canadian mortgage defaults are very low. Something like .2%.

  It would be nice if we could get all of the bad news out on the table at once.

• Crikey
  October 9th, 2008 at 9:57 PM

  Ahh, the bulls are aptly named tonight….

  Ottawa admits it must act on the economy

  http://tinyurl.com/5xrxqb

  “OTTAWA, RICHMOND, B.C. and TORONTO — The federal government is moving to backstop the Canadian banks’ capacity to lend money in an acknowledgment that not even the country’s sturdy banking system is immune to the global financial crisis.

  A plan originally earmarked for Friday morning would see the government assume some mortgages currently held by the banks by giving them to the Canadian Mortgage and Housing Corp., a Crown corporation. In turn, the banks might receive CMHC paper – possibly bonds – against which they could use as collateral for their own loans from other banks.

  In recent weeks, the big banks have faced a sharp rise in the cost of borrowing money in international markets to cover Canadian mortgages – a situation that puts them at risk of losing ever-increasing amounts of money on one of their core businesses.”

  Canadian government assuming “certain” mortgages. I definitely do not like where this is heading.

• Crikey
  October 9th, 2008 at 10:22 PM

  Norm,

  I don’t have enough information about the plan to comment on it, but it looks like it’s a liquidity issue. Assuming mortgages may merely be a way of getting the banks the liquidity they need to keep lending. I think details of the plan are being released tomorrow morning.

  This link is to the Department of Truth’s (cough), er, Finance’s website:

  http://tinyurl.com/4k62qb

• brt500
  October 10th, 2008 at 12:13 AM

  “You’d think so, but you’d be wrong. Variable rates have been floating at Prime – .5% for a few years now… this is no longer the case. The absolute *best* you’re going to find now is straight prime, and more common is Prime + .5 or even Prime+.75″

  Really?? I got prime – 0.75% on a property that cleared in February 2008. A family member was offered prime – 0.5% in June 2008. I think it’s possible to do better than that . . .

• shasindra
  October 10th, 2008 at 5:17 AM

  Had to laugh at this. Is there a rule somewhere that every single RE piece has to have this sentence/sentiment (“It’s different here/this time”) embedded somewhere in the text?

• Norm Fisher
  October 10th, 2008 at 7:26 AM

  The story I referenced above from the website of the Mortgage Group says, “There are a handful of lenders still offering better than prime.” It also implies that they won’t likely be available for long and suggests that future variable rate mortgages will likely be prime, plus.

• Benji
  October 10th, 2008 at 8:45 AM

  brt500

  Think you could get those rates TODAY?

• Pungo
  October 10th, 2008 at 11:41 AM

  Regarding rates: on a variable mortgage I just got three weeks ago, I got prime -0.2%. And that is actually higher than it could have been because it’s blended with a previous fixed mortgage that I had, and interest rates have dropped since then. I renew next spring.

• brt500
  October 10th, 2008 at 11:55 AM

  Benji,

  I dunno, I’m not currently looking! From what everyone else is saying though, probably not. However, Bookrat’s statement that they’ve been floating at prime – 0.5% for a few years is not consistent with my experience. In any case, I’m happy to have gotten brand new 5 year terms at that rate.

• Norm Fisher
  October 10th, 2008 at 1:56 PM

  National Bank is offering prime -.25% today on their variable product. Everyone else is prime +.75% or greater.

  CIBC and MCAP are both out of the variable rate mortgage business. Not even an option at this time.

• Jim
  October 17th, 2008 at 3:23 PM

  Gilbert,

  If you accept the job at the U of S, a place in Arbor Creek will be only a 10-15 minutes drive to U of S. I live in the neighborhood and go to U of S. It is a very nice neighborhood and you would love living here!!!

  I do not actually live in Arbor Creek, I am just trying to dump the investment properties I foolishly bought at peak demand by hyping my suburban holdings by hyping up the area. There is an empty field across the street with just as good a location as my places which haven’t even had an offer in months. It is sad.

  cheers

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