Saskatchewan income growth: the good news and the bad news
Statistics Canada’s latest income report contains some good news for the province. Saskatchewan led the country for overall income growth seeing average weekly earnings increase by 5.4%, compared to the 3.1% growth experienced nationally. Average weekly earnings in the province rose to $742.62 in December of 2007, from $704.79 in December of 2006. Saskatchewan also saw one of the largest decreases in Employment Insurance recipients.
If you’re looking for the negative nugget in this story, you could point to the fact that average weekly incomes in Saskatchewan still lag behind the national average of $782.02 and well below Alberta, the province we seem desperate to become where the average weekly income is $860.31.
Hopefully with the momentum that Saskatchewan seems to have 2008 will be the year that incomes catch up with the rest of the country.
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Norm Fisher
Royal LePage Saskatoon Real Estate
18 comments so far. We'd love to hear your thoughts.
May 19th, 2009 at 4:11 PM
I’m interested to see the next affordability study. My feeling is it won’t be pretty given a 5.4% income growth and 75% increase in housing. House prices cheaper than calgary, obviously… is it more affordable to live in saskatoon… I honestly have no idea.
J.
May 19th, 2009 at 4:12 PM
Thanks guys. After a long day of meetings, I was trying to get caught up on yesterday’s comments. Somehow I managed to click the delete key for this post, and even got through the “are you sure?” warning before I even realized what I had done.
Johny,
The 2008 Demographia Affordability survey (based on data through Q3/07) showed pretty serious deterioration in Saskatoon but still much better than Calgary.
Median house here costs 3.5 times median income. Jumps to 4.8 in Calgary.
It seems to me that prices in the two markets have been moving in opposite directions over Q4 and Q1 of 08 and I suspect that we’ll see a smaller difference between the two markets as new information comes in. That said, I believe that I heard prices are starting to rebound in Calgary. At least there was a “average price” increase in January.
May 19th, 2009 at 4:12 PM
My point exactly. Saskatoon has made some pretty big leaps ($275K avg house price last week???? Ridiculous) since Q3 2007 and Calgary has made some ugly dips.
J.
May 19th, 2009 at 4:12 PM
Norm,
I have been watching Calgary a bit, even though inventory has increased, the average price for SFH has gone up as well.
Dec. 444k
Jan. 455k
Feb. 465k so far in Feb.
Here is a good website for Calgary stats.
http://findcalgary.ca/
May 19th, 2009 at 4:13 PM
That is “single family home”, not including condos. Norm, any idea what avg SP of a single family home is for saskatoon right now, not including condos?
J.
May 19th, 2009 at 4:13 PM
George, Johnny;
In the face of exploding inventories here in Calgary the increase in the average price seems to defy economic fundamentals. There is some thinking that entry level buyers have been mostly shut out. With that market almost gone the price level of houses moving has shifted upward creating a higher average. I don’t think we are seeing across the board appreciation of house prices in Calgary.
Everyone seems to be waiting for something to happen (ie) the return of buyers in the spring.
May 19th, 2009 at 4:13 PM
Johny,
Even though the average residential price has not really moved from June 07 (around 250k) the gap between house and condo average price has widened.
Last months average for Saskatoon was 284k for a house. While a condo was 213k. I would expect this trend to continue this month and the rest of spring. Looking at the numbers I would guess 290k for Feb. for a SFH here.
May 19th, 2009 at 4:14 PM
Johny,
Another thing to keep in mind is that while house prices have appreciated significantly in Saskatoon, pre-boom (a little over a year ago) they were at rock bottom. Based on what I bought my house for versus the owners before me, I calculate their land value at purchase to be $0-10k… my house price hasn’t changed but my land is now valued at about $100k.
So can we expect wages to increase by a huge percent such that we had the same affordability as before (land worth $0 so its the lowest prices in the country). I would say no… Saskatoon’s affordibility will never be that good again.
May 19th, 2009 at 4:14 PM
Ken; George,
Interesting obersvations about Calgary. I wonder how high prices can climb there – I know they’re beyond first time homeonwners now and my gut tells me that some day that bubble has to burst.
May 19th, 2009 at 4:15 PM
Doug,
What your describing is inflation, not the result of us being too cheap before everyone noticed. Inflationary markets do not win long run. To think that this is just the way things are now isn’t wise. Affordability isn’t simply an antiquated paradigm that grandparents will be telling their grandchildren about, it’s a reality that the market will inevitably correct. That’s the beauty of the same free market that everyone points to when arguing against those who’ve been left behind by the profiteers (general term, not meant derogatorily)
J.
May 19th, 2009 at 4:15 PM
Johny,
A small part of what I’m talking about is inflation – more to the core of my post is the real value of land. That’s what we’re really talking about is land – replacement values of houses may be increasing a little with increased materials/labor costs but its the land thats really appreciating.
I bought my own land for about 80k (I rounded up earlier) based on the replacement value of my house. I know what the previous owners bought the house for three years ago, and assuming the replacement value of the house hasn’t changed much – they paid less than 10k for the land.
I’m not suggesting that people accept the prices we have today and don’t have a value in my mind as to what land should be valued at. But 10K IS cheap considering just the costs to service a new lot! Maybe mine is a unique case – Norm, can you add any insight on what average land prices were a few years ago?
May 19th, 2009 at 4:15 PM
“What your describing is inflation, not the result of us being too cheap before everyone noticed.”
Johny,
Yes, Saskatoon was cheap and now it’s not. Seems like pretty infallible logic to me.
May 19th, 2009 at 4:15 PM
Doug,
I think it’s fair to say that a lot is double what it was four years ago.
Johny,
I can’t make any sense out the “affordability” picture. I’m having some real trouble understanding how prices are sustainable given the rapid change. Then I look at the Demographia study and note that we’re 77th out of the 227 markets surveyed. So the majority of them are in far worse shape than Saskatoon where affordability is concerned. One can’t help but wonder if these “affordability” measures are somehow flawed. How are people affording these unaffordable homes?
May 19th, 2009 at 4:16 PM
I think there is some really creative banking practices going on for people to afford some of these prices. maybe we won’t hear about it for a while, (sub prime loan anyone?) like how it festered in the U.S. before catching up with everyone there. 40 year mortgages? so I guess some people will be working until they are 80 years old before their home is paid for. I wonder if people in the U.S. ever thought their homes would depreciate as much as they have and continue to do so. Now with our economies so closely tied to each other who is to say the same won’t happen here?
May 19th, 2009 at 4:16 PM
Thanks Dana.
I can’t disagree that 40 year mortgages have the potential to be problematic. Equity gains come extremely slow so if a market ever turns and prices fall then it can be difficult to get out.
I’m led to believe that Canadian lending practices are not nearly as bad as they’ve been in the US. By June of last year, over 20% of US mortgages were sub-prime. Only 5% in Canada. Most of the really kinky stuff is orchestrated by private lenders and the major banks still follow similar lending criteria to what they’ve been doing for years. You still have to produce some kind of a job verification, a statement of income and meet set debt service levels to qualify here (at least with the mainstream lenders. A broker can probably arrange for less stringent requirements elsewhere).
The Ninja mortgage (no income, no job) isn’t so popular here.
May 19th, 2009 at 4:16 PM
Captcha: “company fireworks”
As I have had it explained to me, it is just an amortization period. That being said, it also predetermines how much interest you pay.
Realistically, if I am EVER in a position to pay extra on my house, I forsee it being enough to really take a chunk out. I’d rather keep my head month to month and be able to afford utilities in the interim *fingers crossed*.
What obviously bothers me – as we are all familiar with – is that people have to take out these extremely high loans and it goes on without a whisper. Really, people talk about it and it creates a fair bit of chatter. But nobody in government has said “whoa whoa whoa, okay…What?” Those bodies exist not only to regulate but also protect people from pitfalls.
It will be interesting to see where Canada goes with this as its new non-interventionist feelings continue to grow out of control.
They either force the banks to lighten up the mortgages out there, force increases in wages or they let things finish converting into a “houses only for the rich” economy.
I don’t care either way. I pay $200 less in mortgage than I did in rent. If I rented for the rest of my life I couldn’t get a better deal.25, 30 or 40 years. Like I said, if I’m in a position to do something about the big number, it’ll be enough that it won’t matter whether I’m paying a total of 50k interest or 30k interest in the end.
May 19th, 2009 at 4:17 PM
Alex,
I believe it’s the government the made long terms possible. Lending is legislated by some “act” in Canada.
Good point that you raise about “amortization periods” and you are correct that there isn’t anything that would prevent a buyer from retiring the mortgage sooner, except lack of will, or money. The key there is to make a commitment and a plan. For instance, you mention that your mortgage payment is $200 less than rent. Perhaps you haven’t included other expenses like property taxes, etc. in that number, but if you had, paying that $200 a month against principal would have a huge impact on the amortization period. I know that you know that, but for the benefit of anyone who hasn’t given it much thought, you don’t need to take 40 years to pay off a 40 year mortgage.
May 19th, 2009 at 4:18 PM
Granted the mortgage is less than the rent, the property taxes certainly do factor in. It’s a heavy price tag at that!
I’m sure I’ll be cut some slack on my income taxes due to my situation in the end, but still – wow!
Good thing I already have it all saved up
Factoring in any extra costs I rented a crappy home for more (so that means, heat, gas and water).
I also consider any additional costs just part of owning as opposed to renting. Because I have modest expectations in the short, medium and long term, nothing really comes as a surprise.
Again, it won’t be long if not already where I’m at most $100 off from renting a place with my current costs. They have turned out to be quite reasonable. Despite being numerous.
As far as the government legislating lending, I think we can see that there is as always a lag time with the government that needs to be addressed.
Hey, I may be a fan of the government but I’ve always got something to say about what it is doing and how it can improve! All the freedom junkies can take solace in that.