“Norm I want to buy my mom a condo in Saskatoon, will you help me when the time comes?”

Thanks. As long as it’s actually for your mother and not some evil plan to invest.

You know where to find me.

I buy cash-flowing rental properties. My business plan assumes only inflation-based increases of 5-6% per year (the REAL inflation rate). Rates of return larger than that are gravy, lower than that are planned for.

Norm I want to buy my mom a condo in Saskatoon, will you help me when the time comes?

However, I have to disagree on one point: no slow down this summer for Saskatoon prices.

Current inventory levels are higher than they’ve been since about October, 2005. That said, they had been declining to ridiculously low levels since then. From that point backwards, normal levels of inventory would be 600-900 listings, and even at those levels prices would be rising, though much more moderately.

I do see a trend towards higher inventory levels and there’s no doubt that demand is dropping off. This is likely to lead to a more stable price environment and it’s not impossible that prices could drop depending on how much of a spread develops between demand and the supply.

I feel that it’s unlikely that prices will push much higher in the short term, but I also felt very confident of that last fall. Many of my colleagues were feeling the same way. “It’s not even possible that what happened in 2007 could happen again,” was the most common thinking. Oops!

It’s hard for me to offer you the re-assurance you’re looking for. I can’t confidently say that “you’ll be fine” on resale if you buy now. If you were sitting in front of me ready to sign an offer, I’d probably say something similar to what I asked my most recent buyer client, “You realize that you may be buying at the peak?”

If I were you, I don’t think I’d be in a big rush right now. I’m inclined to think that things are likely to improve some for buyers in the months ahead. The current market is showing signs of weakness given the fact that it’s spring. I don’t think that the bottom is going to fall out but if the current trend continues it’s possible that there may actually be some “deals” out there as we move into the summer months.

You are probably living under the most affordable conditions which you will ever live in. This is actually much cooler than it seems right now. Why not start paying your 40 year mortgage, property taxes, utilities, etc (minus whatever you might have to pay mom and dad) into an investment account? You’ll have an opportunity to see what it feels like to carry those bills, yet you’ll have an easy out if it’s not manageable. If it works for you, you’ll build equity pretty darned quickly.

If you do buy, be certain that you want to be in Saskatoon for at least five years. Buy something that will meet your needs for at least that period of time. Think ahead and be sure that you could afford to renew your mortgage a few points higher than today’s rates.

Good luck.

I can tell you a bit of what I’ve seen in the past year in Calgary:

I have noticed that there is a massive excess inventory there and “for sale: signs seem to be on 1 out of 5 people’s lawns in some neighborhoods.

I know a couple who just bought a gorgeous new 1900 sq foot two-story home from a builder for $410K with $50K of upgrades thrown in to make the sale.

(Seems like a steal of a deal compared to Saskatoon prices right now.)

I also have a friend there who has mentioned that identical houses to hers are selling at at least 50K below what she paid for hers.

Prices are not going up there, from any angle I have seen.

Thanks for that. I mentioned in another post that my former colleague, now working in Calgary has a friend who moved into a new home out there last summer. He says that another one just like it, directly across the street just sold for $140K less than his friend paid last year.

He also tells me that there is no end to the “entry-level” homes which are for sale right now.

Appreciate your point of view.

I agree that even though the average or median selling price in Calgary is going up the value of a home is actually going down.

I sold my starter home in Calgary last February. It was lucky timing because it was one of only a handful in our neighbourhood for sale and it sold within a few hours for full asking. If the family that bought our home were to sell it today it would be listed for about 25k less and would more than likely be on the market for weeks or possibly months.

We’ll have to agree to disagree on affordability.

Let’s get this straight, I am comparing vancouver to saskatoon but only on the affordability issue. People are making all kinds of claims and purporting numerous arguments for why Saskatoon is / isn’t overpriced, affordability being just 1 of those numerous arguments and that is the only argument I am addressing here. Basically I’m decomposing the argument down to 1 item at a time as it’s the only way to find truth in the whole mess. From that viewpoint, I think that Saskatoon is not maxed out and as such this should not be used as an argument. There are many other fine arguments for why Saskatoon is overpriced, just not affordability.

At the time, condos were up substantially more than houses. I think we’ve seen that gap close a fair bit over the last six months. I was also concerned about a flood of conversion units coming back onto the market but so far most of those units have been sold. It will be interesting to see what happens if inventory continues to grow.

edmontonhomeowner,

Ouch indeed! What are you hearing about values in Calgary? Averages and median prices seem to suggest rising values but I’m hearing a different story from agents.

Our house was appraised at $459,900 in May 2007. It sold recently for $400,000.

That’s more than a 10% decrease in price. Ouch!!

I remember a while back, you mentioned that you see the condo market to be the most vulnerable. Do you the number of condos purchased going down? Do you still feel this way?

Thanks

Thanks. Not sure why I wouldn’t have thought of that myself since I have Bob in my blogroll.

Carl,

23.

I am just curious, of the 82 properties that sold last week how many were condos?

Thanks

http://www.bobtruman.com/SFH_Monthly_Summaries/page_1869385.html

Monthly average, median, DOM, etc.

Also http://www.creb.com is the Calgary Realestate Association.

Thanks. I’ve heard that activity remains strong in upper end housing but that properties at the entry level is very weak. This could also contribute to a somewhat skewed average. I have emailed a colleague to see if I can get my hand on some actual numbers and I’ll post them here if he’s able to provide them.

I don’t know. I have a friend who moved to Calgary eight or nine months ago. He tells me his house is worth less than he paid for it then.

A few bloggers on here keep saying the average sale price in Calgary continues to rise – I just took their word for it. Is it not?

Something,

I love being singled out, it thrills me. Why bother even bringing it up as a comparison, only to say that you’re not comparing?! Vancouver isn’t at the limit of it’s affordability either. That being said, I think both Vancouver and Saskatoon markets are overpriced and need recession badly. There is no reason for any place in Canada to be so unaffordable.

I’ll also have to disagree that Vancouver is the nicer city, but that’s why I’m here and not over there. I appreciate that I can walk around downtown without coming across a plethora of heroine and meth addicts.

What very few people (Heather D being the exception) seemed to pick up on was that I was ONLY comparing Vancouver to point out that we are not at the limit of affordability. I am NOT trying to suggest prices should be the same as Vancouver, I was merely saying that as far as affordability goes we could certainly see higher prices. I agree that Vancouver is a much nicer city but it’s really not relevant as far as people’s economic ability to make a mortgage payment.

How do we know that the averages are still rising in those areas?