Saskatoon real estate week in review – August 17-21 2009
It was a week that may have brought pleasant memories of better days to local home sellers as Saskatoon real estate agents reported one hundred and fourteen house and condo sales to record the biggest week this year; if fact, the biggest week since late April of 2008. Unit sales finished twenty-three higher than last week, and more than doubled compared to the same week in 2008 when just fifty-four Saskatoon homes traded hands.
New listings held steady at one hundred and one properties, down just one home from last week, but thirty-three units fewer than were listed over the same period last year. This week was one of just three in the past twenty months during which the number of unit sales exceeded the number of new listings.
Click the image for a larger version of the graph.
The active inventory of Saskatoon MLS listings resumed its slide, which was temporarily stalled last week, and fell nearly fifty units from 1213, to finish the week at 1165 properties. Active listings are down roughly thirty percent on a year-over-year basis, dropping five hundred and two units from 1667 last year at this time. As of today there are six hundred and seventy-six single family detached houses for sale, approximately thirty-eight percent fewer than were available last year at this time when the inventory of houses climbed to 1,067. Condominium inventory sits at three hundred and eighty today, twenty-two percent off of last year’s number of four hundred and eighty-eight.
Fifty-six home sellers adjusted their asking price through the course of the week and fourteen of thirty-one canceled or withdrawn listings came back to the system as a new listing, most sporting a new price.
In spite of brisk sales activity and falling inventory the average selling price of Saskatoon homes maintained some steadiness, inching up just slightly from $281,095 last week to $282,464. The six-week average fell by approximately twice as much slipping to $282,459 from $285,337 the week before, and remained down from the same week last year by roughly seven thousand dollars. The four-week median took a bounce and reached its highest point in a year, increasing five thousand dollars from last week to $280,000, just five hundred dollars below the number recorded at this time in 2008.
Click the image for a larger version of the graph.
While the underbid chart looks similar to last week’s, overbidding made a remarkable comeback in just one week as eleven sales were reported above the seller’s asking price, by $9,605 on average. Most of the overbid sales were in the $3,000-$5,000 range, but one new home sold near $650,000 at $66,500 above the asking price, driving the average higher. Perhaps more interesting to me is the fact that eight of the eleven overbid sales come from one Willowgrove condo development. Given that it took sixteen months to sell thirty-one of thirty-five units available at this development, it seems uncanny that eight properties should be reported sold in a single week, and somewhat mind boggling that all eight sales should come in above the asking price.
Another eight properties sold at the asking price, and ninety-five sellers negotiated an offer below their list price. The average underbid on properties that sold for less than the list price slid slightly lower, falling from $10,734 last week to $9,605, an average discount of roughly 3.3 percent of the asking price.
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Royal LePage Saskatoon Real Estate
35 comments so far. We'd love to hear your thoughts.
August 22nd, 2009 at 9:36 AM
Norm, …overbidding made a remarkable comeback in just one week as eleven sales were reported above the seller’s asking price, by $9,605 on average. So much for the insanity infecting cities like Vancouver and Toronto remaining there… There’s no logical reason to be overbidding, other than buyers caught-up in an emotionally competitive feeding frenzy. Homeowners who overbid in 2008 are likely underwater (to some degree), so it seems that absolutely no lessons have been learned. And here we thought 2009 was going to be a quiet year; it’s turned out to be a repeat of 2007 and early 2008, in many respects (particularly for sellers). It’s possible that we may now have seen the peak (6-week average) price of 2009 of just under $290,000.
August 22nd, 2009 at 12:54 PM
Jason,
I am also a bit saddened by what’s happening, particularly in Vancouver and Toronto where there seems to be no escape from the craziness. We better have some big gains in employment and incomes or we are going to see some pain being experienced when interest rates start to climb.
That said, I am encouraged that while activity has been strong here, buyers do seem to be behaving somewhat more responsibly. Given that eight of eleven overbids occurred in the same condo development, I don’t think I’d be too concerned about a trend at this point. You’re always going to have some of that, even in a tougher market.
“There’s no logical reason to be overbidding”
There’s probably no logical reason for paying more than market value, but there will always be instances when it makes logical sense to pay more than list. This is simply a different pricing strategy which has potential to work in a segment of the market where inventory is tight. It doesn’t necessarily mean the buyer is paying over market.
Here’s something that may be of interest you. I just picked up on it this morning and found it interesting. Hate to start a rumour but it sounds like this one will live or die by noon on Monday.
Is the Bank of Montreal about to fail?
August 22nd, 2009 at 1:54 PM
Norm, agreed, and from what I recall last week SK is the only province running year-over-year inflation at this point (although if energy is removed as an indicator I think it’s been up year-over-year). Were the 8/11 actually overbids in that condo development, or were they inclusive of any ‘extras’, enhancements or upgrades? Interesting that it took 16 months to sell 23 properties and just one week to sell 8… was the list price recently dropped?
I agree if the property is an outright theft, it might make sense to offer more than list; a casual search didn’t really turn up any ‘deals’, though, and realistically I’m not sure how often these make an appearance. But cash/’no subject to’ offers can also sometimes have the desired effect (without resorting to overbidding). Most of us had a front row seat to the kind of mania that accompanied overbidding in the recent past; it tended to make people overeager, greedy and reckless, and does not for a balance market make.
Thanks for he link of the BOM article. *Very* interesting. I honestly thought CIBC would have been first to collapse, but I hadn’t considered BOM’s massive exposure to the oil and automotive sectors. If BOM crashed, could we see a run on it and other Canadian banks? I think our economy (in part) has been faring better than most countries due to the perception that our banks are more stable or even ‘unsinkable’ (where have I heard that before… If this proves to not be the case, and that our banks are carrying just as much debt or risk as those banks in other countries, would this undermine any economic recovery efforts underway? And with a $50 billion deficit projected for this year, in excess of $500 billion already guaranteed to CHMC and a fall election looming, will the government even have the financial resources to cope with such a collapse?
I sure hope this turns out to be just a rumour, because the collapse of a single major bank would usher in vastly different lending requirements, and it doesn’t take much to imagine how this would impact the current housing market.
August 22nd, 2009 at 2:00 PM
Norm, unrelated, you might find this WSJ article on the ‘improving housing sales’ in the US of interest… (I’ve highlighted the most interest comment)
Improving Home Sales Belie Market Reality
http://online.wsj.com/article/SB125081143925447971.html
“A survey conducted in June of 1,500 real-estate agents sponsored by the trade publication Inside Mortgage Finance found that 36% of all sales involve ‘nondistressed’ properties. Of the nondistressed sales, only 31% were what the survey described as ‘unforced or optional.’ The rest were sales by homeowners in some kind of financial or personal crisis. ‘Think about that for a minute,’ John Mauldin of Millennium Wave Advisors wrote this week. ‘Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage.’ And only a third of the remaining one-third — roughly 10% of overall sales — comes from ‘something we could call a normal selling process.’”
August 22nd, 2009 at 2:42 PM
“Were the 8/11 actually overbids in that condo development, or were they inclusive of any ‘extras’, enhancements or upgrades?”
I couldn’t say for sure, but even that would seem strange.
“Interesting that it took 16 months to sell 23 properties and just one week to sell 8′
I’m looking at the sale dates (contract) on these and they actually range from late June to early August. For some reason, they’re just being reported this week.
“Was the list price recently dropped?”
No, some of them were actually increased in late July.
Thanks. I will check out your article.
August 22nd, 2009 at 3:43 PM
“For some reason, they’re just being reported this week.” Bizarre.
August 22nd, 2009 at 7:21 PM
I have to say just over 2 years ago I was one of those people who overbid by a LOT after losing out on 3 homes. The house I bought was listed at $239,900. I ended up paying $260,000 to get it. I’m one of the fortunate ones in that I just sold it for $296,000 managing to recoop my investment and then some. Don’t think I’d want to be overbidding right now.
August 23rd, 2009 at 9:57 AM
Cats, having gone through this once before, if you found yourself in a similar situation in the future (faced with the prospect of overbidding or losing out to a higher bidder), what would you do? Congrats on selling your home; are your plans to rent for the foreseeable future or are you back in the market again?
August 23rd, 2009 at 4:27 PM
I was reading over a few of the predictions of bloggers earlier this year: “2500 to 3000 listings” in Saskatoon and price reductions to 2000 levels. Do these predictions remain plausible for 2009 or 2010? I can only wonder what the next 3 months will hold… any predictions?
August 23rd, 2009 at 5:58 PM
I’m not sure about 2000 levels for pricing; I believe many were 2007-ish (my own were a tad more ‘bearish’ at late 2006-era). As for inventory levels, 3% interest rates have a tendency to throw projections for a loop… (think we came close to 1,800 with private at one point).
Next year, really depends on how soon and how far we see interest rates increase. But I don’t think it’s a stretch to say prices are going to fall another 10% from the peak in 2009; more if we don’t come out of this recession, government debt and unemployment snowball and we see a Canadian bank failure or two. In 2010 I think we’re going to see housing levels at or below levels in 2009. Condos are an entirely different matter, and with the various new and renovated developments coming to completion, I think we could see in excess of a +50% increase in condos next year.
Inventory in 2010 is a whole other animal… I’d say we’re going to see housing levels at or slightly below levels this year; we’ll probably see 50-100% more inventory for condos as various new developments and renovation projects are completed.
August 23rd, 2009 at 11:17 PM
Yup, things have certainly changed since January. I don’t think anyone could forsee how massive (and global) the various economic stimuli would be. It certainly has had the intended effect, but we must pay the piper somehow. As many wiser than me have also pointed out of late, unless incomes rise or unemployment numbers improve, there’s not much sustaining this rally except more cheap credit. That being said, I think we’re in a good part of the world to at least see some stability with regard to our economy in the short term.
I honestly have to say I can’t see interest rates rising much prior to the end of 2009, and even through Q2 2010. I’m basing this assumption on the fact that the BOC will likely move in tandem with other central banks, and on the fact that the recovery will probably take longer than most think. I think inventory will continue to decline steadily, but I can’t predict anything further than next Spring/Summer. I think a further decline in prices in the realm of 10% is entirely within the realm of possibility, perhaps more for higher-end properties with bigger present (and future) inventories. This is all idle conjecture, of course.
Norm,
Interesting about the BOM link. Their yields were insanely high last year, over 9-10% at one point I believe, significantly more than other peer banks. I can’t see the government letting a bank fail, but it sure may cause a huge crisis of confidence. I guess we’ll see what happens tomorrow…
August 24th, 2009 at 9:45 AM
Jason, Would I do it again? No. I got lucky when reselling and got back my deposit and then some but I don’t think many people will.
And I am NOT buying right now. Just renting. I moved out of S’toon and will wait until real estate prices go way down before I invest again. People always talk about how you “give your money away” when you rent but heck in 2 years I only paid down $5000 in the principle on my morgate and the bank got the rest in interest (about $30,000).
August 24th, 2009 at 9:47 AM
Related BOM update here (still nothing official, and it sounds like we won’t hear anything concrete one way or the other until at least August 25).
http://whispersfromtheedgeoftherainforest.blogspot.com/
August 24th, 2009 at 10:19 AM
Cats, out of curiosity, was it always your intent to sell soon after purchasing, or did the start of the price decline in 2009 and demand for houses in a certain price range shape your decision? You mentioned “out of S’toon”; have you found offerings and rent rates to be more reasonable than within Saskatoon? How far would prices have to go down before you’d entertain owning again? Early-mid 2007, late 2006? (further?)
……….
Crikey, “That being said, I think we’re in a good part of the world to at least see some stability with regard to our economy in the short term.” Yes, we’ll always have the ability to feed ourselves in this province (something as a society I think we take for granted).
August 24th, 2009 at 8:16 PM
“3% interest rates have a tendency to throw projections for a loop…”
Get used to it. If you think the government is done with the economy, think again. This is just the beginning. No offense to you personally, but this is one of the huge flaws with the bears arguments, they ignore the government influence on the market.
On that note, I will make a prediction. Bank of Montreal will not fail, the canadian government will not allow it. The worst of the loan pool will either be allowed to be kept off the books or directly insured by the government. If things are as bad as claimed the government will step in and provide a cash infusion in exchange for equity on terms no sane investor would ever consider. There will be talk of how this is necessary for the good of us all and the move will be applauded by the financial community.
August 24th, 2009 at 8:30 PM
Peter, none taken. And by the same token, one shouldn’t assume the Canadian Government has unlimited power to influence the market (interest rates really can’t get any lower, and we can’t continue running record deficits indefinitely).
With respect to BMO, if the Canadian Government doesn’t allow it to fail, it means they bailed it out – which essentially means it collapsed (see: big ‘fail’). But you’re right, we’ve already insured close to $550 billion through CHMC, provided the banks with close to $150 billion in liquidity, so what’s another several hundred billion to shore-up BMO…?
August 24th, 2009 at 11:39 PM
So, it looks that we may be delving into the world of purchasing and renting out a basement suite to supplement the mortgage. We are doing research into things we need to know about being a landlord, but I would be interested to see if anyone has personal experiences and/or tips about things we should know.
On a side note, if a bank like BOM goes under are your savings safe? I don’t bank there, but I’m just curious.
August 25th, 2009 at 12:30 AM
Landlords: Non-smokers (includes no ‘social smokers’) – you don’t need additional hassles with insurance, no pets (includes ‘cats’) – it’ll be harder to evict and pets wreck the place ($ to replace damage). It’s worth losing a few months rent to find the right tenant; it’ll cost you more than a few months rent rushing out and accepting the wrong one. When doing your calculations budget less revenue for rent and more for maintenance, upkeep and periods of vacancy. Mark would be the best person to ask, as I suspect he has extensive experience in being a landlord.
Banks: as a general rule, $100k max per individual (regardless of the number account); I believe another $100k for a joint account. Investment (non-savings) accounts are different.
August 25th, 2009 at 6:47 AM
Padraig,
Information for Landlords and tenants – From the “Office of Residential Tenancies” Saskatchewan.
Approved forms and sample documents for Landlords and tenants in Saskatchewan.
The Residential Tenancies Act, 2006 Saskatchewan – Nearly 60 pages of painful reading but if you’re going to be a landlord you should understand the legislation.
I completely agree with Peter that the “collapse” of BOM, or any other major Canadian bank is unlikely, but as Jason suggests, a failure is a failure even if someone swoops in to save it. Given all of the talk about how solid the Canadian banking system is, and how different things are here, I can’t help but wonder what effects diminished confidence would have on our economy. Could such a failure cause this recession to look more like a W? Could it cause panic selling on the markets?
August 25th, 2009 at 7:19 AM
Norm, BMO profit rises 6.9% (looks like the rumours were a bit premature)…
http://www.financialpost.com/news-sectors/story.html?id=1927342
Humorous video on banks (“Money as Debt II Promises Unleashed”). I particularly liked the analogy between counterfeiting and banking credit…
http://www.youtube.com/watch?v=_doYllBk5No&feature=PlayList&p=879A14495D29C64F&index=0&playnext=1
I think the threat of a “W”-shaped recession is still a very real possibility. We haven’t seen the full impact of the problems in the US credit card and commercial real estate markets.
August 25th, 2009 at 5:47 PM
Hey Norm, haven’t posted on here in some time like the new look. Saskatchewan seems to continue to defy as far as housing goes. When it comes to determining how all this ends, I am in camp with this guy.
Much Ado About Reserve Growth
by Lee Adler
“Critics of the Fed have expressed concern about the inflationary implications of the huge expansion of the Fed’s balance sheet, particularly excess reserves. The reserve bulge was created when the Fed expanded the alphabet soup programs in 2008. At the same time the Fed began paying interest on reserves, paying 1%, which was .75% above Fed Funds at the time. So the banks held the funds which they borrowed under these programs at the Fed because they got a higher rate from the Fed than what it cost them to borrow, and a better rate than they could safely get in the market. The Fed was basically providing them a risk free subsidy to borrow and NOT lend. The net inflationary effect was therefore nil.”
August 25th, 2009 at 6:19 PM
Thanks for the advice folks. Maybe as I get more experience with real estate I can actually contribute to the discussion instead of always asking for advice
August 25th, 2009 at 8:35 PM
Jason,
My point was not to imply that BOM was somehow stronger because of potential government involvement but rather, as an investor, this is what I expect will happen. If you want to get right down to it, I suspect damn near every bank in north america & europe would have gone under if not for the massive efforts of the government, through interest rate manipulation, tax cuts, loan guarantees and direct stimulus.
August 25th, 2009 at 10:15 PM
Peter, I agree with your assessment entirely. My only counterpoint was that there could come a time and point in the future where the government is unable (not unwilling) to intervene, due to massive debt loads, record deficits, etc.
The_Chartist, interesting take: “One thing seems certain. This cannot be sustained indefinitely.” I would tend to agree.
August 26th, 2009 at 12:00 PM
Energy royalties, income tax lead Alberta’s $6.9B deficit
http://www.calgaryherald.com/Royalties+income+lead+deficit/1931870/story.html
“CALGARY – The Stelmach government released the details Wednesday morning of its projected record $6.9-billion deficit this fiscal year, unveiling a first-quarter update that predicts a massive drop in energy royalties and income tax revenue. The total shortfall – $2.2 billion more than initially expected – is largely due to energy royalties totalling only $3.9 billion, when the April budget had non-renewable resource cash pegged at $5.9 billion.”
Saskatchewan would be wise to consider the fate of its Western neighbor, and not count on estimated royalties and tax revenues to offset ambitious spending programs. Frugality and fiscal prudence would seem to be warranted in the future to avoid any tax increases.
August 26th, 2009 at 8:03 PM
http://www.bloomberg.com/apps/news?pid=20601109&sid=aFHYtyliHcfw
“French President Nicolas Sarkozy’s plan to shun bankers who don’t accept pay limits was met with alarm by analysts and investors in the U.S., ”
..
“France won’t hire financial firms unless they apply rules agreed to by French bankers that include a three-year deferral on two-thirds of bonus payments, Sarkozy said yesterday”
..
This is the most encouraging thing I have heard all year. I don’t usually side with the french but putting some kind of restrictions on the financial scoundrels is a good step forward.
“If the best and most qualified bankers go to places where they are compensated for their work, it means that Sarkozy will be doing business with only those that don’t have the highest degree of excellence.”
This kind of thinking drives me batty. The same thieves who lead us to the edge of financial abyss without any warning now claim that they deserve their ridiculous pay packages because ‘they are the most qualified’. Show me the evidence. In reality, a few traders aside, most of the top dogs in wall street are there due to connections and ability to talk. These companies made good money when times were booming, and then effectively went bankrupt last year. The financial companies are run by a bunch of gamblers, anyone can do that.
Jason,
The government controls the printing press. There is literally no limit on what they can do technically, the only limitation is their will. Look at Argentina or 1920′s Germany for what a country can do if they put their mind to it.
August 27th, 2009 at 7:51 PM
A little lighter view.
Hitler Misses the Bull Market | Public Investment
publicinvestment.net/…/hitler-misses-the-bull-market/
August 28th, 2009 at 6:10 AM
Are Canadians Spending Their Way Into Another Crisis?
http://www.financialpost.com/most-popular/story.html?id=1932483
“‘The risk is that we become complacent,’ said Andrew Pyle, wealth advisor at ScotiaMcLeod. ‘Right now, Canadians have a borrowing strategy that does not fit well with the rising rate environment. That, to me, is the most significant risk.’
Michael Gregory, senior economist at BMO Capital Markets, said demand for existing housing units dried up ‘quickly and violently’ in the wake of the recession. The recent gains to date represent a combination of pent-up demand and historically low rates. It is his belief the market will cool once that pent-up demand is filled.”
August 28th, 2009 at 7:40 AM
Just curious to know what you guys think? We purchased our house in 2008, as we did not really have a choice in the matter. We were kicked out of two houses in less then a year due to landlords selling there properties (also costly). We couldn’t find another suitable rental, and were out of time. We decided to buy and found a property in our last week of renting. It wasn’t a mansion but to us it was a lot of money to pay at $235g. Yesterday I decided to contact the same Realtor that we went through to obtain the property, to see what the property would fetch if we were to sell right now. I received an email this morning with the assessment and WoW, a nice little slap to wake us up. Apparently our property might be able to fetch $220g! We were disgusted to say the least.
Just wondering if anyone might be able to offer any advice on what we should do? We do not want to lose our down payment but it appears we already have?
Any suggestions would be appreciated. Thanks…
August 28th, 2009 at 1:40 PM
Curious – If the house still works for you, then hold on to it. Focus on paying down the mortgage as fast as you can, that will save you the most money. Being up or down $15k will not amount to much in the long run. I am guessing you have already forked out around $1,000 in lawyer fees and $7,000 in CMHC insurance that you will never see again.
Selling, you would pay about $10,000 for a realtor (if you went that route), a another $1,000 in lawyer fees. Depending on your mortgage, you could face ~$3000 in penalties for paying out your mortgage early.
August 28th, 2009 at 3:07 PM
Curious, echo’ing what Charles said, I would add the following points.
1. If you have a home equity line of credit (HELOC), pay that off first (it would be at a higher interest rate anyway and ties into #3 below). In addition, if your mortgage rate is insanely low, there may not be much savings by paying down the mortgage early; you could also look at refinancing (±pros/cons). If it were me, I’d bank the money (you can always apply it later and in the interim you buildup a reserve to weather any ‘contingencies’).
2. With respect to sale, assume that offers will come in $5k-$10k below list, and that’s before real estate commission, mortgage penalties, legal, etc. Whatever you’ll net has to be enough to pay off the mortgage, or you’ll have to come up with the difference.
Disclaimer: Consult with professional legal counsel before considering the following:
3. In Saskatchewan, we have “jingle mail” (provided there’s only a primary mortgage on the property, and it’s your primary residence). If at some point down the road you’re not able to make the payments, you can basically hand the keys back without declaring bankruptcy. CHMC and the bank are on the hook for the balance. In this instance, worst-case scenario you’ll be out your original down-payment plus any mortgage payments you made (which being mostly interest, is essentially “rent” anyway).
August 28th, 2009 at 3:18 PM
Curious,
“Yesterday I decided to contact the same Realtor that we went through to obtain the property, to see what the property would fetch if we were to sell right now.”
Were you simply curious about the home’s market value or are circumstances demanding that you move?
August 29th, 2009 at 8:51 AM
Hey Curious,
I think the important question is not what the house could sell for at this point in time, but what your time horizon is with the property over the longer term. If you need to sell now or cannot continue making your payments, that is another story. If you bought the house to live in, try not to be “disgusted” at shorter-term fluctuations- they will happen. No asset will “only go up”, especially over as short a term as a year, in an economy like this.
August 29th, 2009 at 11:27 AM
Nice detailed review and analysis for a real estate. thanks for posting, keep it up.
-David
condo for sale Philippines
August 29th, 2009 at 6:53 PM
“Cats, out of curiosity, was it always your intent to sell soon after purchasing, or did the start of the price decline in 2009 and demand for houses in a certain price range shape your decision? You mentioned “out of S’toon”; have you found offerings and rent rates to be more reasonable than within Saskatoon? How far would prices have to go down before you’d entertain owning again? Early-mid 2007, late 2006? (further?)”
Jason – No it wasn’t my intent to sell this quickly. When I bought I thought I would live in the home for many years. What prompted me to sell was a combination of factors, one being the decline in 2009 of housing prices. I’d put a large downpayment on the home and I didn’t want to lose that.
Nope rentals in other cities are just as bad as S’toon. Not enough places and much, much higher rents than even a year ago.
Prices would have to drop down to what seems like a place they will stay for a while…so probably I’ll wait at least a year from now. Not sure that they’ll ever fall to what they were before the boom but I believe they will decline from what we see today.