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

• Saskobserver
  April 8th, 2009 at 1:48 PM

  Thanks Norm. Are there still a lot of people moving in from other provinces and are looking to buy properties, or the buyers last week were mostly local Saskatoonians? In essence, I wonder how many investors are still around buying properties…?

• Norm Fisher
  April 8th, 2009 at 1:48 PM

  Hi Saskobserver,

  To the best of my knowledge we still have out of province buyers moving here. It’s hard to know how many. This is something you get a sense for over time but I’m not aware of any big changes there.

  Investors? There are still some “Johnny come lately” types that are calling. I always tell them that prices are up 50 points this year, that I think we’re approaching the top and that there isn’t anything available that can produce a positive cash flow. Based on their late arrival these probably aren’t the most experienced or savvy investors. The kinds of warnings I’m issuing normally send them on their way.

  I do believe that there are many properties which are held by investors who plan to bail when they feel the time is right. This is the product that could come pouring back onto the market if they get the sense that things are getting too risky. Most of these properties will not draw enough rent to cover expenses and the “investor” is simply in it for appreciation. If they feel that might level off, or start to go in the other direction, I think they’ll start to bail. As I understand it, this is fairly typical at the end of a “boom.”

• Jedi
  April 8th, 2009 at 1:48 PM

  Norm, if you look at the total sales vs. number selling above list over the last 4 weeks, the percentage is still over 50%. It definitely seems like things are slowing. When will the overbids reflect this?

  Also, one real estate agent explained overbidding as buying ahead of the market. The idea is that one is paying what a house will be worth in x amount of months(3, 5, 9, etc). Given the number of sales at overbid prices in the last 2 months (thinking that the market may have cought up for the first 4 months of the year), will prices continue to rise to the overbid price (approx 20 000)before levelling off, or will this be reflected by a jump in asking price, or will those who overbid recently find them selves possibly waiting a long time for their house to be worth what they paid?

  Answers always appreciated.

• Jay Thompson
  April 8th, 2009 at 1:49 PM

  Interesting… one week certainly does not make a trend, but the Saskatoon market continues to mimic the Phoenix market in eerie ways. Nice work staying on top of it Norm! It will be interesting to watch the data over the next few weeks.

• Norm Fisher
  April 8th, 2009 at 1:49 PM

  Jedi,

  These numbers are going to fluctuate some from one week to the next but I think the “trend” over several weeks seems to indicate that the percentage of “overbids” is dropping and so is the “average overbid.” Although I can’t be certain, and I’m really just running on gut here, I think that the numbers reported next week will show a further decline, likely below the 47% low that we hit during the week of August 13. If inventory continues its current trend, buyers will have more options and that’s going to mean fewer options for sellers.

  It seems to me that the overbids we’re seeing are more “smoke and mirrors” than anything right now, more likely resulting from low pricing practices than anything else. This low pricing strategy makes a lot of sense for a seller when the market is on fire, but again, we’re starting to see fewer showings on listings and fewer offers. Demand seems to be waning some from the red hot spring months. Of course, when we hear that 50% of listings are selling over list price to the tune of 15 to 20K we assume that sale prices are continuing to climb at an alarming rate. Are they really? Consider that the average price of a Saskatoon condo was $221,349 in June. As of today, the average price for August is $216,048, down 2.4%. The average price of a Saskatoon house was $267,843 in June. So far in August, it’s at $278,274. Granted, it’s higher but by less than 4%. Combining both categories we see a 2.5% increase from $254,830 to $261,464. These are not huge changes either way. Back in early June I said, “Watch for prices of Saskatoon condos to stabilize.” At the time, it seemed to me that condo prices weren’t making much sense when you compared them to houses. I believe that we’re experiencing a bit of a correction and things are starting to make more sense across the various housing categories. This is probably an indication that buyers are putting more thought into what they’re offering. They’re now saying, “That one sold for X, that one sold for X, therefore this one is worth X, maybe X and a smidge.”

  During January, February, and March “buying ahead of the market” made good sense. I’m not so sure that’s the case right now and I think that’s how buyers are feeling as well. They seem to be proceeding more cautiously. As the odds of creating a massive bidding war decline, sellers are more likely to reject the idea of low pricing. After all, what do you do if you’re 20K below what you hope to receive and nobody offers to buy the home? Seller says, “Okay, I left my home open for offers for four days and nobody offered to buy it for $249,900. I have two options. I can raise the price to $269,900 or I can let it linger on the market and reject offers at list price.” Neither of these options strike me as sound marketing practices. I noticed last week that many of the new listings did not include the “seller will review offers on ??/??/??.” I expect that we’ll start to see a trend in this direction. Average asking prices will probably show some strong increases and average selling prices will continue to show signs of stabilizing. While I am not alone in thinking this way there are some agents who feel the market will “take off like a rocket” after the long weekend. It’s all speculation.

• Norm Fisher
  April 8th, 2009 at 1:49 PM

  Jay,

  Nice to hear from you. I have to say that the lack of activity on the buy side, combined with some of the action on the listing side (lots of small condos put on the market) really had me thinking about some of the things you said.

  For those who don’t know Jay, he’s the “Phoenix Real Estate Guy.” I had the opportunity to have breakfast with Jay in early March and he shared with me how the Phoenix real estate boom found its end. He was the inspiration for “…and suddenly, like someone turned off the tap,it was over.”

  Thanks again Jay!

• SaskatoonSeller
  April 8th, 2009 at 1:50 PM

  Hello Tim great blog!, I’m actually shocked that the market has slowen down so fast about 2 weeks into July things changed so drastically. In my opinion, investor’s should not be scared off by this “slow down” in the market. July and Aug are usually slow months so why is everyone freaking out over this?. Maybe cause April, May, and June were record setting months, and bidding wars were through the roof!. Then along came July with our 30+ degree weather everyday of the week. No one was in the mood to buy a home during a heat wave. They all went on vacation or to the lakes.. Yet people are interpreting this as the boom ending or topping out??. Look at the average price for a home in Calgary compared to the average price of a home in Saskatoon. People will continue to see the drastic difference in price, and continue to migrate to Saskatoon. I predict that in Sept we could start to see delayed presentation of offers again, as the market should pick up allot come Sept Oct, and slow down again into the winter months. Come April 2008, it will be a repeat of what happened in the spring of 2007. And the investor that got scared off by the market slowing down in July & Aug, will be kicking themselves wishing they would have held onto their properties or bought now and sold in the spring of 2008. We still have a housing shortage, homes will continue to sell, and prices will continue to appreciate. Just like the stock market, what goes up must come down, but then its got to go back up again, and the best time to buy is when the market has gone down, especially when there’s still low inventory, and contractor’s are backed up with 3 months of work. Just means properties that our under construction will take longer to build.

  Norm, what our your predictions for next spring 2008?

• Norm Fisher
  April 8th, 2009 at 1:50 PM

  SaskSeller,

  Thanks. You make some good points. This slowing market is still pretty strong in comparison to almost any other period over the last 15 years. It’s the change from the last few months which makes it a little unsettling. I would agree with your thinking that there’s not likely much need to panic. Nevertheless, I’m sure some will. I think there are a lot of inexperienced investors who have purchased property here and many who purchased with intention of reselling it when they feel the gains are sufficient. Some of these people many even be subsidizing their payments as they have a challenge capturing enough rent to carry them.

  This slow down will likely serve as a small correction where some of the real weirdness starts to work itself out. For instance, the price of some types of condos have come to close to single family homes and the 1,000 square foot bungalow has increased disproportionately to the 1,800 square foot two-storey. We may see some of these numbers work themselves out.

  Having said all that, it does still feel a bit eerie, as Jay put it. I know people assume that July and August are slow months for real estate. Last year, only May and June produced more unit sales than July and August. That’s not that unusual.

  2008? I’m still trying to get my head wrapped around 2007. I’ll probably take a crack at that sometime in November.

  Thanks again!

• Saskinvestor
  April 8th, 2009 at 1:50 PM

  I bought a condo last week that was low listed to attract bidders and failed to generate any bid at the bid opening. Yes I paid slightly over the list price but I still believe, probably 30k under what I would have paid in June. Just like SaskSeller I believe there still money to be made in the Saskatoon market when comparing it to other Canadian markets. You other folks can continue with your doom and gloom, I’m going to do some cherry picking.

• Alejo
  April 8th, 2009 at 1:51 PM

  [sarcasm]

  Well, I suppose comparing to Manhattan, Tokyo and HK, Condo units in Calgary are a great bargain too. Investors should seriously consider invest in Condo units in Calgary, cause they are SO much cheaper than Manhattan, Tokyo and HK!

  Also, I think if you want to buy house in US right now, the price is probably 30K cheaper than it is in June.

  [/sarcasm off]

  hehe, I am in a sour grape mode Monday morning cause I realized ain’t got no money even though I have a professional designation >.<

• Johny
  April 8th, 2009 at 1:51 PM

  And the Market Pumpers/Dumpers have arrived. Saskinvestor, mind providing the mls number to your recent purchase so we can get an idea what to look for if we too decide to pick cherries 30k under value?

  Give it up guys, you’ve had your run of flipping… now, thanks to it, we need significant market corrections.

  J.

• Saskinvestor
  April 8th, 2009 at 1:51 PM

  I’ve made enough since the beginning of the year to roll the dice a little.

  I either win more or win a little less, life is good either way.

  The key is to buy when people are selling and sell when people are buying.

• Alejo
  April 8th, 2009 at 1:52 PM

  Then why aren’t you investing in the U.S Market?

• Saskinvestor
  April 8th, 2009 at 1:52 PM

  no money in that till they find a potential path forward with their banking system, that why I’m here
  

• Doug
  April 8th, 2009 at 1:53 PM

  If I look at the trend over the last 10 weeks, I see what you see Norm. Still, we have 59% of the market overbidding and at a rate of $16k. So why does it seem like the market is cooling but so many people are competing and coming in with big bids?

  I believe its because they’re using historic prices to determine how to come in with a bid offer. If 50% of the market overbid last week at an average of 18K, you’re going to see that as a buyer and its going to influence your offer.

  I see demand falling, average overbid comming down, inventory levels increasing – but even if the market is falling, its going to take weeks for people to realize it. In the mean time, all they have is 1-2 week old prices to go with. So I agree with Saskinvestor that there is money to be made still – I give it a couple months. Still, I wouldn’t necessarily want to be selling in a couple of months when inventories hit the 600s (I can’t see them hitting 700 Norm but I could be wrong).

• Alejo
  April 8th, 2009 at 1:53 PM

  Saskinvestor, can you elaborate on your last comment? Your unwillingness to purchase U.S properties is due solely to the U.S banking system? or is your unwillingness is caused by the belief that their market is in such an inflated stage?

  Do you believe that the U.S Banking system is the prime cause of their current crisis? i.e. it is because the banking system in the states that caused the current situation?

  Or do you believe that the U.S Banking system is just the facilitator of the current crisis? i.e. Seller demanded a hefty premium on their house, and the banking system merely gave investor that are oblivious to their true financial state an easy access to a debt they can’t repay?

  If it can happen in US, it can also happen in Canada. I know Saskatoon’s condo is still at a very competitive price compare to Toronto. But, no offense to Davidson residence, if Davidson suddenly has 100 condo units for sell at $168,000, which has the same spec as a condo in Saskatoon for $240,000.(at 70% of the price) Do you think that is a good deal?

  I think it’s the market that scare off a lot of the potential investors, rather than their banking system. Yes, you do want to buy when people are selling, but you want to buy towards the end of that period.

  Well, I am glad that there are people that are very optimistic about Saskatchewan. I hope the province lives up to it. Otherwise, NDP is gonna lose the election if the housing market corrects itself during the election period.

• SaskSeller
  April 8th, 2009 at 1:53 PM

  You also have to find what people are looking for in Saskatoon, and that’s affordable housing especially for people who have been kicked out to the streets with all the new condo conversions taking place. The type of properties investor’s should be buy now, our 1 & 2 bed condo’s in the $120,000 – $130,000 range if they can get their hands on some.

  Also I think the market will appreciate well into the new year, not at the rate that it has been, but at a slower pace. So if you are buying properties now, don’t be afraid to hold onto them until the spring. At least that’s how I see things going.

• Jedi
  April 8th, 2009 at 1:54 PM

  Just a couple of thoughts on condos. Although the price appreciation has been remarkable, I am unsure as to whether it will slow down. There are a variety of reasons. The most significant is that there are very limited options for students, seniors, first time home buyers, and people with steady income but earning 80 000 or less. In many desireable neighbourhoods condos are really the only affordable option for the aforementioned group. I welcome any corrections to the following math. If a person/family is clear of most debts, the bank will approx. approve 4 times the gross income. At 80 000 combined income, that is approx 320 000. Now, lets assume the family doens’t hold significant investments, and has student or car debt. Drop the number. Maybe some credit card/line debt. Drop the number. And, lets assume the people are responsible and don’t want to be house poor. That might leave them around the 250 000 mark. (And probably a 40 year mortgage, for 25 years reduce that number further.) If someone wants to invest in RRSPs, RESPs, has a couple of little mouths to feed, and saves for a rainy day you probably have to have a combined income of 110-120 000 to afford a 325-350 000 home, not be house poor, and drive newer vehicles. So, to anyone without significant incomes or previous equity, there is a bit of a strain when it comes to housing. One option is to get a piece of the pie. That will hopefully build equity and aloow one to at least keep pace with the market or hopefully move up as they are more established in their careers.

  Other reasons for condo popularity: variety of options- gated communities, one’s that offer exercise rooms, entertainment rooms, secure parking, car washes, and a freedom from maintenance. (Note, well-managed condos, not those lacking in reserve funds!) People are very busy and to know the lawn is watered and cut and the sidewalk clear of snow frees them up to participate in volunteer activities, going to the gym, so on. Also, there is some piece of mind in knowing that most major repairs are looked after in the sense that everyone shares the cost. Lastly, they are usually smaller so to someone starting out a house can be a lot to furnish, not to mention the necessity for rakes, hoses, lawn mower, so on. Utility bills are also generally lower.

  I am sure most people are aware of the downsides of condos so I won’t make a list. Also, it depends on where one is in life or one’s personal interests. Obviously most condos won’t be ideal for families of 5 or avid gardeners. I welcome any feedback regarding my condo commentary. Like everything there are pros and cons. In past threads there seems to be some anti-condo sentiment, so I wanted to try and make a case for the rising value of condos(and possible stabilization or continued appreciation).

  A couple of last thoughts – consider the aging population of the province. No source, but do remember a report placing Sask. as a province with an elderly majority. At some point the boomers are going to want to downsize. Finally, not sure if we have to invent a condo terminology but if people are addressing a specific issue, please be specific about the types of condos. A condominium is a type of ownership. I think most people mean apartment style condos, but to those unaware there are townhouses, gated communities, bungalows, so on(I think some of the Willows high end properties are condos), so please be specific if the point or comment warrants it.

• Jedi
  April 8th, 2009 at 1:54 PM

  Not sure if anyone reads MoneySense but if you go to the website it lists Canada’s best places to live. Saskatoon ranked 16th overall. You can see their criteria. I think this ranking is done every March. It will be interesting to see next years rankings with the real estate boom. Also, anyone looking for average income for Canadian cities will find info on the same link. Calgary is 104 000, Saskatoon 70 000. Not sure if this holds up to some of the other sources posted.

  http://www.canadianbusiness.com/rankings/bestplacestolive/list.jsp?

• Johny
  April 8th, 2009 at 1:54 PM

  Keep in mind that the $70,000 figure is household income and not individual income.

  J.

• Jedi
  April 8th, 2009 at 1:55 PM

  I am. That is why condos are popular. It is the only thing 70 000 household income can afford! This income level is probably looking at the 200-225 range. Not a lot out there right now.

• Johny
  April 8th, 2009 at 1:55 PM

  My guess is the average household is not looking for a 200-225K condo. You’re failing to mention the additional $200-$400 condo fees. that coupled with a mortgage actually makes a house more affordable than a condo.

  J.

• Johny
  April 8th, 2009 at 1:57 PM

  Also, what’s there to reference that suggests condos are more popular for families?

  J.

• Jedi
  April 8th, 2009 at 1:57 PM

  Johny, I think we miss the point each other is trying to make. The price appreciation of condos seems disproportionate to the price appreciation of housing. What one would expect is to see houses catch up and even surpass the percentage of appreciation, or for condos to “correct” or drop in value. The argument I was making was that because houses have become so expensive in relation to wages, that, for families starting out or without prior equity, in many neighborhoods, condos are the only option for ownership. This is not say families desire them. Given the choice I am guessing that 95% or greater would rather have a house. It just isn’t an option anymore. As condos are becoming the only affordable option it is possible they may even appreciate more until they too are unafordable. That is all I was trying to say. There was a cover story in the Star Phoenix comparing drug, alocohol, nicotine use and possibly crimes among students and there was a clear link between use and no use and where one lived in the city. To live in the more desirable areas you better have 300 000 plus for a house. I don’t think the average wage allows for this. Yes, condos have downsides, but it is ownership, and not susceptible to the landlord crap we are seeing right now. I would hope one would do their due diligence in regards to reserve fund, condo fees, rules among the association and so forth. I am not an advocate for condos. I am just trying to offer an explanation for their price surge.

• Jedi
  April 8th, 2009 at 1:57 PM

  Regarding condo fees, they usually include water, and sometimes gas and /or electricity. Lets say they just include water. The cost of gas and electricity is about 100-120 dollars. Plus condo fee equals 320-520. What are average costs for a house? Probably 300-400. Therfore these numbers basically negate. (Lets not forget the difference in property tax). Therefore, it comes down to the mortgage payment. Again the issue is not whether people want a house or a condo. Given that option at the same price everyone would choose a house. As houses are still considerably more, condos remain the only option for a significant amount buyers.

• Batman
  April 8th, 2009 at 1:58 PM

  I think there is a major difference between a desireable area and a good area for a family to live. I’ve seen nice homes available in good areas for under 300k.

  Regarding condo fees, my wife and I lived in a condo for 2 years. During that time, our condo fees were raised from $175/mo to $220/mo! On average, our house expenses were not quite as much as our condo expenses. Sure, we’re paying more for our mortgage now, but not having to deal with a condo association anymore is priceless

• Sunny
  April 8th, 2009 at 1:59 PM

  Jedi we lived in a condo before we bought our house. We are living in a “good” area and it never cost us $300,000+. It all depends on how new and how big a person has to be in to be happy with the house. My point is that one of the reasons we moved out of the condo was the condo fees. They kept increasing every year. Last year by $40. Our condo fees covered our heat and water. But the heat was uncontrollable (hot water heat) and we were really hot in summer and winter with no way to control it. When looking at buying a house we priced out our utils compared to condo fees and took into consideration the taxes too. Believe it or not when all was said and done it was cheaper in the house. This is my feelings, but I don’t think that condos are a good option for families, too many things you can’t control about your own home (condo commitee) and it wasn’t much cheaper to live in one a few months ago either. When we sold our condo and bought our house there was only a $60,000 difference and we go over double the square footage more with the house. I think for students or single people just starting out condos were a good option, but it’s almost too expensive for these people now, we’ll see how that changes in the following months. Also SaskInvestor how do you think condos are going to increase when they keep falling instead of rising? When we sold in May to now I’ve notices a drop of at least $20,000.

  I do feel that our bubble is busting. I talked to 2 people that are in the business sector this morning and they feel the same. They still can’t get people to work for them and both voiced the feeling that there has not been enough job creation to warrant an increase for this housing boom. I know you keep comparing to Calgary, but they are not Saskatchewan. We need to look at what we’ve got and see where we are going, not compare it to another province. We need to compare apples to apples. Alejo I agree with you. We can look elsewhere to say they are more expensive, but how does everything else compare?

  Jay I was wondering if you could tell me how Phoenix is fairing now? Do you think the market will increase as you get closer to winter which I think would be your busier season (please correct me if I’m wrong)?

• Doug M
  April 8th, 2009 at 2:01 PM

  All those numbers assume those 80000 families are debt free. My wife and I (1 kid) are professionals – but both with student loans – we’re good for about 140k from a bank (and we’re closer to 100K than 80K) . So what to buy? Pleasant Hill sounds like a nice name LOL. or a 450sq ft 1 bed/bath house. We’re wauiting to see what the buy in price will be for our apartment which is soom to be a condo.

  The other thing i see- if the vacancy rate is about 1.5% for and1% of suites become condos, and 25000 students arrive … maybe we can but a building together.

• Jedi
  April 8th, 2009 at 2:01 PM

  Thanks Batman and Sunny. I was aware of some of the draw backs of condos but was under the impression that the fees didn’t rise as fast. I also underestimated the condo board situation. My situation is more along the lines of Doug’s and it probably boils down to frustration with the market in its current state.

• SomethingDoesntAddUp
  April 8th, 2009 at 2:02 PM

  All of the comparisons I have seen of houses to condo’s seem to assume that housing prices will increase or at least stay flat. If house prices start to decrease then for condo prices to even stay the same they are just going to get more and more expensive relative to houses.

  Given the rise in inventory levels it is very plausible that prices will decrease or at best stay flat.

  Longer-term I would say that the condo situation looks bleak. All of these condo-conversions and new developments are only going to artificially increase supply. When the price of condo’s is so much higher than what it actually costs to build (as deduced from the 100%+ increase in prices when building costs haven’t gone up that substantially) you WILL flood the market. Another concern of mine is the University’s reaction to this whole mess. This is a major threat to them as one of the draws of U of S has always been low housing prices. I have already heard rumours of them building a second Sieger Wheeler complex. At any rate they have a lot of money to throw around and they will do what is necessary to keep students coming. I also wonder what sort of temporary impact all of the flipping and condo conversions is having on the numbers. It seems to me that there are a larger than average number of units that are out of commission until the construction gets done.

  People seem to draw a lot of faith from the low vacancy rates but those numbers can swing fairly quickly. I don’t know the exact rate but when I looked into it 3 years ago I was generally told that it was a mediocre rental market. High rental prices and low employment increases will only cause that to continue.

  Also, I read back a few posts that someone didn’t believe inventory would hit 700? Why not? What kind of senseless statement is that? The fact is inventory levels are rising and investors aren’t stepping in to fill the gap.

  To make a long story short it seems to me that most of the arguments for housing prices coming down are based on forward-looking evidence: chiefly low employment increases and the undeniable higher cost of living. Most of the arguments for prices to increase draw from the past: price increases over the last year, the present: low vacancy rates and the senseless: we are cheaper than Calgary and Vancouver. The only argument that carries any weight is the present vacancy rates but as I have said, this can change in a manner of months. I didn’t even get into what will happen if resource prices go down.

  What will happen next month or two months down the road? I have no idea. Long-term, you speculators have already taken all you can out of this province. I can’t wait to read your whining posts a year from now when the market is down 20% and you can’t sell your properties

• Norm Fisher
  April 8th, 2009 at 2:02 PM

  Something,

  Doug mentioned that he thought 700 was a stretch. He’s a smart guy that crunches stats for a living so he might have a better idea of what he’s talking about than I do, but like you, I don’t see that number as too far out there. We’ve has 15 consecutive weeks of more listings than sales so we inch a little higher each week, some weeks taking a big leap. The most recent weeks we’ve seen a surplus of 40-70 listings each week. If it’s the same this week we will cross the 600 mark, about double what we had a few months ago. Of course, if some of my colleagues are right and it fires up again in September we could see a big dent in that fast.

  Doug, is that what you see happening? Do you think it will go nuts again?

• Brett Ackerman
  April 8th, 2009 at 2:03 PM

  Norm,

  Interesting stats in saskatoon….we are sitting with 405 units on the market and 73 have offers pending so that narrows it to more around the 330 mark and 109 of those are in the washington park/general hospital area which is a very large rental area with most homes ranging in the 30-60k range. This only leaves about 220 unit remaining and only 150 of those are homes so our market here is still very low on inventory but their seems to be a few less buyers out there currently so september will be interesting to watch if things are going to taper off more or pick up to where we were in may.

  Regarding Condo’s I own a couple of units and have seen the fees rise approx $20 a year on them as I beleive some developers market them with low fees ($95-$99) here to make them look more attractive and this also makes most ppl alot less attentive to their water usage. In a 48 unit complex last year our water bill exceeded $24,000. and I beleive budget for this was around $15,000. Now this only averages out to $50.00 a month per unit but also keep in mind this is mostly young couples or maybe a small family livign there and very minimal yards to be watered so this is in my opinion a very large amount of water consumption. Another big hit was snow removal and lawn care. You get what you pay for and I found in 2 situations now we had to fire our current ground keepers and hire a more reliable company however in doing this we had to pay a significantly higher fee. I think in general owning a condo is a lifestyle you pay for and that’s little to no maitenance. Nothing in life is free and if you want the care free no maintenance style of living; your going to pay for it, and each year those fees are going to continue to climb with inflation as those people also live in your market and have to pay more and more for their living accomodations. The other big draw to condo’s are that they are NEW. Nothing to do but unpack. In a condo unit that was built last year in the northwest end 75% of the unit owners are late 20 early 30 single professional working women. Not being stereotypical here but I do find that most women I sell to typically want a home that is next to move in and the odd one wants to test their skills and techniques they learned from all the home flipping and reno shows they see on tv. So when your out showing 1970 houses that need a complete overhaul for 200 – 220k or they can move into a BRAND NEW townhouse condo and pick all the flooring,paint colors and cabinets for 220- 230k it just seems like a no brainer as a starter home. They never built these things to house a family of 5+ but for an entry level unit they are sure tough to beat the lure of NEW.

  Brett

• Norm Fisher
  April 8th, 2009 at 2:03 PM

  Hey Brett,

  Your inventory situation sound much like ours was in January. That can’t be much more than a five or six week supply. Regina could easily take off again if demand picks up some.

  Your argument for condos make good sense. Throw in five new appliances and a window treatment package and you’ve really got a winner with the entry level crowd. We saw many, many buyers go this direction for those very reasons. Still, I think they start to make less sense as the price starts to get to close to houses. Some of those buyers will go condo no matter what. Others, particularly young couples will often opt for a house, even if it needs a little work, to have a yard and a basement. etc.

  I am amazed at how much these units have increased since last year. I recall selling one of the last new Jastek townhouse condos on Pawlychenko last August for 125 or 126K. The most recent resale of a similar unit sold in July for $235,000. Wild.

• Alejo
  April 8th, 2009 at 2:03 PM

  Brett, I think you missed private listings. There are 407 listing on MLS which are sold by agents. There also are an additional 164 listings on Skhomes4sale.com, which are private listings (people selling without agents). Combined Regina currently has 571 units on sale.

  Interesting point to note: it would appear that right now agent listings actually has a more reasonable price. Most of the house listed on skhomes4sale has a higher price than comparable units listed by agent.

  Still, I think Regina’s current inventory is at 571. I think listings by both agents and sellers should be counted.

• Alejo
  April 8th, 2009 at 2:04 PM

  Also, for reasons unknown… the skhomes site only has 1 listing from City of Saskatoon. So Saskatoon’s inventory level are not effected materially.

• Sunny
  April 8th, 2009 at 2:04 PM

  Something I give you kudos! You echo my sentiments exactly!

  Alejo there is another site used for home sales in Saskatchewan – http://www.saskhouses.com. On there you will find homes from all over the province being sold privately. That is where we listed and sold our condo through. But yes I agree with you that some home sellers on the private sites are living in the past, about 1 1/2 months back when prices were increasing instead of tapering. You should see even the condos sitting on the site. Wow!

  Brett you are just talking about new condos. In Saskatoon there are more older condos being sold (Norm is this right?) than new. There are new developments going up in Lakeview and Willowgrove/Erindale. Yes, these condo units have lower condo fees, but the older ones need more work done on them and revamps so the costs are not low. And with a lot of these apartments to condos they don’t completely revamp, but add new decorating and call it a day. I agree that a single woman moving out on her own may want the security of a condo unit, but my point on my last post was that it is not as cheap as you think (condo fees) and the lack of control (condo association) is frustrating too. I think they are great if you are a young couple starting out, or a single individual so that you can have equity, but I would really hope families would not have to live there living long term. So overall I don’t see the price of them increasing in the next little while. I could be wrong but I agree with Something. I think the condo boom could be done.

• Hossein
  April 8th, 2009 at 2:04 PM

  Most of the private listings for Saskatoon are in this site: http://www.saskhouses.com

• Todd
  April 8th, 2009 at 2:05 PM

  Alejo,

  I don’t think Norm or any other real estate agents look at the levels of private sales because, quite frankly, they have no way of measure it. There are people that use skhomes and there will be others that sell via the paper and others that sell somehow else.

  And skhomes isn’t popular in Saskatoon. If you’re looking to sell privately in Saskatoon, people use a different website, which I won’t publish here out of courtesy to Norm.

• Alejo
  April 8th, 2009 at 2:05 PM

  I am looking to buy in Regina. Unfortunately there is no blog like this for Regina. So I am hanging around in Saskatoon’s Blog hehe.

• Northstar
  April 8th, 2009 at 2:06 PM

  Taking the $80,000 per household number that has been thrown around. With the banks lending up to 4 times that for a household, that’s $320,000 worth of house. Even if you slash $95,000 out and make it $225,000 because of student loans, car payments, children etc etc, that still gets you a good house in good areas. There are currently 244 houses on MLS right now under $225,000. Now granted 1/2 of them are in locations that aren’t the greatest but that still leaves 125 listing that are. Places like Holiday Park, Parkridge, Buena Vista, Exhibition, Sutherland, North Park, etc etc.

  I’m not understanding the people who feel that their $80,000 – $100,000 household income doesn’t buy them anything. I feel in certain situations that an “entitlement mentality” could be in play.

  The condo thing I’ve never been able to wrap my finger around. I understand that it’s a great option for a lot of people but it seems in almost every city that condo prices are within striking distance of housing. I don’t get it? Condos should be 1/2 the cost per sq/ft as a house however that’s only my opinion and supply/demand proves me wrong.

  I’m very interested in what will take place next spring with the elections. I think which ever party is elected will play a huge part on the future of the housing market.

• Warren
  April 8th, 2009 at 2:06 PM

  Okay, does anyone know where MoneySense pulled these numbers from? Last time I checked StatsCan (about 45 seconds ago), the mean (average) household income in Saskatoon was $41,991 in 2001(most current year of info). Assuming an Alberta-esque spectacular 5% annual growth in incomes, that would place us somewhere around $56,270 in 2007. And I guarantee that there hasn’t been 5% annual growth in incomes.

  Here

  Using the handy-dandy RBC mortgage rate calculator, this average household income of $56,270, with $200/month for taxes and $200/month for bills, 0% down, and a 5.5% interest rate; means that you would be approved for a whopping $175,000 home. Did I mention this calculation assumes absolutely 0 debt, lol?

  Doing it over, with the ridiculous $80,000 household income, and some normal debt ($40,000 in student loans, $20,000 on car(s), and $5,000 in credit cards/lines of credit), other factors all the same and you can now afford a $154,000 home, lol. And I have friends (single, not two University grads) who have 150% to 200% of that student loan debt by themselves.

  So I think the very talk that homes in Saskatoon are affordable for first time buyers is absurd. But what do I know, I don’t live in Saskatoon anymore, lol.

• Saskwatcher
  April 8th, 2009 at 2:07 PM

  I moved to Saskatoon about 10 yrs ago and population was ~200K at that time. In my impression this figure is pretty stable over yrs. But I recently saw a couple of articles on Starphoenix, which mentioned that Saskatoon population is ~240K. Is this accurate? How the population is increased so much in recent years?

  The trend of housing market is decided by many factors as stock exchange market. I have seen a lot of interesting discussions about this in this website. It’s clear current Saskatoon market is in a “pause” phase after a major market correction in the first half year.

  THE QESTION IS: Is the average housing price reached the peak? I doubt it.

  In one case, Norm mentioned to be in a balanced market the active listings should be at least 1000. In another case, Norm mentioned the figure would be 800. So let’s say one sign for a balanced market would be 800-1000 active listings.

  Overbidding is a sign of extremely hot market. To be in a balanced market the overbidding should down to zero.

  As long as there are overriding and less than normal active listings, which reflect the demand, there should be enough heat to push the average housing price upward. In one side, we definitely felt the hot temperature in Saskatoo’s housing market is decreased as demonstrated by the increase of active listings (will be ~600 at the end of Aug?) and the decrease of overbidding in terms of amount and percentage. But in the other side, after the average housing price hit 250K+ in June and dipped into 240K+ in July the price is bounding back again to 250K+ in Aug.

  It’s certain the housing price will not appreciate as fast as the first half year and more fluctuations will come in the coming months. Could we see the housing price will be in the range of 280K-300K next spring/summer with zero overbidding and active listing of ~800-1000?

  With the warning of US housing market buyers and banks are more cautions. This is good for Canada and Saskatoon to develop healthy housing market and economy and will reduce the likelihood to copy US version here.

• Cindy
  April 8th, 2009 at 2:08 PM

  There is a lot that many stand to loose in this market.

  1-There has also been repeated mention of investors purchasing multiple homes. This to me, indicates a falsely inflated market.

  2-I agree with the stats can results. I don’t think the average person in this town can afford to jump into this market. It isnt just student loans, rent, credit debt, ect. We have a higher cost of living – with all the flurry of the housing market, our eyes seem to be turned away from gas prices. Personally, my gas expense is now a major concern on a monthly basis. It is a big ticket monthly expense.

  3- With all the talk of the ethanol based fuels, now the food prices are going up as well. The world food bank says this is the first year in a long time – dont remember the date that we actually will have a world food shortage – thanks in part to the “greener gas” effect of ethanol.

  4- Interest rates are on the rise. There is speculation over a major world recession. There won’t be one of us that will not be touch by this.

  5- Sure Saskatoon is a great place – but something doesnt add up. Without the average income in this city dramatically increasing, I believe that we currently are seeing an inflated market. There certainly are people coming from Calgary, Edmonton, BC. These are, I would speculate, middle class folks just trying to get a home, a job and raise a familly, potentially retirees looking to capitalize on some equity. However, we need major global corps headquarters/offices here to demand the big buck paychecks that can afford the housing. I seem to recall that the three major cities for this are – Vancouver, Calgary, Toronto.

  Everyones entitled to their opinion, but there is more to consider than just supply/demand effects to this market. Where are the lower income famillies going to live – can they afford to live, relocate to another city – which city? Even with the $80,000.00 figure, I would be quite concerned for people with a $200,000.00 mortgage with the current interest rates if there is other debt to manage. Eventually the marketing of Saskatoon to other cities will falter, as people have to consider not just income, housing costs but standard of life issues. I would love to see current estimates for standards of life per city.

  I know that CAN banks are more cautious, but maybe the consumer is not cautious enough? I wonder about the repeat of the US market occuring in CAN.

• Batman
  April 8th, 2009 at 2:08 PM

  Warren,

  When my wife and I applied for our mortgage, the only thing that counted against us was long-term debt. In our case, we only had our $450/mo car payment. Between the two of us, we pull in about 60 – 65K. We were approved for roughly $250,000.

  Just thought I’d throw in something other than statistics.

• Norm Fisher
  April 8th, 2009 at 2:08 PM

  According the Stats Canada, the “median family income” for Saskatoon was $63,600 in 2005. That number tells us the 50% of the population has a greater income than that, and 50% have a lower income than that.

  http://www40.statcan.ca/l01/cst01/famil107a.htm

  I think I read somewhere that incomes in Saskatchewan grew around 4% in 2006 and the expectation was that they might grow slightly more in 2007. If that’s true, It’s safe to assume that over 50% of Saskatoon’s population have an annual family income which is greater than $70,000.

  A family which earns an income which is at this assumed median can “afford” to spend up to $1,750 per month servicing mortgage debt including principal and interest, property taxes and heating. With taxes estimated at roughly $200 per month and heating at approximately $100 per month, that leaves $1,350 per month to service mortgage principal and interest. At current rates, the buyer can expect to pay roughly $6.25 for each thousand dollars they borrow. Using these figures, they qualify for a mortgage of $216,000. If they have only 5% to put down, that puts them around $225,000 for a purchase price. They “qualify” to have additional debts which absorb up to $583 of monthly income (decent car, maybe a credit card).

  These numbers are based on a tradional 25 year ammortization. If one was willing to explore the idea of longer periods the amount which they could qualify for could likely be increased by as much as $20,000.

  This is at the median so the picture starts to look better for roughly 50% of the population who are earning higher amounts. Of course, it starts to look worse for the other 50% who earnd lower amounts.

• Norm Fisher
  April 8th, 2009 at 2:08 PM

  Saskwatcher,

  My estimate of the number of active listings required to balance the market is derived using the SWAG* method of statistical analysis, which is likely the most commonly used method with the longest history. The number is subject to some fluctuation based on perceived demand at the time the number is quoted. Keep in mind that as prices rise, demand naturally drops off, and vice versa. For instance, “investor” activity has clearly taken a big dive since around the start of July. Proponents of the “buy low, sell high” theory are less likely to jump into this market as buyers at this time. Today, my SWAG estimate indicates 800 active listings would be required with no more than 20% of those being “conditionally sold.”

  * Statistical Wild-Ass Guessing

• Cindy
  April 8th, 2009 at 2:09 PM

  Norm,

  I have nothing but the utmost respect for you. This is a great website, your humor and professionalism (despite some testing), and your commitment to Saskatoon Real Estate are to be commended.

  Thank You!

• Jedi
  April 8th, 2009 at 2:09 PM

  No offence to any meteorologists on the blog, but SWAG is probably more accurate than the weather!

• Saskwatcher
  April 8th, 2009 at 2:10 PM

  I saw a lot of fundamental analysis for the housing affordability in Saskatoon and I agree with the conclusions. But if we apply similar analyses to the housing affordability to cities of Vancouver, Toronto, Calgary, Edmonton or the whole nation what kind of conclusion will be generated? Residents in these cities can still find shelters suitable to their financial situation and personal preferences. Life is still going on.

  Housing price is directly driven by pure demand-supply ratio, same as stocks. Housing price is not rigidly decided by the calculation of income and interest rate. Otherwise, the prediction of housing price will become an easy math quiz. If you have ever played the stock market you will know stock price is not only decided by earning-price ratio. We are getting used to the relative cheap housing price in Saskatoon. But that market is flown away with the Saskatchewan River and will never come back.

• Jedi
  April 8th, 2009 at 2:11 PM

  Norm, and all others, regarding the listings, do they represent people who actually want to sell the house or, given the tremendous appreciation, is there a high quantity of people asking a ridiculous price thinking that if someone is silly enough to pay it, they can have it. I am assuming we would see some of this in any market, I am just wondering if there is a higher quantity of them now. I have seen a couple of houses on various real estate companies sites and the mls that have been on throughout the boom, and imo, are overpriced.

  ps. Maybe the situation has less to do with sub-prime mortgages and more to do with Miss South Carolina!

• Jason
  April 8th, 2009 at 2:11 PM

  I was just listening to the radio this morning and heard that the NDP are once again ramping their “move to Saskatchewan” campaign. I am just curious as to whether there are any numbers out there showing how effective the campaign has been, and a quick demographic breakdown of those of those who have made the choice to relocate back to Saskatchewan. I have personally observed a lot of boomers making the move back, selling their Alberta residences and planning to wind down towards their retirement in the somewhat more affordable centres like Saskatoon, but I haven’t heard or met many young couples making the move back. On the contrary, I have heard of more Saskatchewan people making the move out to Alberta over the past year than vice versa. In fact, just this week I found out that a couple of web developer guys who owned a business on Broadway have just decided to shut down their Saskatoon business and make the move out to Calgary due to greater economic opportunity.

  I am just wondering how successful these campaigns are in the long run, and if they are actually causing more problems in the short term by driving out many young people because of the rapidly rising housing costs, and instead seeming to attract a large portion of soon to be retiree’s. I am just hoping there are some numbers that show otherwise, as I can’t see this necessarily being a good thing.

• Northstar
  April 8th, 2009 at 2:11 PM

  All the talk of “Saskatoon wages don’t support this”, “Intrest rates are going up” and whatever else is being thrown around are all very rational, fundamentaly sound ideas. There’s only 1 problem… People aren’t rational!!!

  That’s why by talking statistics, only 8% of people in California are statistically able to own a house. Same with Vancouver. To own the average house in Vancouver “statistically” the average household income would have to be over $175,000. That’s accounting for all the debts that are being talked about in Saskatoon. (ex, student loans, car payments, children etc etc.) I can’t imagine Vancouver’s avg household pulls in more than $80,000 per year. Don’t quote me on that.

  Batman’s household income is $65,000 and he got approved for $250,000. Saskatoon has a ways to go before it tops out.

• Northstar
  April 8th, 2009 at 2:11 PM

  I’m in no way stating that what has happened is the healthiest situation for the city. It is what it is though and people will continue to flock and pay higher prices because they can.

• Johny
  April 8th, 2009 at 2:12 PM

  Jason,

  And therein lies the eternal question.

  Northstar,

  Have a look down south at what’s happening to people that tried to buy houses they couldn’t afford. Obviously we’re seeing people with low household incomes buy houses that proportionally/historically they wouldn’t have. The general theme of questions on this board seems to be, what are the consequences of this type of loose lending and over-extension… Again, have a look down south, people’s lives are being ruined.

  J.

• Northstar
  April 8th, 2009 at 2:12 PM

  Johny,

  I agree with you. I’m not arguing the point of “This boom is great” and lenders should start writing loans that don’t make sense to keep it going. What I’m arguing are the people that think the bubble in Saskatoon is going to burst because of 4 months of huge growth and whatever other reasons. Those reasons, although fundamentally are correct, in reality don’t really matter.

  If people who can’t afford a home ( 90% of the population in some cities ) didn’t buy one because “proportionally/historically they wouldn’t have”, then 10% of the population would own all the homes. That would create a far worse situation. That is why there is looser lending situations.

  As far as the States goes I am watching very closely. Mostly because my wife is from Texas and I’m currently invested in real estate there. What is happening in the states is actually a bit different then what you see in the media. The media portrays an impression that the US market is going in the crapper. Media likes that doom and gloom stuff. If you take a close look what you will see is over inflated coastal markets and a select few other major markets in a major correction. Definately partly due to bad lending. However interior states like Utah, Colorado, Texas, Tennesse etc etc are still quite strong. This is because a lot of people cashed in on their coastal booms 1-2 years ago and are buying cheap in other places. Sound familiar?

  Baby boomers want to retire some place nice and mortgage free. Saskatoon still fits that perfectly. An average price of $350,000, then not so much. I’ll start to worry about the Saskatoon market a year after Vancouver and Calgary start to cool.

• SomethingDoesntAddUp
  April 8th, 2009 at 2:12 PM

  Northstar,

  If people don’t act rationally then what makes you think you can predict in which direction they will push prices? The direction in the short-term is going to be subject to random forces. That is, it can go down or it can go up. All you have to grasp onto are fundamentals. Interest rates, inflation, household income, job growth etc.

  It is not that we are saying we can use these factors to conclusively predict but at least if you look at fundementals you can push the odds long-term in your favour.

  What you are talking about is just pure guess work.

• Warren
  April 8th, 2009 at 2:13 PM

  Jason wrote :

  “I am just wondering how successful these campaigns are in the long run, and if they are actually causing more problems in the short term by driving out many young people because of the rapidly rising housing costs, and instead seeming to attract a large portion of soon to be retiree’s.”

  It’s always refreshing when someone else actually gets it.

• Northstar
  April 8th, 2009 at 2:13 PM

  Something,

  “at least if you look at fundementals you can push the odds long-term in your favour.”

  The key words there is “Long-term”. I agree, fundamentals will always come in to play long term. It’s the same with stocks. What I am talking is short term ( The next year ). I always reserve the right to be wrong but I don’t ever remember a market taking off 30% in 4 months only to drop 30% in the next 6 months.

  Moreover the other arguments claiming Saskatoon doesn’t support this just don’t make sense to me.

  Wages – Saskatchewan ( Average )

  P.S.T. – the best next to Alberta

  Gas prices – if you think $1.09 is bad go to Vancouver

  Job growth – good

  Unemployment – Best next to Alberta (around 4%, under 3% in Saskatoon

  Intrest rates – 6%… Sounds good to me (Last I heard states was going to lower rates)

  Demand – Ask Norm how many hours he works per day.

  Resources – “A ton” including Oil, Uranium, Potash, Fresh water, etc etc. ( to think that resources are going to drop in price long term is crazy talk )

  There’s not anything anyone can say to convince me that this market isn’t going to contnue higher starting January / February.

  I appreciate everyones point of view. If next June rolls around and we’re not at least a $275,000 avg home price I will put BBQ sauce on my words and eat them.

  All in my opinion!!

• Jedi
  April 8th, 2009 at 2:13 PM

  I agree with you Northstar. I think what happens until Feb is moot (pending some type of major world event). We will know what the market is going to do based on whether it takes off or not Feb to April.

  If we’re wrong I have a great BBQ sauce recipe!

• Jon
  April 8th, 2009 at 2:14 PM

  Any decent tradesmen that was any good left that stinkhole Saskatchewan back in the late 80′s when Alberta needed real treadesmen and were and still are paying top dollar for years yet to come.Saskatchewan is a cesspool of big dreamers looking for a quick way out.I’ll give ya some advice!Drive west young man and live a better life where your hard work is appreciated by being paid good wages and steady work.There is no rush to come because Alberta she will always wait for ye strongbacks full of fine saskatchewan made quality workers,yes you!Take a step up in the world and come and share some Alberta wealth ye good man!

• Warren
  April 8th, 2009 at 2:14 PM

  Do you see the kind of rednecks I have to put up with out here? Yeesh…

• Batman
  April 8th, 2009 at 2:15 PM

  Don’t lump me in with the folks down south who over-extended themselves by buying homes that they couldn’t afford. My wife and I did some extensive budgeting before purchasing our home and made sure to leave plenty of buffer in case if the unthinkable were to happen. We’re protected against interest rate hikes for five years; by then we will have advanced a bit more in our careers and hopefully we will be in a better position to make our next step on the property ladder.

• Jon
  April 8th, 2009 at 2:15 PM

  Keep dreaming boys, cause she’s back to bologna and kraft dinner after this little government made real estate gimmic is finally gonna ruin yer steaks!

  Thats how the cookie crumbles as they say on the poor side of town.Which ive spent most of my life living in,with great foolish pride I might add.

  In retrospect to the dumbass comments on the gov’s advertising waste of money site,and so called Sask sayings,they spent a million dollars on tourism.OUT OF PROVINCE for crying out loud.

  Mean while the damn food banks cant provide enough and the working class move to Alberta cause they cant afford the high costs of rents and mortages in Saskatchewan.

  Calvert needs to get his damn head examined regarding this big tourism out of province spending idea.

  Man!There are so many organizations that could benefit from that type of funding.What a waste of hard earned tax dollars!!!!!!!!

  Oh, but what do I know,Im just a construction worker…wink-wink.

  Goodaye-eh!

• Jon
  April 8th, 2009 at 2:15 PM

  Oh and Warren,

  Its the redneck pride that put food on your family’s table and many others for generations take a look at your provinces history boy!

  Working people.I mean sweat and tears, hard work.You should be ashamed of your little pink soft hands.you oil of olay-boy.

• Guest
  April 8th, 2009 at 2:16 PM

  I hear that a new airport opened up in Fort McMurray to allow workers to commute more easily there while living in other cities. I’m thinking that Saskatoon is almost as close as Edmonton and is 100 times nicer to live in than Ft. McMurray itself which is an industrial hellhole. This could keep prices firm in Saskatoon for some time.

• Norm Fisher
  April 8th, 2009 at 2:16 PM

  Guest,

  Yes, we already have people working in Fort Mac living here. It’s a good option given the insane prices out there.

• Norm Fisher
  April 8th, 2009 at 2:16 PM

  Jon,

  Haven’t you got some livestock to tend to, or something?

• Northstar
  April 8th, 2009 at 2:17 PM

  There’s a lot of talk about the avg home price here on this blog. I see the avg intelligence level just dropped 15% at around 11:00pm last night.

• Jedi
  April 8th, 2009 at 2:17 PM

  I think it will continue to drop as the investors pull out! lol

• Warren
  April 8th, 2009 at 2:17 PM

  Jon:

  Ummm, maybe I don’t post here enough to be noticed, but I was born and raised in Saskatchewan. And proud of it. So actually, it was my family’s intelligence and hard work that put food on our table, not “redneck pride” (only in Alberta and maybe Alabama are those two words ever used in a sentence). I’m just here in redneckville (Alberta) to take your money.

  Jon wrote “Saskatchewan is a cesspool of big dreamers looking for a quick way out”. Ummm…you do live in Alberta right? The province that fancies itself now the centre of the energy universe, lol. If that isn’t dreaming, I don’t know what is. Go to Houston, and see what they think of the backwater little office in KalGary.

  I’ve done hard physical work in my life, on many different jobs. Luckily, my parents taught me the value of an education though (and the ability to spell correctly), and (two degrees later) I don’t have to go outside when it’s -40 and swing a hammer to make a living. But hey, to each their own.

• SomethingDoesntAddUp
  April 8th, 2009 at 2:18 PM

  Warren,

  While I don’t generally agree with Jon your take on Alberta is all wrong. I spend more than a bit of time prowling through investment newsletters in the US and they sure don’t talk about Texas oil to much these days. Not when they are thinking of future returns. You do, however, hear quite a bit about the Canadian oil sands. Now I am not personally a believer in peak oil but as far as American opinion goes, Alberta is on the map.

• Warren
  April 8th, 2009 at 2:18 PM

  SomethingDoesntAddUp:

  The newsletters don’t talk about Texas oil because it peaked back in 1972 (there isn’t much to talk about). I’m not talking about the oil itself (since the tar sands is full of bitumen, not oil, it’s a moot point anyways), I’m talking about the energy industry. I’m not saying this in an accusatory tone, but have you been to Houston?

  And I’ve beeen over the issue of peak oil on a previous thread. Your belief or disbelief in it doesn’t make it any more or less of a reality than your belief or disbelief in gravity. Unless you belief in abiotic oil, there are only so many hydrocarbons on the planet. The fact they these reserves will eventually be depleted is an inevitability, the only question is the time frame when it will happen.

  Anyways, from someone who works for one of the five supermajors (six if you count Total, but they really have no NA presence), just take my word for it – they’re somewhat interested in the oil, but they view Alberta as a cute little field office. For God’s sake, all the execs at Shell thought they were going to lose their jobs after RDS bought Shell Canada out completely; it was assumed that all the exec positions would go to Houston.

  Anyways, I know this sounds like I’m playing both sides of the field by saying this, but while we are running out of cheap and easy oil quicker than most in the industry want to admit, there’s more left than just in Alberta (and in places you don’t have to pay some guy $50/hour to weld a pipe for you). I’m not saying that Alberta isn’t “on the map”, but this whole idea of Alberta being the centre of the universe is getting really tiring. It’s a province with good and bad aspects like all the others.

  Sorry, but when people who can barely string a coherent sentence together try and trash my home, it gets a little aggravating.

• SomethingDoesntAddUp
  April 8th, 2009 at 2:19 PM

  I actually have been to Houston before. Housing prices there are comparable and perhaps even cheaper than in Saskatoon by the way .

  I think the point I was making was exactly what you said , American oil production is declining, so I’m not sure what we’re arguing here. I guess we have two different perspectives on how oil will pan out, you foresee peak oil and I believe oil will continue to be found and ultimately replaced by alternative energy. However, if you are right then you’d better believe Alberta is going to be a powerhouse. I don’t know where all the headquarters will go, and maybe you’re right that American’s will never give it the respect it deserves but then again money always talks.

  The estimates I recall are for 3 million barrels per day by 2015. I am not sure the exact price they get but oil is currently at $70 per barrel and if peak oil happens that number will shoot to $100 or higher. That translates into some $300 million revenue per day and $100 billion per year. Much of that would be absorbed by costs but you are still going to see a lot of money poring into the province over the next decade if things pan out as you expect. For a peak oil believer I don’t know why you’re not more optimistic.

• Warren
  April 8th, 2009 at 2:19 PM

  SomethingDoesn’tAddUp:

  Yeah, don’t remind me about Houston real estate, lol. Makes you really wonder about what a house is really “worth”. Did I mention there is no state income tax in Texas too?

  My point is this…Albertans are making two very large assumptions that I am hesitant to make. One is that even though conventional oil and gas production in the province has peaked, oil companies are going to be falling over each other to develop the tar sands. I’m not saying that production won’t continue to increase in the sands, but there are so many issues and risks involved that aren’t for many other competing sources.

  -water requirements for bitumen extraction

  -natural gas requirements

  -construction of upgraders for the bitumen

  -pipeline construction to carry the crude to markets

  -exploding input costs, including increased labour demands

  -environmental restrictions, especially when Ontario inevitably votes the Liberals back into power

  The tar sands aren’t nearly the endless ATM for the oil companies that people think they are. And already, the 3 million bpd projection by 2015 is a little optimistic as projects continue to get postponed or outright shelved in the face of increasing costs.

  The second assumption that I am reluctant to jump to is that increased production will lead to increased wealth for the province and its citizens. The Albertan government themselves is projecting resource revenues to be the same in 2015 as it is now, even though oilsands production is expected to triple (due to the differing royalty structure for conventional vs. non-conventional oil and gas). I live here and I think I’m making out like a bandit, but I see so many people every day who are worse off than they were five years ago. The one comment that Jon made that I actually do agree with is how a lot of the people moving back to Saskatchewan are being pushed out by higher costs that they can’t afford more so than choosing to cash out.

  So I guess my argument with many Albertans is with the belief that having bitumen deposits is going to make the average Albertan wealthy. I think a lot of the profit from that $100 billion a year you quote will be going to…you guessed it, head offices.

• Warren
  April 8th, 2009 at 2:19 PM

  Sorry to have gone off on a tangent. In getting back to real estate, since many of the bulls in Saskatoon like to compare Saskatoon to Calgary as justification for how much higher prices can go; I thought people might be interested in some recent developments. The avg price of a SFH fell about $20,000 in August, and there are now almost 5,000 sitting on the market for sale. I am hesitant to make any predictions, but I think (one way or the other) the next couple of months will be very interesting. I think it will all depend on what direction the media steers the general population. It very much becomes a self fulfilling prophecy, RE goes up because the media tells people that it is going up. Now that people are starting to see the effects of the bubble bursting in the States, some of that psychology has to filter back up here.

• Doug
  April 8th, 2009 at 2:19 PM

  I think it comes back to some earlier comments that psychology definately moves the market but over the long term, its tough to beat the underlying economics. Northstar did a really good job of pointing those out earlier in this thread.

• TrySayingTH
  April 8th, 2009 at 2:21 PM

  Hello Norm,

  I am looking forward to reading your new review. I highly appreciate your effort for posting the information.

  I keep reading your weekly reviews since you start tracking down saskatoon housing price. I am not either an enocomist or analyst of real estate market. I do want to buy a house in Sasktoon but the price is absolutely prohibitive. I argued with people around me with this point of view that the house price went up in a very unreasonable way. The mainstrem opinion about the terrible price is based on ongoing Saskatchewan economic booming. Booming certainly benefit people by providing many more job opportunity and means raised life level. But in the case of saskatoon, the housing price pre-boomed definitely, which inevitably reduces its magnetic power to those people who want to immigrate into the province but doubt possibility to find a job paying for mortgage and sustaining a decent life level with an ease of mind. At least I don’t want to be only a slave of a house. Saskatchewan is booming or saskatchewan real estate is booming?

• jrochest
  April 8th, 2009 at 2:21 PM

  I work at U of S. I make 80,000 a year. According to Northstar, I should be able to buy a 320,000 dollar house or condo.

  Mortgage payments on a 30 year loan for 300,000 work out to 2,000 a month at current rates, leaving me with a little over a grand a month to live on, post deductions, taxes, insurance payments et al.

  Now, that’s all just ducky fine if you’re imagining that over the next 20-30 years I’ll not going to, oh, own a car or replace the roof or go on a vacation or have dental work done or send a kid to university or, god forbid, buy some clothes. If I’ve not gotten rid of every doit of student loan or consumer debt, I’ll have even less to live on.

  And, of course, this is to buy a house or condo (if condo, then there are fees on top of the mortgage) in a town of 200,000 people, in a province with a declining population and a very low-end economy by comparison with major urban centres. The upshot of this is that I’m putting a good 50% of my income into a property that may have very little market value when I come to sell. I’m pretty sure that people will still want to buy in Vancouver, Montreal or Toronto, but Saskatoon’s long-term prosperity is iffy. I don’t think the place will be a ghost town, but there’s not enough here to make it boom like a drum.

  All this explains why I’m not buying. And won’t buy, bluntly. I live in a rental apartment, and I have a roommate: there’s a crunch right now, and yes, rents may go to Toronto levels, but I don’t think they’ll stay there. Tenants are single people and young couples: they move on to greener pastures when things get too expensive. Rents may go to 2,000 a month for a one-bedroom, but I don’t think they’ll sustain that in the long term.

• Norm Fisher
  April 8th, 2009 at 2:22 PM

  TrySayingSth,

  Thanks for the kind feedback. I appreciate that you’re following the blog. Thanks for stopping to comment.

  I certainly can’t disagree that house prices have outperformed the economy as a whole. While I think things are generally good in Saskatchewan and that we have great potential for future economic growth we haven’t suddenly become prosperous. Income growth is coming nowhere near matching growth in housing prices and it does present a real dilemma for Saskatoon people who were not able to enter the market before things took off.

  House prices can only be sustained through equity and income. If people with lots of equity stop coming in, house prices may decline unless incomes see some growth. Without the inflow of equity you can’t support rising prices without rising incomes.

• Norm Fisher
  April 8th, 2009 at 2:22 PM

  jrochest,

  Thanks for the comment.

  I don’t say this to minimize your concerns but there are some problems with your math. If you have an annual income of $80,000, you have a net income of $57,210 or $4,767 per month so you’d have a little more than “a grand a month to live on” with a $300,000 mortgage. Further, a 25 year mortgage of on that amount is $1,875 based on today’s competitive rates. Provided you’re not bogged down with other debt you would have no problem qualifying for the amount stated and should be able to manage the payments. You’re probably far better off than the average guy from Saskatchewan.

  That is not to say that you should, but at least you could and there’s not too many single people who have the option to buy a house priced 20% above the average.

• jrochest
  April 8th, 2009 at 2:23 PM

  That’s not what it says on my paycheck, alas. I take home between 3,800 and 4300 a month: more later in the year, because the CCP and EI payments stop being deducted. Part of this is because I make maximum payments to the pension fund.

  According to the RSBC mortgage calculator, I’d be paying around 7.30 % for a 25-30 year mortgage: that’s over 2,000, depending on how you slice it. Add to this student loan payments of 500 bucks a month and yes, indeed, you’re talking “a little over a grand to live on”.

  My point wasn’t to stress my poverty but the opposite. I make good — nay, wonderful — money, and in a town this size home ownership should be a no-brainer. But it’s not, mostly for the reasons I got into later — I know in my bones these prices will not hold in the very long term.

  If my reaction to this market is “no thanks”, I can’t imagine what it’s like for the average joe with a family.