Saskatoon real estate: Week in review (August 4-8 2008)
Looking at this week’s sales, you may have thought it was Christmas for Saskatoon real estate agents, and not in the good way. 
Just 38 properties, including 35 in the single-family homes and condominiums categories were reported firmly sold, the lowest number of weekly sales since the week of January 7-11. Another 24 properties display the conditionally sold flag on the Saskatoon MLS system.
New residential listings were on the low side in comparison to recent weeks as well. Only 135 properties were listed for sale including 87 houses and 41 condos, but given the slower sales activity, total active listings found a new high point at 1,555. Of those, 1,011 are houses and 436 are condos.
The average selling price for the week spiked to a new high of $332,529 but the upward surge can be attributed to one residential sale that topped $1.1 million dollars. Selling about $200K off of its list price, the same property drove the average underbid to a new high of just over $18,000. Removing this one property from the mix brings the average selling price to $308,485, still the highest number we’ve seen since the week of June 23-27. The average underbid would also be adjusted to $10,865, which is more or less on par with what we’ve been seeing in recent weeks.
This week’s soft sales performance could be one of those strange anomalies that we see from time to time in the weekly stats but August is typically expected to produce above average unit sales and this gives us an incredibly slow start in reaching the numbers posted in previous months of August.
See a Google map displaying the boundaries of Saskatoon real estate “areas” here
Data collection and calculation for our statistical reports
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
Follow our daily updates on Twitter @SaskatoonHomes.
Norm Fisher
Royal LePage Saskatoon Real Estate
203 comments so far. We'd love to hear your thoughts.
April 28th, 2009 at 2:33 PM
WOW! 332K average price? Saskatoon real estate just keeps soaring! Nowhere but “up” from here…
April 28th, 2009 at 2:33 PM
Lol! Okay “NormFan.” I have several properties that I’d like to discuss with you. Call me.
April 28th, 2009 at 2:35 PM
Sorry Norm. I love the blog and all, but I am not currently “in the market”. You see, I already have a 40-year mortgage, a second investment property paid for with a line of credit, two new vehicles, and loads of credit card debt. I would love to buy a third property from you, but I would not want to make my first financially irresponsible move, even if all the market indicators are positive for buyers at this point.
Maybe a 350K average next week? We just need to keep those low-dollar condos from selling for another week…
April 28th, 2009 at 2:35 PM
sarcasm is the lowest form of wit sir.
April 28th, 2009 at 2:36 PM
and I always thought it was “knock-knock jokes”
April 28th, 2009 at 2:36 PM
I wonder how sales numbers will respond to the Merrill Lynch report, even if a buyer doesn’t believe it, there’s got to be an impact, and it would be crazy to pay list now, when 200,000 Saskatoonians have just been beaten over the head by media coverage of over valued Saskatoon housing (the same way they were beaten over the head with “boom” talk up until … well this article)
Sure sale numbers will be down, but by how much?
And total listings continue to climb.
Plus Norm says Saskhouses has 420, would be interesting to see if with all private sales, Saskatoon is above 2,000 listings right now.
April 28th, 2009 at 2:39 PM
NormFan,
No point in getting silly at this point.
Doug,
You’re very slick at getting your talking points out there. “Norm says,” Lol.
I would say that 2000 would be an easy number. 1550 plus 420 pretty much puts you there.
April 28th, 2009 at 2:39 PM
NormFan,
C’mon, you could’ve given yourself a pseudonym a little less, well, embarrassing to Norm.
Real estate agents have feelings too.
April 28th, 2009 at 2:40 PM
That Merrill Lynch report was just put out to make people not want to invest in housing and more into the Mutual funds they are having a hard time selling. The more doubt they put out the more money in there pockets as people switch from one to the other.
April 28th, 2009 at 2:41 PM
Crikey,
Tim, No doubt that these guys have some interest in shifting investment focus away from real estate. I will be delighted in mutual funds stop sucking so badly.
April 28th, 2009 at 2:42 PM
Hey Crikey – there is nothing insincere about my pseudonym. I am a “Norm Fan”, and have been a lurker on this blog for some time. I find it quite odd, and even a bit embarrassing that this is the best on-line source for Saskatoon real estate statistics. Further, the fact that Norm seems to have a firm grasp of the ways that statistics can mislead the uninformed (and he does things like remove outliers), also add considerable value to this site. I only wish that the people at the Star Phoenix were as careful and thorough when reporting numbers.
Agents with feelings? Perhaps…
April 28th, 2009 at 2:43 PM
NormFan,
I didn’t mean to offend. Yes, the I would argue MSM tends to report the news adding to the “boom” mentality. No one likes to be the bearer of less than glowing news about the place one calls home. This isn’t just a local issue, as I’m sure you’ll discover, if you continue researching. I think it’s difficult for many people to face and prepare for the possibility that one’s house might not be the “gold mine” or the “retirement fund” that many thought it was going to be. Even if they didn’t think that, it’s easy to feel “misled” by the banking industry. For example, do most people know that over 25 years, the average $300K home will cost a little less than $600K over 25 years (principal plus interest at 7%), but over 40, the same home will cost over $900K (principal plus interest). No, most banks will not point that out, because they will make far more money off of you if you choose the longer term. Thankfully, the baking industry is starting to see the downside of this foolishness by looking at the consequences southward.
Yes, this is the best on-line source for Saskatoon RE news and statistics, bar none. No argument there.
Good blogging.
April 28th, 2009 at 2:44 PM
10 days does not make a market but it does seem like Calgary is accelerating in their free fall since last July.
Right now the average house being sold is 429k, down from a high of 505k in July 07.
Condos are 266k, down from a high of 332k in May 07.
These are some great stats pages to research if anybody wants.
http://www.findcalgary.ca/
http://www.findcalgary.ca/aPage.jsp?aPageId=20
April 28th, 2009 at 2:46 PM
Bear and Bull market graph
http://www.mymoneyblog.com/images/0708/inflect.jpg
April 28th, 2009 at 2:46 PM
Have you seen graph on Calgary house prices interspersed with “interesting” economic predictions, George?
http://albertarealestatewatch.blogspot.com/
This is good too:
http://www.canadian-housing-price-charts.235.ca/
“Calgary’s detached house prices dropped another 4% M/M and 10% Y/Y (chart) as sales dropped another 9% M/M and 12% Y/Y (scorecard). Condominium prices also continued their path down 6% M/M and 7% Y/Y while listings grew by 77% Y/Y. Money flow is moving out of Calgary real estate despite the record price of oil in July and as of May the percentage rate of price change has turned negative.
Edmonton’s detached house prices slipped another 0.5% M/M in July and are down 9% Y/Y (chart). Combined residential sales are down 16% Y/Y while inventory is up 70% Y/Y (scorecard). Alberta prices are sinking and Edmonton holds the current Canadian distinction or providing their unwitting buyers who bought at the peak an 11% loss in wealth. If you put 20% down, you have nine left to go.”
April 28th, 2009 at 2:46 PM
Zippy,
thanks. I have seen both those websites, not for awhile though.
Prices are now on par with Dec 06 in Calgary.
With record invenotry on MLS and CMHC says there are over 13,000 houses under construction in Calgary. Add over 20,000 MFH under construction as well, sales at under 2000 per month it does not take a rocket scientist to figure out prices will continue dropping there.
April 28th, 2009 at 2:47 PM
“it does not take a rocket scientist to figure out prices will continue dropping there”
No, and all of that data was collected before the recent drop in commodities:
http://www.bloomberg.com/apps/news?pid=20601087&sid=apgNk43p76p0&refer=home
April 28th, 2009 at 2:50 PM
As a complete aside, it does seem to me that the average bloke on the street is just starting to realize that something is up with the housing market. Despite the best efforts of the newspapers to assuage them that all is well.
And Normfan welcome out into the open. I do not envy you your 40 year mortgage and its attachments. Have you considered getting rid of that second car to trim the expenditure and line of credit? I am lucky enough to live within a kilomtere of my workplace and have been lugging my rotund frame in regularly.
In any case,I have never quite figured out why Canadians think they need a second home for the three months of the year when the land is warm and sunny.
April 28th, 2009 at 2:52 PM
So the majority of you will be happy to see that I’m leaving. Maybe less happy that it’s for a lot of money in Calgary. Not buying out there either, but my rent for a well situated 2 bedroom apartment ($1,000) is similar to Saskatoon. Following Crikey’s advice, I’m going to invest my substantial savings, conservative for now, and my new job is actually willing to pay me for/pay for finishing some extra training. Maybe I’ll move back to Saskatoon some day, if prices go way down, otherwise I’m retiring to BC in 30 years, for cheaper than it is to live in Saskatoon if prices stay the same in Vernon/Saskatoon. Who know, if Calgary prices continue to drop, maybe I’ll buy there in between once I’ve built up the savings.
And Norm, you brought up the saskhouses numbers … i wouldn’t have mentioned that their inventory continued to climb if you hadn’t first! Plus with the whole ignoring their sight thing I didn’t actually know their total number.
April 28th, 2009 at 2:53 PM
I have a mortgages question. I see a lot of talk on here about the pros and cons of the 25-40 year amortization. What is everyone’s opinion on fixed vs variable? I may be getting one here shortly so I would love any feedback anyone had. I’m most interested on whether there is much difference on what goes to the principle.
Thanks!
Sean.
April 28th, 2009 at 2:56 PM
Good for you Doug! I’ll be happy when society out here stops telling thier children that you can’t make it anywhere else but Sask beucase it’s the ‘only affordable place to be’.
I remember being told that left and right and even now by coworkers and middle aged Saskies.
Enjoy Calgary!
April 28th, 2009 at 2:57 PM
i went with 5 year variable, 4.15% interest and i can lock in anytime at around 5.5 or something like that. and its looking like interest rate arn’t going anywhere until atleast 2009, and they could still drop, depends what happends with inflation. you just have to pay attention to when they are going to announce interest rate changes. even if it goes up a full % thats still only 5.15. If inflation sky rockets so will interest rates so that means its time to lock in
April 28th, 2009 at 2:57 PM
Doug,
I will be sorry to see you go… you’re the one who directed me to this site first!
I wish you much success- do visit once in awhile and let us know what you’re up to.
April 28th, 2009 at 2:57 PM
Hey Doug,
Congratulations on your new gig! Glad to hear that you found a good opportunity in Alberta. I had a funny feeling that it might only be a matter of time.
Wishing you the best.
April 28th, 2009 at 2:58 PM
Sean,
If history truly does repeat itself, you can always count on me to make the wrong mortgage decision. I locked in, so you should probably go with a variable.
Seriously though, I think if you read the fine print you’ll find that you’re “lock in” rate also fluctuates as your variable rate does. In other words, if the variable rate increases to 4.25, you’re potential lock in rate likely goes to 5.6. If not, the wise thing to do would be to stick with the variable rate until it reaches 5.5 and then lock in.
April 28th, 2009 at 2:59 PM
Glad to hear things worked out for you in Calgary, Doug. I am actually heading out there next weekend to check out a few firms as financially Calgary seems to make much more sense than staying here in Saskatoon. Seems like there are two groups here in this city, the “haves” who were fortunate to get in before the boom, and the “have nots” who weren’t home owners and are still stuck making the same mediocore wages yet expected to pay 2.5 times for the same house the “haves” enjoy. One can stay here and hope wages pick up so that they can enjoy the same quality of life as the “haves”, or they can simply cut the rope and go to a city where they aren’t treated like second class citizens and constantly made to feel like buffoons for not being fortunate enough to buy pre-boom. This smugness that now characterizes Saskatoon is probably the biggest turn off to me. We went from a humble small townish feeling city where money never seemed to be of big priority to where we are at now where you can’t walk into a coffee shop or store and not hear the “haves” bragging about how much their home has appreciated over the last month, and how rosy things are in Saskatoon. Never once would these people dare to stop for a moment and consider the other side of the coin; those whose rents are rising exponentially and those whose dreams of home ownership have been crushed by the new so called booming Saskatoon economy. No, they would rather brag about how smart they are and take turns patting themselves on the back about how clever they were to buy before prices shot up with little concern for folks like the guy behind the counter who is wondering how he is going to make enough $$ to cover his latest rent increase.
The new reality of Saskatoon is that it has become city driven solely by greed.
April 28th, 2009 at 2:59 PM
Jesse G. wrote:
“I remember being told that left and right and even now by coworkers and middle aged Saskies.”
My experience has been that its these “middle aged” people who cannot fathom their house falling in value. Which is very strange because a lot of them lived through the 80′s bust and apparantly didn’t learn anything.
But when I moved out to Calgary, it was the middle-aged people who had owned their home for a decade or more who told me how their house was worth “at least $500,000″. I would ask them if any of them knew how much $500,000 was – ie. around $3,500/month with a conventional mortgage after property taxes and insurance. These are people in their peak earning years, and none of them would be able to purchase their own homes at the time. Yet they all thought the prices were accurate. Searching for the greater fool, I guess – crazy…
As for Doug – congrats on pursuing a better life for you and your family.
I’ll repeat myself like a broken record here – but what are the long term effects of this “Saska-boom” going to be? Early retirees have cashed out of Alberta and moved back to Saskatchewan. And youth, like Doug (his statement about retiring in 30 years makes me assume he’s 30-ish) are leaving the province again, for more money and less expensive living. And this is good for the long term how?? The people you should be keeping to grow your economy and fill your jobs are bailing and being replaced with people at the end of their productivity. At least the Smitty’s in Saskatoon will be kept busy.
What’s worse is that the youth who are staying have (for the most part) taken the whole “buy now or be priced out forever” bit – hook, line, and sinker. Many with $0 down and/or 40 year amortizations, so it won’t take much for them to be upside down on their mortgage.
April 28th, 2009 at 2:59 PM
K, sorry for the quick double post, but wow.
FrustratedRenter, that is one of the greatest posts I have ever read. Period. Amazingly well put.
April 28th, 2009 at 3:00 PM
FrustratedRenter,
Good entry. I sense and share your frustration with the newer mentality of the citizens here.
I mimic your thoughts as I too am one of the ‘poor folk that didn’t get in on time’ and am continuously asked when I’m going to go out and buy a house since I’m 30 and ‘i’m not getting any younger’. Lately I’ve changed my ‘cannot afford it’ self pity response, to a more blunt response…I respond by saying ‘someday, but it won’t be here in THIS city OR province’. That shuts people up good. They don’t keep pushing or asking when I’m going to get into a house before it’s ‘too late’. They get a pouty look on thier face and give me an ‘oh.’. It’s priceless.
April 28th, 2009 at 3:00 PM
Congratulations, Doug!
I don’t think anyone will be glad to see you go, except maybe the resident bulls.
Good luck in Calgary; this seems like a very reasonable choice, and I’m pretty sure you’ll not be the first nor the last to make it.
April 28th, 2009 at 3:01 PM
Doug and all;
Calgary is full of Saskatchewan and Saskatoon ex pats. For some it has worked and for others not so much. I empathize with your frustration but don’t know how much more satisfaction you will find in Calgary. You may discover in five years that you have been working your a#* off; made (and spent) a ton of money at the expewnse of some personal aspirations. Calgary is a great city with its own problems. The smugness mentioned in Saskatoon will be replaced by arrogance, the crime here is more mobile; this past weekend a young man was shot and killed in broad day light in a decent residential neighborhood.
If you think Saskatoon has growing pains with traffic and construction, wait till you hit Calgry rush hour.
A constant refrain last year in calgary was “If I had to buy my house now, I couldn’t”.
But congratulations and best of luck to you. For the right mind set, Calgary is a great place.
April 29th, 2009 at 9:02 AM
Ken –
I think Doug said he wasn’t planning to buy in Calgary.
The draw seems to be more money and comparable rents, not “affordable housing and no traffic!”
April 29th, 2009 at 9:02 AM
I’ve heard of many people (younger people) getting out of dodge here and renting a place too. Funny thing about traffic. I was in Calgary a few weeks ago, and needed to get from Downtown (chinatown) to Lake Bonnavista area, and it took (I timed it) 14 minutes on a Saturday afternoon at 5pm. I’m not saying anyone is wrong, just saying the HOURS OF COMMUTING argument doesn’t stand up to me anymore as it once did. Don’t even get me started on the bus system in saskatoon…
April 29th, 2009 at 9:02 AM
Norm was on the CBC radio this morning!
Much deeper voice than I expected.
April 29th, 2009 at 9:09 AM
Jason J. said “I went with 5 year variable, 4.15% interest and I can lock in anytime at around 5.5″
The actual question and answer is what increase in monthly payments does a 1.5% increase in interest amount to? You will not be paying 1.5% more in monthly payments but I roughly calculate 25% more.
Are there any amateur statisticans out there who can get a more accurate figure? (Don’t ask me how I do dosage calculations!)
Frustrated Renter: Excellent post!
April 29th, 2009 at 9:09 AM
Excellent point, Sam.
Luckily, you’ve got the nurses checking you prior to giving those meds, hmm?
You can plug the numbers into any good online mortgage calculator, but this is the difference between a monthly payment on a 25 yr., $250,000 mortgage at different interest rates:
monthly payment at 5%= $1,454.02
monthly payment at 6%= $1,599.52
monthly payment at 7%= $1,751.04
Now, I’m not saying I’m expecting interest rates to jump suddenly (who knows at this point), but that’s qite a difference in monthly payments, no?
This might be best anwered by accounting guy or Warren.
Gentlemen?
April 29th, 2009 at 9:10 AM
Doug,
Good luck hope you find Calgary as enjoyable as you think it is.
Dr guy,
That Dr guy that posted on here before I reinvested into BQI today buying at 3.71 im gonna ride the wave with you!
April 29th, 2009 at 9:10 AM
Doug,
good luck in Calgary. If you are interested in buying in Calgary, I would wait. Watch the vacant homes the specs got caught with. Whether it is true or not, one guy who has a blog in Alberta did this and paid 125k less than listing ( I could be wrong, but close to this) With over 2000 listings that are VACANT, write up 2000 lowball offers, someone should be willing to bite!
April 29th, 2009 at 9:11 AM
Armoth,
I have been intrigued by Oilsands quest since you mentioned a while ago. I do believe it is a good buy and I will buy, but not for awhile, I believe oil has a bit to go down yet, (80-100) and this will affect the BQI price.
They do not have any earnings yet, so it is still speculative. And it seems that most people ( investors ) are waiting for steam injection results and a buyout.
Sorry, I know this is a blog about RE.
April 29th, 2009 at 9:11 AM
Before I put any cash into Oil Sands Quest i would wait to see what opti stock does once they start producing at the opti/nexen long lake project. If they can’t make a go of it O.S.Q is done for.
April 29th, 2009 at 9:11 AM
thanks Wesco,
You seem to have the best understanding of this. I have looked at this website for BQI.
http://finance.google.com/finance?client=ob&q=AMEX:BQI
Stocks with no earnings are speculative, and are usually penny stocks. I just wonder if I am late too the party. Would have been a great buy in July05.
April 29th, 2009 at 9:13 AM
Wesco,
The main interest is Axe Lake and their test project is going to be done this winter or early spring. Eric Sprott( Canadian Billionare) bought 11 million shares for $4 a piece which I use myself as a basis for the value of the stock without further dilution. If there is huge development of the oil sands not just with BQI but with all oil operations in Saskatchewan we will be getting some nice hefty tax breaks and etc more than Alberta has experienced since we have a more diversified economy. Wesco I believe I did find a job for you at Petrobank…..if that was you that asked it mightve been Warren who knows
April 29th, 2009 at 9:13 AM
George,
I enjoyed reading that info it solidified my views of most institutions and funds are very good at buying high and selling low.
April 29th, 2009 at 9:14 AM
Armoth:
That was me wondering about the jobs available in Saskatoon.
So what would I be doing at Petrobank, and how much would I be making?
April 29th, 2009 at 9:14 AM
I recall reading somewhere that the Oil and Gas Industries support about 3% of the population in AB and SK. Interesting if it’s true. Has anyone heard anything different in terms of what percentage of the population this industry actually supports?
April 29th, 2009 at 9:14 AM
Crikey,
I may believe that percentage if your just looking at the employees of the Organizations who run and maintain the plants and what not. However its the construction that really drives the economy in Alberta. I guarantee that the 3% does not include the personnel required to install pipelines and the personnel required to construct the upgraders and refineries in Alberta.
Also Armoth I’m not looking for a job. I’m just fine.
How come you never accepted my friend invite on facebook? Wes McDougall?
April 29th, 2009 at 9:15 AM
Everbody will read this I’m sure.
Gormely will have a spot with Merrill this morning. Should be good.
http://www.canada.com/saskatoonstarphoenix/news/story.html?id=f0dc0687-4830-4f46-948d-20d869b8be29&p=1
April 29th, 2009 at 9:15 AM
http://www.canada.com/saskatoonstarphoenix/news/story.html?id=f0dc0687-4830-4f46-948d-20d869b8be29
I see the local Budgie cage liner is still performing its primary function as panderer for the local housing industry. And as par usual, they have quoted the usual suspect list of braying jackasses quoting the “hot economy” ad nauseum. And as expected there is no countering source predicting a precipitous drop in prices.
I am afraid that all the “fluffing” in the world by the “crack” investigative newspapermen downtown will not be able to keep the prices “up”.
I am sorry to have changed the focus of this thread onto media criticism and away from its rightful subject matter: buying stocks and bonds.
April 29th, 2009 at 9:15 AM
George,
Great link post. I think Norm raised some good points in how they go about finding these ‘facts’ out. See, I’m one to want to know all angles as well so i see where he’s coming from on this.
I think that the overvalue may come up when it’s compared to a standard set of variables, amenities, typical family situations, types of jobs people retain or can get, and so on…though the discrepency between Saskatoon and Regina is a valid argument too. For years though Regina has always been lower priced for housing, even before the insane price increases. I’ve lived in both cities and they are VERY much the same.
To compare it to the rest of the country or compare it to more expensive places in the world is like saying to a country where there aren’t a lot of high paying jobs that well they are paying $290 grand for a house in Saskatoon, therefore ours should be the same even though our wages are 13 cents a day. Apples and oranges.
I do like the OMG PANIC TIME vibe from everyone since the merril report was released though. Maybe make people think in REALITY.
April 29th, 2009 at 9:16 AM
Just to add… something funny the other day, I won’t say where or what, but A few guys have bought (obviously to make a quick buck) a unit in my building and have been ‘renovating it, or converting it’ and are trying MADLY to sell. They had a cheesy open house sign and I noticed 3 things that would immediately make me NOT want to buy their converted unit. Same old Balcony door, rough and pain in the butt to open, same old windows, same as door, and old air conditioning unit. I wonder how many of these HUCKED together units will come on the market from average joe’s that hopped on the ‘i can renovate and make money too’ bandwagon…
I mean good luck to them but you can just tell when someone is just trying to make a buck
April 29th, 2009 at 9:16 AM
K 3rd time’s the charm….
So this French woman in the article…says at least she won’t be dropping the money on rent anymore…how much rent were you paying if a $235,000 house is cheaper than it..not to mention factoring in all the utilities, property taxes, repairs and so on…. Penthouse on the most expensive building here? I doubt that’d even run at that high of rent. This is the part of the media I don’t like, leave it at a feel good note no matter if it makes sense or not. Silliness.
April 29th, 2009 at 9:16 AM
Yes, I did catch the StarPhoenix article. I did have particular issue with this:
“In addition, the median income of a two-income household in Saskatchewan is in the $83,000 range. If that’s multiplied by 31/2, you get $290,000, slightly more than the year-to-date average price of a Saskatoon house. Even the Merrill Lynch report says three times median income will give you an affordable home, notes Fisher.”
Median household income is traditionally based on average income, and it was not traditionally based on the assumption that there were going to be two full-time wage earners in the family. Two full-time wage earners have not been the norm for more than a decade or two.
Taking this line of logic, if you are single, or if one spouse would like to stay home to take care of the kids, or you get divorced, or you are a single parent, you can never buy the average house??
I don’t get it.
April 29th, 2009 at 9:17 AM
Crikey,
As a singleton unmarried un-two income person that’s 30, I completely agree with what your conclusion is. That’s the thing, and I think that’s why many people feel negative towards things. I remember asking when I first found this blog, WHO is the ‘average’ entry level house buyer. Usually I got responses that stated, they are the people that can afford to get into the market at entry level. Which basically says those that can afford it, CAN AFFORD IT.
I would love to see the comparison over the years, say every 10 years, of the profiles of people that bought into housing, It would start with singletons affording it, and affording to take vacations on one income with no education, to what it seems now, 2 income families BOTH with some education (Or work like oil rigging), and then show a projection if the trend continued, which i’m sure if it did, would show 2 families shacking up to afford a single house.
April 29th, 2009 at 9:18 AM
The one thing I can’t figure out is why most realtors defend high prices. Norm, you don’t and there are others. I know other realtors read this blog. So this is for you guys and others who are interested.
Lower prices would open the gates to a bigger pool of buyers which = more sales. A RE market that has prices that allows very few first time buyers, properties that can not be cash flowed is not good for the industry.
And so first time buyers, short and long term investors are basically shut out. To fill houses with home owners with this years record housing starts, we need massive immigration. Otherwise inventory will keep piling up and sales will keep dropping.
This has a ripple effect in our economy. Home builders pull back in housing starts = loss of jobs in construcution. We have seen this in Alberta big time already and will continue. The mortgage industry along with realtors suffer as well. Calgary and area has 5700 plus realtors with less than 2000 sales a month. Not all are eating this month.
http://www.newsweek.com/id/151748?ref=patrick.net
Wouldn’t Saskatoon be better with lower prices?
April 29th, 2009 at 9:18 AM
Jesse G.,
“then show a projection if the trend continued, which i’m sure if it did, would show 2 families shacking up to afford a single house”
Very sad, and very true. Perhaps you can find a nice open-minded above average-earning professsional couple to buy in with.
Hey- this might work well for the forever rising price theory… how about trans-generational mortgages!! That way you could pass your mortgage on to your children and grandchildren, and everyone would be forced to stay at home forever to pay off the house. Sweet.
April 29th, 2009 at 9:18 AM
“Hey- this might work well for the forever rising price theory… how about trans-generational mortgages!! That way you could pass your mortgage on to your children and grandchildren, and everyone would be forced to stay at home forever to pay off the house. Sweet.
”
My thoughts exactly. I mean it’ll be good for business right? GREAT for the economy! People could spend more on other things then if they know their mortgage will be passed on! People will still be getting rich…just not anyone without old money… lol. IF I have time I’m going to do my best to research costs and prices and who the average buyer was back in the day, and include that in the imagery..Since you can’t find it anywhere I may just do that myself.
April 29th, 2009 at 9:19 AM
Sam,
“usual suspect list of braying jackasses’
Ouch!
Crikey,
I believe that groups like demographia would typically use median household incomes. I think that it’s always been difficult for singles to buy “average homes.”
In any case, my primary beef with the Merrill Lynch report is the apparent discrepancy between markets. Toronto is not overvalued, Saskatoon is 50% overvalued and Regina 48%. Use any income figure (median, average, single, double, etc.) you like and apply a consistent income multiplier and you’ll see that the numbers tell a different story. To be sure, they will all be overvalued. Toronto more so than Saskatoon and Regina far less.
Any other argument flies in the face of the comments left above and suggests that home ownership should exclusive to igh income earners.
April 29th, 2009 at 9:19 AM
Norm,
median income for Saskatoon is about 72,000 if my numbers from stats can are right. I think 83k is too high.
For anybody moving to Saskatoon
http://www.canadaimmigrants.com/saskatoonliving.asp
A household with 70k can afford a 280k house WITH a 25% down payment and a 25-year mortgage loan at a five-year fixed rate -excluding maintenance fees.
Only half the mortgages in the last year are 25 years.
Who has 70k for a down payment?
April 29th, 2009 at 9:20 AM
Well if I would be single and working in Saskatoon (could have taken a couple job offers there), I think I would be one sad guy. Lots of student loan debt, average paying job and real estate / rent prices way out of reach for me to live on my own. I know there are people in the city who this has happened/happening to, how long before they leave…….
April 29th, 2009 at 9:20 AM
So, “housing is not overvalued nonononono not at all” is the front-page story in the Star-Phoenix? The LEAD story? with a 48 point full-spread headline? And full-page coverage on page 4?
Gee, do you think someone’s worried?
April 29th, 2009 at 9:20 AM
Norm,
does not the Merril report weigh heavily on past affordability.
Toronto’s bubble in 89 put affordability at about 65%, they are now above 45%. Historically between 30- and 45% on average.
Saskatoon has never been above 30% dating back to 88. Historically we are between 20 and 30%. We are now in the low 40′s.
This report would be different for us if our affordability spiked like Torontos in 89 and we had affordability of 50% in 89, but we did not.
Just look at the RBC affordability index for 4thQ 07
April 29th, 2009 at 9:21 AM
George,
If I recall correctly, Joanne and I were talking “couple households.” StatsCan pegged that at $76,600 in 2006.
http://www.statcan.ca/Daily/English/080611/d080611c.htm
Average weekly earnings increased 5.4% in 2007.
http://www.statcan.ca/Daily/English/080226/d080226c.htm
They have been increasing at a similar rate through 2008.
http://www.statcan.ca/Daily/English/080729/d080729a.htm
I know that the average and the median don’t necessarily move in tandem. In 2006, the median increased faster than the average.
I think if you reread the story you will all see that I did not argue that $290,000 is affordable. I clearly stated several times that homes are overvalued, that affordability has taken a beating and that current prices expose us to risk of losing young people.
April 29th, 2009 at 9:21 AM
You know what would be great too for wages, is to show what people that have what jobs, can afford to get into it. Sure average earnings have jumped say that 5.4% in 2007, but how many 30% jumpers are balancing the other 2% jumpers. I know i know I’m lookign way to technically at it. I do it to justify my own frustration.
April 29th, 2009 at 9:21 AM
Norm –
Your comments were balanced and reasonable, as they always are. In fact, you seem to be the skeptic in the article, which makes me chuckle.
My laughter is at the Star-Phoenix’s selection of experts to interview: the heads of the real estate board and the local home-builder’s association, two realtors and a recent home buyer. This isn’t an investigative piece: it’s propaganda.
I don’t agree that the prices are affordable for the average family, though — even if you assume two reasonably healthy incomes per household. I do remember that the Merrill report suggested that prices had outpaced current and *future* earnings.
Toronto prices are too high in a number of areas: condos, in particular, are going to fall, but this is the case for most markets. Prices didn’t spike in TO the way they did in Alberta and Sask, though: they’ve climbed steadily to a high point.
By the way, Crikey — Japan had 60 year generational mortgages at the height of its bubble. You’d hand the payments on to your child and grandchild.
April 29th, 2009 at 9:22 AM
George,
Wolf specifically talks affordability in terms if the 3 times income metric. He also says that 3 times is dated and that a number towards “previous historical high” (3.2%) is more appropriate in today’s lower interest rate environment.
He does adjust for “systematic influences specific to a given market over time.”
Translation: Toronto is wonderful while Saskatoon is a dust bowl in the prairies where nobody really wants to live, and that could never change.
April 29th, 2009 at 9:23 AM
Wesco,
Exactly right on being unnafordable for singletons. I still have my example of my one coworker who made the same as i did here @ $32,000 a year wiht 8 years exp and moved to Calgary and got $54,000 to start plus an extra week of vacation and paid benifits, parking etc. Where we worked you had to pay for your benifit coverage, plus parking @ $90 a month.
Sask’s got a long way to go baby.
April 29th, 2009 at 9:23 AM
jrochest,
Joanne told me yesterday that it’s almost impossible to find people outside of the industry who will comment. She was ringing phones at the university yesterday trying to find someone to comment.
By the way, this piece is clearly an industry to response to one of those “outside of the industry” experts. Why is it unreasonable that the Star Phoenix should seek a response from real estate? What is wrong with discussing this openly?
April 29th, 2009 at 9:23 AM
Good luck on getting ANYONE at the university before school starts. Trust me holidaying kills July and August at the uni.
April 29th, 2009 at 9:23 AM
Jesse G,
“Exactly right on being unnafordable for singletons…Sask’s got a long way to go baby.”
Again, how is this something that can be pinned specifically on Saskatchewan? Isn’t this the case everywhere?
April 29th, 2009 at 9:24 AM
Norm,
It may be to some degree yes. I just know what I personally have experienced in my jobs and many interviews I’ve had in my field. Though I will completely admit that my field is HUGELY cheap while the big wigs walk on people’s backs. So I could slightly bit tainted in that.
The thing is, is the quote is pieced together from my entry, the first part was agreeing with Wesco, the following was proof personally that I’ve seen in the discrepency. With my coworkers $54grand a year she’d be able to at least afford to have a better life, renting, or an easier time hitting entry level than if she had stayed and still got $32grand a year here.
Before this whole run up, if she had gotten that $54g wage in Sask, she would have been able to buy a NICE house on her wage. At $32g’s she would have been able to buy one that was in need of quite a bit of repair. Now in sask she couldn’t buy neither, and since rents are comparible in Calgary as they are in Saskatoon / Regina, she can have a better life out in Calgary.
Sorry for the ramble.
April 29th, 2009 at 9:24 AM
Keep in mind that the ‘average’ house has changed considerably since the times when the ‘average’ family had only one income. Trying to make that comparison really isn’t valid. Those two incomes are buying a lot of luxuries these days. Does anything get built now without walk-in closets and a master ensuite? Or less than 3 bedrooms and 2 bathrooms?
When I was a kid, I shared bunk beds and a basement bedroom with my sister, and a bathroom with my parents. We had one car, the kitchen was nothing special, and my mom stayed home. My neices, though, each have their own bedrooms with walk in closets, another room for toys, and the McMansion has 4 bathrooms. Both parents work. I definitely feel like the lucky one.
These are the choices we make. I think it’s still possible to own a house like the one I grew up in on only one income, but it won’t come with granite countertops, like today’s ‘average’ house.
April 29th, 2009 at 9:25 AM
Heather,
Very valid point. See in my mind the average house ‘to me’ is a 3 bedroom 800-1000 sq ft bungalo. not the bohemiths’ that they use these days as the cookie cutter models, the long slender 2-3 storey’s or the wider, 7 foot of backyard, with dual car garage models.
I would personally love to see a lot of newer innovative plans, odd lookign houses, artistic, new shapes, new functions, etc. Housing these days are built with so much wasted space it’s amazing.
April 29th, 2009 at 9:25 AM
Okay: as far as I can tell from a distance (I’m not in Saskabush) there have been three articles on this in the SP, all written by Paulson.
The first was on the 8th: “Report says Saskatoon housing market due for a dip”. This was a front page article (above the fold but not the lead) which largely summarized the report, and stated, in the last paragraph, that Janzen was out of the office and could not be reached for comment. You’ll notice that “50% overvalued” appears in the body of the article but not the headline.
The second appeared on the same day: “Sask. houses overvalued: Report”. This was written after an interview with Janzen, and it opens with the statement “The head of Saskatoon’s real estate association disputes a national report that says houses in the city are overvalued by 50 per cent.” It’s
The third article was a wire story from Canwest News, written in TO and covering the report more generally: it’s not about Saskatoon.
This article is the industry response, yes, but it’s also more than twice the length of the other two combined, and it’s in the most important real estate in the paper. It’s disproportionate.
Jesse’s right about the problem getting ahold of U of S people; lots of profs are out of town. I’m away and so are lots of others, although it’s research and writing, not vacations (I bloody wish).
Besides that, I’d be surprised if someone at U of S works on real estate, local or not. She would have had to go outside of the city and province, probably to the UBC business school, which has a huge RE component and some excellent stats online, at least.
April 29th, 2009 at 9:25 AM
Heather –
The problem, though, is that the basic value of the house isn’t changed. Oversized new builds on the outskirts of town are still cheaper than older smaller houses in established neighborhoods.
Finishes and bells and whistles don’t actually add that much to the value of the property. Ironically, people buy McMansions because they’re cheap.
April 29th, 2009 at 9:26 AM
Regardless if Merrill is close to their valuation of 50% or not, this is the start of the talk the US saw in 05-06. With unaffordable prices, slowing sales and ever increasing inventory there will be more studies and news reports coming out in the next few months that will range from flat growth to a bust here.
Just google ” US house prices 06″ and you will see the similarities.
If you have 3 minutes, I posted this before. It is now on Garths website.
US house price peak was 3.9. Ours is at 4.2.
Take a ride on the housing roller coaster adjusted for inflation.
http://video.google.com/videoplay?docid=-2757699799528285056
April 29th, 2009 at 9:28 AM
Gormley will be talking about the Merrill report after 1130am
http://www.newstalk650.com/
April 29th, 2009 at 9:28 AM
I’m not sure if this is the site you mean, jrochest, but yes, the site does have some excellent information:
http://cuer.sauder.ubc.ca/cma/index.html#
They only list major cities in Canada, so Saskatoon is not listed specifically.
April 29th, 2009 at 9:28 AM
In typical Saskatoon fashion, Gormley has shut out non-homers from the discussion and is only calling for current home owners to give their opinion on the current market prices. In his opinion, he views our cities housing prices as right where they should be. I would call into his show, but I know he would just label me as a disgruntled NDP supporter who wants to see the province fail.
April 29th, 2009 at 9:29 AM
Oooh, it’s a good thing “we’re different here”. And that “our economy will save us”. Yep, that’s sure a relief.
From the US:
“One Third of New Owners Owe More Than House Is Worth”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3uzhDOF9FXI&ref=patrick.net
This bit of the article is particulary scary:
“For those who bought at the 2006 peak of the housing market, 45 percent are now underwater”
April 29th, 2009 at 9:29 AM
I’m listening to Gormley — and I’ve got to say GOD BLESS sensible Saskatonians.
Every person he’s had on has said “yep, I think it’s pretty much overvalued…”.
Young guy (in Caswell?) “Well, we paid 136 7 years ago, and now it’s 400; I’m from Vancouver and it doesn’t go up like that there, even…”
Old guy (adjusting ball cap) “Yep, I’ve seen this before…specultors come in…everyone gets all excited…then they lose their money…”
April 29th, 2009 at 9:30 AM
jrochest,
I am also finding that there are not many people who will state that Saskatoon is not overvalued. I think the question that’s being discussed here is “are we overvalued by 50%?” and I’m not hearing so many “yes” answers on that question.
Does anyone else find it odd that Merrill Lynch would not have someone speak with Gormley? I’m surprised nobody has raised that. At least the real estate industry is willing to discuss it.
April 29th, 2009 at 9:30 AM
So who wants to be the person to call in and ask old John how many properties he’s bought in Saskatoon the past couple of years. He seems pretty antsy about the report and he is almost coming across as desperate on his program.
April 29th, 2009 at 9:31 AM
Crikey,
good post. But I have to mention to you that the US housing bust happened because of the SUBPRIME mess. Duh! Didn’t you know?
And didn’t you know that over 35 countries are experiencing a housing downturn in the developed world. And it is because of SUBPRIME they are experiencing a downturn.
And in Canada we don’t have SUBPRIME, so no worries here.:)
April 29th, 2009 at 9:31 AM
and jrochest,
The Caswell Hill guy is out of his mind. Three of 53 Caswell Hill sales this year crossed the $300K mark. (305, 305, and 337,500) The average over the year is $216K.
Just doing my best to keep the rhetoric in line. I know that you don’t appreciate unsubstantiated claims.
April 29th, 2009 at 9:31 AM
In defense of Gormley, he wanted Merril Lynch to back up their statement of 50% overvaluation, but they wouldn’t. So he called them on it. Even Gormley says we are overvalued but not to that extent. Gormley is pro Saskatchewan, and I like his program, even though I don’t agree with him always. He brings up good topics.
April 29th, 2009 at 9:32 AM
Norm,
After finally reading the report one question I would like to ask Merril Lynch is why do they have Saskatoon, Edmonton and Calgary at the top of overvalued list with better economies than the east, while a place like Windsor is undervalued by 40%?
April 29th, 2009 at 9:32 AM
I would also like to see how they arrived at their numbers too as many would.
I do want to say though that just because an economy is ‘hot’ doesn’t mean majorities of people benifit from it nessessarily.
April 29th, 2009 at 9:32 AM
Oh, I suspect that the authors of the report would be the ones to do this, and after the media blitz of the last week they’re probably not all that keen to do a Saskatchewan call-in show. I’d assume that they don’t really want to go on talk radio and try to explain their data collection and analysis methodology to a hostile host.
Besides, it’s pretty clear that their statement that property is overvalued is being seen as a deliberate attack on Saskatchewan by pointy-headed academics “sitting in towers in Toronto”.
Their main point wasn’t that Saskatoon and Regina were going down or were overvalued: their point is that Canadian RE, and particularly western Canadian RE, is overvalued and due for a substantial correction: that the party is over here as elsewhere. They weren’t attacking Saskatchewan: they were pointing out that we , along with everyone else, have a bubble, and guess what? We do.
I doubt, extremely, that their methods were flawed, but someone would have to look at the report itself for that, and I don’t get the impression that anyone has done so.
April 29th, 2009 at 9:33 AM
I agree that may be the case as well. Even from what I saw of the interview on BNN, the person seemed to be very methodical and not emotionally attached in his responses, just seemed to be mathematical in how he responded to the questions. It’s not like he was out there going (in best Thruston Howell the 3rd’s voice), over in good old hicksville, property is insaaaaaaaaaaaaaaaaaaaanely overpriced….
Anyone wonder if one of the contributing factors to easterners thinking the west is a bit silly is beucase of the way people respond to anything coming from out east? Chicken or egg that’s what i wanna know.
April 29th, 2009 at 9:33 AM
Norm
The guy didn’t say he was in Caswell: he said West Side, so heaven knows where. I don’t know what the highest value area over there is — I assumed Caswell.
And I think he said that his neighbors were asking 400 or so — asking and selling, two different things.
The transcript’s on line, I suppose it would be easy to check.
Is the report available somewhere? I missed that!
April 29th, 2009 at 9:33 AM
Thanks all for the kind wishes, will update once I’ve figured out that with same groceries, cheaper gas that cost of living is actually same/lower in Calgary.
Just costed out auto insurance, will be cheaper than in Saskatoon!
Anyway, looking forward to the big raise, and free training. Ciao
April 29th, 2009 at 9:34 AM
I do apologize Norm for including you in my list of Jackasses. Please consider yourself exluded. I suppose one should be more careful of the crowd near the target when unleashing a broadside.
With interest rates going up and credit becoming more difficult to attain, this recent decline in prices is just the first deflationary ripple. I assume anyone who bought from January 1 onward is already in a situation where they owe more than their house is worth.
And here is the view from two years out.
http://www.guardian.co.uk/business/2008/aug/08/subprimecrisis.useconomy
If anyone wants to bray about the hot Saskatoon economy saving us, this is your chance to chime in. There is a spot on the list now available
April 29th, 2009 at 9:34 AM
Do people here really think that things are going to collapse to 40 or 50% of what prices are at now?
No offense, but IMO, if economists knew anything, they would all be retired as millionaires.
April 29th, 2009 at 9:35 AM
“Do people here really think that things are going to collapse to 40 or 50% of what prices are at now?”
I say prices will easily fall 30-40% over the next 18 months. But I’m not an economist.
Is that in my favor?
April 29th, 2009 at 9:35 AM
Wesco,
Ive added you me and my wife was pondering who you were for awhile cause sometimes my cousins add me but we all have german and french names then Mcdougal comes about =o)
p.s. Check out my stock its making another run (crosses fingers). Strangely the stock market reminds me of home ownership where the fact remains if you buy a properly priced house when u sell in 25-35 years you will be ahead.
jrochest,
I would say its a bubble in some areas like condo conversions but the entry level houses like in Whelan and Carter neighbourhoods wont see much of a dip (maybe 15%)…but I could be wrong =o)
April 29th, 2009 at 9:35 AM
Just for the record Norm, there are several houses in the Caswell Hill area that would easily sell for 400k- they haven’[t been on the market in decades though. I can think of a couple of houses overlooking Ashworth Holmes park that would likely fetch well above 400k, and which have had the same owner for at least 20 years.
Just wanted to respond to the “out of his mind” part of the comment (which I know wasn’t intended in a bad way)
April 29th, 2009 at 9:36 AM
‘I doubt, extremely, that their methods were flawed, but someone would have to look at the report itself for that, and I don’t get the impression that anyone has done so.’
jrochest as a university professor you should know that peer review is extremely important in research. At an academic level this report would be thrown out. The authors of the Merril Lynch report have not released their statistics, their sources, or even details on their methodology. The reason no one has looked deeper into the reports results is because they CAN’T. They might as well be an anonymous Internet blogger.
Arguably the best valuation on homes is via affordability indexes and unemployment/employment rates. On those basis Saskatoon and Regina are near the Canadian median. Saskatoon bungalows being overvalued by 5-15%. Condos and entry level homes close to twice that.
If the Merril Lynch report was accurate then average homes should be worth less they were in 2006; ‘preboom’. Homes in Windsor would be being snapped up. People wouldn’t be spending 3 hours on the 401 commuting to young street; Toronto homes being very reasonable.
I’m flabbergasted that anyone would blindly accept results of this type. Accepting/supporting non-peer reviewed reports whose methodologies are not even published is most definitely blind!
April 29th, 2009 at 9:36 AM
No offense Sam, but that is just stupid.
Do you seriously think that what you “owe” is going to matter if another “Great Depression” was to happen?
If that level of economic depravity happens again in North America, the plain fact is that it wont matter whether you owe $1million, $250k or $100k, you will be unemployed, broke, bankrupt and eating at a soup kitchen, along with 80-90% of the rest of the country who would be in the same situation.
Most of our economy these days is based on consumer goods and services, and all of that would collapse, it would make the Great Depression look like the 2002 dot com bubble. All our stocks would collapse as well.
Our governments would become insolvant which would probably spell the end of Liberal Democracy as well, and would have the potential to seriously trigger a third World War.
I expect that the Government would take full ownership of all homes in the country (socialized housing) and relocate 1/4 of Canada to work on Farms.
Oh, all the money you have in the bank? It wont be worth anything either due to inflation. Ever seen Potatoes sell for $100 a pound?
As I have posted before, I just bought a house for $250k. If it is worth half that, I don’t care, provided I have a job and can pay it.
I might as well go a little further too. If another Depression comes and Civilization collapses, I don’t care either. I will be in the same boat will BILLIONS of other people, do the best I can until I die, at which point I hope my believe in the Lord Jesus Christ will save my soul.
April 29th, 2009 at 9:37 AM
Doug,
AAAAAAAmen. but no! it can’t be cheaper in calgary! (inserts argument everyone in the city seems to have -> but you’ll take HOURS to commute! no? didn’t work? okay how about i’ve had friends move out there and move back becuase it was soooo expensive…that work? no?! well then YOU HATE THE PROVINCE and you should just go away!)
Hah. showed u
*thumbs up man.
April 29th, 2009 at 9:38 AM
jrochest,
I posted a link to the report in the Merrill Lynch post.
I must say though that I am surprised by your comments. Having watched this guy on BNN I would assume that you were aware that he specifically said Merrill Lynch is not calling for a substantial correction. He was even careful not to say that about the areas which “most concerned” them.
Further, this discussion erupted as a result of the newspaper article which called into question whether or not Saskatoon may be overvalued buy “as much as 50%” and that is the specific question which Gormley asked today.
If anything is really laughable, it’s the willingness to accept this kind of report as fact even though the methodology is quite vague and the author will not speak to the media to make his case.
It’s also kind of amusing that all of these other housing issues are being tossed into the discussion. I think everyone is very clear on what the question is here and while these other points are valid they don’t really have much to do with the question.
If there was an intelligent argument to support the claim that Saskatoon is 41% more overvalued than the rest of Canada someone would be making it, but as I said earlier, there just isn’t any way to cut that math and get to that conclusion. If any one of you actually has an answer to that question I will look at it with an open mind. All I’ve heard so far is skirting, excuses, and unqualified justification for very serious comments that seem to have no foundation.
That said, I’m sure that the main point of the report is to say that the wild ride in real estate is over and that the same kinds of returns cannot be expected in the future. I agree completely but I think you can appreciate why Saskatoon people might have some interest in discussing the local aspect of the report.
April 29th, 2009 at 9:38 AM
My dear Joe, I am not predicting another Great Depression, just a significant drop in house prices. What you owe will certainly have a big impact if interest rates spike.
I think we should keep Jesus out of this. If he didn’t step in to stop Hitler, I have some doubt as to whether he will make an appearance to bail out Saskatoon homeowners.
April 29th, 2009 at 9:38 AM
“If there was an intelligent argument to support the claim that Saskatoon is 41% more overvalued than the rest of Canada someone would be making it, but as I said earlier, there just isn’t any way to cut that math and get to that conclusion.”
Fair enough. I don’t happen to think that Saskatoon is 41% is more overvalued than the rest of Canada, I think that the large majority of RE values in Canada are overvalued, west of Toronto probably worse than the rest, as the runup in prices was more extreme.
What we have to remember that people will pay a premium to live in certain places, like Vancouver or Victoria, where there are oceans, mountains, and near year-round temperate weather. Or in places like Toronto, Ottowa or Montreal, where there is a significant enough population that there are many cultural and entertainment activities. Will they pay 7x their annual income when there is little to no chance of the value appreciating? No, they’ll probably rent or move somewhere else. I am a case in point on that one.
Saskatoon, as nice as it is, has no oceans, no beaches, and nearly 8 months of winter. I am willing to live with that if it allows me to live significantly more cheaply. If it doesn’t, I rent (yes) or move (not yet).
April 29th, 2009 at 9:39 AM
Sam Johnson: I’ve (somewhat harshly) suggested in the past that you were fear-mongering with your comments here. Unfortunately, your posts seem to back up that assessment.
I read the article you posted. You said this, as the reason for posting it:
“And here is the view from two years out.
http://www.guardian.co.uk/business/2008/aug/08/subprimecrisis.useconomy
If anyone wants to bray about the hot Saskatoon economy saving us, this is your chance to chime in. There is a spot on the list now available :”
If you’re suggesting that this is what Saskatoon will look like in two years, I think you should read the article again. Here’s the part where they describe the lending practices which played such a big role in the runup:
“”There was a lot of fraud. People would lie about how much they earned … Whatever you put was true. You put down your salary and they gave you $1m and said, ‘Go buy a house,’” explains Carlos Justo, a broker who has worked in property for 30 years. “I had a client – he’s a banker – and he said, “Carlos, my 13-year-old son could get a mortgage. He has a social-security number and a tax ID. If he had applied, he could have gotten $1m.”
As the banks made little effort to verify the information, “credit-challenged” applicants were often able to get the now notorious sub-prime loans – contracts that allowed for two or three years of minimal payments and then an increase of 500%, so that an $800 monthly payment suddenly balloons into $4,000 a month.”
I ask you and those who’ve suggested that I’m wrong in suggesting that there are key differences between what happened in the U.S. and what happened here- does the above mirror what’s happened in Saskatchewan?
I took out a mortgage loan last year. So did my parents. I know damn well how hard it was to qualify and to back up our creditworthiness. The events described in the story simply don’t equate to how things work(ed) in Saskatoon.
Do I think 40-year zero-down mortgages are (generally speaking) a bad idea? Yeah, I do. See my previous discussion about why a 40-year mortgage worked for us, though.
Do I think that houses in Saskatoon were, and are overpriced? Yeah, I do. I’ve said so very plainly every time it’s come up. Prices moved too far and too fast to account for fundamentals- like the significant wage increases that appear to be coming for many Saskatchewanians.
You, on the other hand post what I would describe as “scare stories”, with extremely dubious connections to what’s happening in Saskatoon real estate, and suggest that this is where Saskatoon will be in two years. I don’t know how any reasonable person could draw that conclusion by reading the article you posted. It really just seems like you’re grasping at straws to further your own viewpoint.
Basically what I would hope for on this blog, from both “sides” where applicable, is more honest discussion and fewer strawman arguments.
No one that I am aware of has argue that Saskatoon prices were not overpriced to some degree at the peak; it would be nice if people stopped implying that “bulls” were suggesting the same.
April 29th, 2009 at 9:39 AM
Jesse G.:
When I posted suggesting that strawman arguments were a serious detriment to the quality of this forum, I was thinking of posts like yours:
“AAAAAAAmen. but no! it can’t be cheaper in calgary! (inserts argument everyone in the city seems to have -> but you’ll take HOURS to commute! no? didn’t work? okay how about i’ve had friends move out there and move back becuase it was soooo expensive…that work? no?! well then YOU HATE THE PROVINCE and you should just go away!)
Hah. showed u
*thumbs up man.”
Your post implies that people who prefer living in Saskatoon to Calgary will make any argument, regardless of merit, to support that preference. It also implies that people have made all the arguments you’ve suggested, including the “hate the province” argument.
Can you point to any previous posts that show the arguments you’re suggesting people are actively making?
April 29th, 2009 at 9:40 AM
Oh dear me, I seem to have drawn the wrath of a solicitor.
It has been my experience both first hand and from learned colleagues that it is/has been in fact very easy to qualify for a mortgae far in excess of your means here in Canada.
There are in fact many reasons to believe that we may be entering a situation that will mirror the American one. It is happening in the UK, and it may well happen here.
I try not to frighten but to inform. Is the fright a by product of becoming a little more informed?
April 29th, 2009 at 9:40 AM
Sam: (can I call you Sam?)
I’m not a solicitor, barrister or any type of lawyer. I probably should have chosen my handle better.
You dance around the issue. I agreed with you that mortgage loans got ahead of themselves with the 40-year, zero down. That’s not is dispute. What you argued, by posting that link, and I disputed, is that anything resembling the ridiculous lending practices described in the article occurred here.
Or were you and your learned colleagues offered loans outside of your TDS/GDS ratios, without mortgage insurance for the lender, with massive balloon payments, etc.? Is this accurate?
“I try not to frighten but to inform. Is the fright a by product of becoming a little more informed?”
I truly appreciate the “bulls” who come to inform and to have a reasonable discussion and yes, even argue. I do not believe you are such a person.
April 29th, 2009 at 9:40 AM
lawtalkingguy,
No doubt there are Caswell properties that could trade for $400,000 but they’re not the norm and they weren’t selling for $135K a few years ago.
Crikey,
You won’t get any argument from me on your points.
April 29th, 2009 at 9:41 AM
lawtalkingguy
Sorry to have offended but i go by my own experiences with people.
Growing up here since 1978, i have heard many things, there are other things too that i find rediculous too…for instance the rumor that regina is just a dirty city and that they have ‘bad water still’ and on and on and on by many people in saskatoon. What about car insurance. Who doesn’t remember the constant comparisons that SGI is the best price for car insurance ESPECIALLY compared to other provinces, so again, DON’T DARE MOVE…
I’m the type of guy that likes to experience things for themselves and not be ‘scared into beleiving one thing or another’ especially since i’ve gotten older and actually LOOKED into how much of the rhetoric is actual fact, and i have to tell you, not much of it has been.
I’m congratulating someone who maybe has found a light at the end of his tunnel and a light to shine his frustrations away from being a ‘forgotten’ man in his own province. I’m sure this is by no means typical but again, I congratulate or critisize by my own experiences.
I try to be as open to things as possible, and to take in all the facts and make a decision as it applies to myslef or someone in a similar situation. There was no offense meant to anyone, it was directed at Doug and my congradulations still stand for him.
Have a great day!
April 29th, 2009 at 9:41 AM
Norm said:
“No doubt there are Caswell properties that could trade for $400,000 but they’re not the norm and they weren’t selling for $135K a few years ago.”
Very true- I was just worried that some might take the comment in a different direction.
April 29th, 2009 at 9:41 AM
I am 67 years old, lived through the 70′s, 80′s, 90′s, etc.
I am no expert but I do know this:
The tendancy to over-react to negative economic news is very large in people, much larger than they over react to good news. Fear is the strongest emotion. The young are always more likely to do this as well, us old guys have weather a lot more
I grew up in an age where we expected to die from Nuclear Holocaust, then we were hit with what people figured was economic armageddon in the 80′s from high interest rates, amazing inflation in the 70′s, but we came through it ok in the end. Times were tough for a while in some cases, but we made do.
During that entire time, I remember the doom sayers saying that the end was neigh, but it never happened.
I can say that at the end of the day, nobody knows jack about what will happen. Looking at history is only partially effective, because every situation is different.
How much the market here corrects is purely going to be determined by the economy. Comodity prices, while softening, are not going to “bust” like they did in the 70′s.
Now, if we have a complete global collapse, thats a different story, but predicting something like that is akin to impossible.
April 29th, 2009 at 9:42 AM
lawtalkingguy
you said:
“I took out a mortgage loan last year. So did my parents. I know damn well how hard it was to qualify and to back up our creditworthiness. The events described in the story simply don’t equate to how things work(ed) in Saskatoon.”
I agree with that statement. I myself went to a bank to see what I would qualify for. The amount they told me wasn’t a huge amount, it was around $125grand and they worked it out to somewhere between 1200-1400 a month. I mean I guess I could have taken it but no way where the banks as stupid up here as elsewhere. At least in my experience. By the sounds of it if they were I would have qualified for a $400,000 mortgage and then cried that i coudln’t pay it….but then again I’d have been a moron to take that too. Heck, I would have been a moron to take what the bank told me I’d be able to ‘afford’. That should be used as the upper most boundary and not something that one takes.
April 29th, 2009 at 9:42 AM
Jesse G said:
“Sorry to have offended but i go by my own experiences with people.”
Fair enough, and I wouldn’t say I was offended. And for what it’s worth, I’ve heard just about all the arguments you described made in person over the years (except the hate-your province one), so your post wasn’t really off in substance, just in tone (in my opinion).
Going by my own experiences with people, it was about three times the cost for one of my friends to license his car in Alberta compared to Saskatchewan (about eight years ago). It was in fact the reason he moved back at that time. I don’t doubt that things have changed over time, and that as a twentysomething male he was an exceptional case, but my point is that argument carried plenty of weight at one point.
As for commutes, Calgary drives me completely crazy. Maybe it’s just me.
Meanwhile in Saskatoon, I bought a nice house 4 minutes from downtown by bus or car, or about a fifteen minute walk, for about the median home price in the city. My limited research indicated that the same thing wouldn’t have been remotely possible in Calgary.
April 29th, 2009 at 9:43 AM
To every1 that cares,
Did any1 happen to check out Merril Lynch? So far their net income is -13 billion yes minus 13 billion. If a poor broke cousin tried to tell you what is wrong in the world would you take his advice especially in finances? If Goldman Sachs puts out a report I would listen to it but for a Merril Lynch economist I wouldnt listen to a darn thing that broke bloke said.
April 29th, 2009 at 9:43 AM
Armoth:
Your a bull and don’t believe the market is going to correct 50%, so go away. Merryl Lynch is gospel.
April 29th, 2009 at 9:43 AM
not a lawyer talking guy,
first of all your name is too long lol. jk.
I don’t want to be one of those people that pumps up Calgary and disses Saskatoon. It just happens that lately that’s what’s been a bit of a subject with Doug moving there, others mentioning it and so on.
What drives me nuts here, is mentality of some folks. I’m a book lover. Regina’s had a Chapters for 10 years or so. Saskatoon? Finally we’re getting an Indigo. No one wanted it, they thought hey we already have a bookstore, why get another?! Same attitude with Starbucks coming into the city. Same with lululemon, same with the Casino downtown, same with Galaxy Cinemas. I recall people, LOTS of people I KNOW and work with that said things like “we don’t need a big nice theatre here, we already have enough of them, no one will even go see movies in it being downtown”….
My point is thru my life I’ve been told, by everyone, parents, friends, friends parents, people i work with, etc…that unless you’re rich, you can’t possibly afford to live ANYWHERE else. In canada OR the states OR elsewhere. I know car insurance rates are high, if you’re a young, or a bad driver in other provinces, but being 30 and a good driver, to me it’s probably very competitive.
Maybe it was becuase I was never in the popular crowd of people where everything was just football, beer, and other things to make everything seem so rosey.
Congrats on the place you’ve found though, it’s fantastic! I just like that there ARE possiblities out there. I’m not locked in a prison city or province…I can go elsewhere. That doesn’t mean i Hate it here though. I’m a value man and if i get more value somewhere else whether it be Calgary, or Ohio, then it’s good for me.
April 29th, 2009 at 9:44 AM
Interesting article doesnt seem right though on a couple points namely the difference between regina and saskatoon. Why does the report say %50 ovevalued then say 3 times average family income is comfortable which is $250,000 sticking their foot in their own mouth. But the real average or so has always been 3.5 average wage 290,000 ant the last average reported was 293,000 or something like that im confused.
April 29th, 2009 at 9:45 AM
Armoth,
I realize trying to get something rational outof you is difficult, but please explain:
What does their “brok-ness” have to do with the validity of their arguments?
Nearly every American (and Canadian) bank has posted losses this year. Shall we ignore all of them?
http://bankimplode.com/blog/category/writedowns-and-distress/
April 29th, 2009 at 9:46 AM
Crikey,
Something rational is som1 who is successful you follow their advice if you wanna ask a dang bum on 20th for advice(Merril Lynch) go right ahead I wouldnt think any less of you. Do me a favor read GS’s financials before bashing me they are successful even in a downturn.
April 29th, 2009 at 9:46 AM
Just on wikipedia searching about US housing bubble
Boom ended August 2005
Mortgage rates rose almost one point
Affordability conditions deteriorated
Speculative investors pulled out
Homebuyer confidence plunged
Resort buyers went to sidelines
Trade-up buyers to sidelines
First-time buyers priced out of market
“Out of 20 largest metropolitan areas tracked by S&P/Case-Shiller house price index, six (Dallas, Cleveland, Detroit, Denver, Atlanta, and Charlotte) have seen less than 10% price growth in inflation-adjusted terms in 2001–2006.[51] Seven metropolitan areas (Tampa, Miami, San Diego, Los Angeles, Las Vegas, Phoenix, and Washington DC) have appreciated more than 80% in the same period of time.”
http://en.wikipedia.org/wiki/Image:USA_home_appreciation_1998_2006.svg
The biggest bubbles were the areas that appreciated more than 80% in 6 years.
April 29th, 2009 at 9:47 AM
Now applying that to Saskatoon
*Boom ended April 07 ( basically any house up to then would sell at list or more)
*Mortgage rates have slowly edged up in the last year
*Affordability conditions are the worst ever here and the 4th worst in Canada behind Vancouver, Victoria and Toronto
*Speculative investors are pulling out with so many listings on MLS. For most it is now too late. Smart money was gone spring 07.
*Homebuyer confidence gets worse with high costs of ownership, fear of buying at the peak,stock market volitility, middle east uncertainty
*Well, we didn’t have resort buyers in the first place, so that does not really count
*Trade up buyers are slowly going to the slide lines, a new home is now too expensive for many with equity built in the last few years. The spread is too much.
*First time buyers are definitely being priced out and after Oct 15 even more so with tightening lending standards.
The biggest bubbles in the states were the areas that climbed too high in such a short time frame. And I suspect they had many excuses for each place that they wouldn’t crash to previous levels pre-boom.
Saskatoon has climbed higher in a shorter time frame and using the undervalued ( when the rest of Canada was overvalued) strong economy, different here theme will not work. Merril Lynch is probably pretty close in their study of Saskatoon, but wrong of Toronto and other Eastern places. I would like to see their data or explantion of a few things. Their report does not show much other than graphs. ( where is the data?)
April 29th, 2009 at 9:48 AM
I know many like to use this blog to publish 3000 word essays, however I’ll make mine brief:
1. ML is wrong. 10-15% overvalued would be about right.
2. Doug – just leave already. You are starting to sound like one of the arrogant saskatoon homeowners you and others have complained about.
That is all.
April 29th, 2009 at 9:49 AM
George,
How many of the places from the link you posted was 50% under the average home price in US. If you could give a good example of the same situation that happened here in Saskatoon and Regina with us being undervalued and if you check the information before the boom you will see every1 said the exact thing I was saying all along we are undervalued but not now.
April 29th, 2009 at 9:49 AM
West side neighborhood climbing from 165K to 400K = montgomery. Although there were few in that price range a few years ago, and a decent selection nowadays under 400K. It is a very nice area, but I think one of the ones that climbed disporportionately.
April 29th, 2009 at 9:49 AM
George are u saying that we are going back to pre boom levels when the report you are quoting says 3 times average wage which is 220-240 preboom levels were 160-180.
April 29th, 2009 at 9:50 AM
Any body can afford 250,000 morgtgage with the average wage. My nephew is 18 straight out of highschool and is making 6 figures a year floorlaying and he is busy as hell. These people crying that houses are too expensive need either go to school or work a trade god enough of the whining allready.
April 29th, 2009 at 9:50 AM
bill,
I’m sorry but that’s mighty presumptous of you to assume everyone wants to lay tile or do other grunt work. Some people are fine with doing that type of work but not everyone has the desire to blow out thier body so early on. I mean you get paid good yes, but what is the cost. Personally I took schooling in something I liked and could get a job in, and be at a desk, and still have the use of my knees and back after 10 years of doing it. Just because a few trades or dirty jobs get paid a lot (and they should beucase they DO have a cost involved) doesn’t mean everyone should just shut up and feel stupid for not picking those exact career paths.
my own opinion.
April 29th, 2009 at 9:51 AM
I want to add…250 grand eh on the average wage…what’s the average wage in the province again? for a singleton? crunch the numbers again you’ll find it’s NOT actually possible at least not thru banks with a brain. I make 43 grand a year and was only approved for 125 grand. i have a 335 buck loan but that’s all.
April 29th, 2009 at 9:52 AM
Homes are for families meaning two income earners thats what the average wage. so Jesse times your wage by 2 and there you go 250,000 bingo. My nephew is saving up money for u of s so he wont need student loans it not his career choice. And anybody graduating from any private school like saskatoon buisiness college can get easily 40,000 as a secratary like my gf did first interview they asked how much she expected she said 40,000 they gave it too her right away. She also had no prior experiance in that field either. And most people buying there 1st house is far from being average they usually start with something really small and work their way up like our parents had too. Kids today are too spoilt and want the best of everything right away if you dont have rich parents too bad.
April 29th, 2009 at 9:52 AM
Jesse G,
So your saying you made a similiar wage than me when I bought my home but they offered you less. Its a credit issue not a affordability issue….
April 29th, 2009 at 9:53 AM
Armoth,
people in Vegas said it was because they were gaining 80k people per year and “it was Vegas” that their housing would not go down, blah… blah
in Phoenix they said it would not go down because of massive immigration,people who move there have money, a strong economy, tonnes of investment, great weather year round, affordable compared to California….blah blah
you get the picture.
Each city made excuses to justify their runup in prices and then they made excuses to justify that they were not going to crash. Each city failed. Saskatoon is no different. Using the “we were undervalued to begin with” won’t work.
Between 2003 and 2006 house prices went up 34% triple the rate of wages in the same time. Affordability was becoming worse before the boom. We were maybe undervalued in 2003. But you have to remember builders were still making money back then. So it is not like they were selling at a loss back then.
April 29th, 2009 at 9:53 AM
Bill,
I do agree that it would take 2 income earners. That’s where I got hung up on the ‘average earnings’. So the key is to get together with someone to buy a house. What if you aren’t one of the lucky ones to find someone. I mean I have a gf yes, but what of those that don’t? Are they forever left out of the market? Your gf got very lucky to get $40,000 at the job trust me.
I do also agree a lot of kids are spoiled today, but isn’t that a bit steep to assume everyone is just lazy? I’m working 2 jobs personally (and any more on contract i can get on the side) so I hear ya on people being lazy. But in no way is it generally ‘just that easy’ to pull in $40 grand a year.
April 29th, 2009 at 9:54 AM
bill,
if we take away the subprime mortgages we had for 2 years ( 40 years, 0 down, just interest payment) and if there was not the false demand ( speculators) and no bidding wars, we would be around the 185k – 215k mark right now. I bought in 2005 for 160k, houses on my street sold in May for 319k and 329k. Very similiar homes, actually I did some reno’s, they did not. If an increase of 150k- 170k in 3 years is not a bubble, I don’t know what is. Even if we were undervalued. ( which I don’t think we were)
People being house poor is detrimental to our economy. With the rise in commodities it only makes the problem worse. People are house poor, gas is the most expensive, food is going up like crazy. Leaving no money left over to spend except more credit cards. But this is good, right?
Jesse G.,
patience is key,
April 29th, 2009 at 9:54 AM
George,
The undervalued arguement does work because if we were 30-40% undervalued than the rest of Canada it means we are 10-15% overvalued now. Those guys from Merril Lynch got their degrees from a cracker jack box so i dont even know why people are even listening to them.
April 29th, 2009 at 9:54 AM
George you DON’T understand the sub prime mortgage issues in the US. Your examples between Canada and the US are NOT comparable.
1st off and LEAST important the banks are protected by home insurance through CMHC or a few other insurance providers. It is mandatory if your down payment is less then 25%. Our banks are protected unlike the US banks. Stanley Morgan being a great example of what losses our banks are protected from in Canada.
2ndly and most important sub prime mortgages are just that. Sub prime. It has nothing to do with term length or down payment. In the US banks were giving people mortgages based on 1-2% interest rates. These low interest rates were INTRODUCTIONARY and then reverted to normal rates.
Lastly the introductory rate problems were compounded by poor lending rules. IE proof of income was weakly enforced, total debt ratio was ignored (or only based on introductory rates), and in some cases people without jobs qualified.
The result was that when the introductory rates ended people could no longer afford their homes. Interest rates raising SLIGHTLY had very little to do with the problem. The US rates now are rock bottom and the housing foreclosure rate is still very high. Here is an example. A $320,000 with a 25 year mortgage at 1% introductory rate would have a monthly payment of just over $1200. At a more realistic 5%, after the introductory rate expires, the monthly payments over $1800. A 50% increase.
If you want doom and gloom comparables you need to look to the 1980′s. A double digit prime lending rate would certainly cause significant problems to home owners. Unfortunately our 4% inflation doesn’t correspond with the 10-15% inflation of that time. So while conceivable, it isn’t on the foreseeable horizon.
April 29th, 2009 at 9:55 AM
Ok Jessie i hear what you are saying but if you are alone you dont need a whole house to yourself its a waste to the enviroment just buy a small 500sf condo.
Im really against filthy rich people buying mansions and never using them. I agree with you george on some points 1st of all the banks here are tough to borrow from even with excellent credit and big downpayments not like the states. And these 40 year morgatges were probably co sighned by parents or someoneelse. And I bought my house in dec of 2006 and it was 185 and so were all the comparables. But we should be 3.5 or at the least 3 times the family income which some say is 75 others 85 not a big difference so even at the lowest 225,000 highest 255,000 highest and remember these are average houses. First time buyers usually will buy lower ones like on the west side 200,000 then move up. Are those prices unreasonable. What you are saying like some other people on this blog are is that prices drop back to 180,000 with 2 years gone buy with 0 gains that is ridiculous. Not to mention all the people who will be hurt by that prices are to high right now people who bought in at the peak will lose 50,000 to 60,000 grand they can make that up in 4-5 years but what u are saying will reak havoc and forclosures and for what when the prices I quoted are more than reasonable to afford. Sorry I wrote a bit longer than I wanted.
April 29th, 2009 at 9:55 AM
Round and round the argument goes. I think I posted some of this a long time ago. I like the 67 year old guys post “weathered” and “experienced”.
Us young idiots believe the banks commercials that we can all afford everything on credit. “You earn more than you think”. Hmmm, I think the reverse is really true.
Media is hugely responsible for the run-up in prices. Lots of dummies bought in when they shouldnt have. And, I mean dummy in the most respectful way – do the math on your own budget – not what some creditor will lend you.
Our generation has grown up thinking – they wouldnt lend me this if I couldnt handle it. Sorry – I think not.
That US vs Canada not being the same, as our lending standards are way stricter. Crap. Anyone actually do an analysis of this? I just keep hearing people say its different and then list of the three or four things that everyone mantras. However, flat out, Canadians are up to their ears in consumer debt.
I miss the predictions. I guess I see Saskatoon at the average price of 250-260
We’ll see.
Norm – love your blog. Can’t help but see what happens. Funny how getting burned does that;)
April 29th, 2009 at 9:56 AM
Ryan -
Check out the real estate listing magazines a little more closely.
“Introductory rate of 0.5 % for first 24 months” on some of the new buildings.
April 29th, 2009 at 9:56 AM
Armoth:
I’m still waiting for details on this job offer so I can move back to Saskatoon and buy a house. Please give details of what I can do at Petrobank and for how much?
April 29th, 2009 at 9:56 AM
And has anyone else noticed that there are a lot of similar minded posters on here with similar writing styles? It’s almost like they make the same spelling mistakes and even use the same shorthand.
I feel like a detective, snooping out the truth, lol…
April 29th, 2009 at 9:57 AM
Warren,
If you want me to do the work for you pay me a commission of 50% of your first years salary before tax other than that contact petrobank.
Cindy,
Where can i sign up for that deal?
April 29th, 2009 at 9:57 AM
Cindy, I’d love to see a Canadian example of a sub prime introductary rate. I’ve nevery seen one. I suppose it could be builders doing their own financing on Condos.
Either way the banks can’t approve mortgages based on introductary rates or beyond the ~42% TDR and that is what caused the housing meltdown in the US.
April 29th, 2009 at 9:57 AM
I guess it’s to be expected, but to me it seems all the bears keep moving to Alberta. I guess they’re putting their money where their mouth is.
April 29th, 2009 at 9:58 AM
Norman (not Norm)
“I know many like to use this blog to publish 3000 word essays, however I’ll make mine brief:
1. ML is wrong. 10-15% overvalued would be about right.”
You could have at least afforded some reason(s)!
I think Saskatoon is 500% over priced.
April 29th, 2009 at 9:58 AM
Cindy,
I think we’ll see more “introductory rate” offers as some of these condo conversions find that they’re having a hard time selling units but they will most likely be write downs paid for by the unit owners. I believe that CMHC will still require that these buyers be “qualified” to meet the GDS and TDS ratios based on a current three year rate.
I can say that the banks will continue to play the “zero-down” game as long as they are allowed to (after October 15). Bank throws in the down payment and cranks up the interest rate to get the money back.
No matter how you slice it, these “programs” definitely allow an under qualified buyer into the market and create a dangerous situation especially at a time when values won’t be rising and may in fact be contracting. The buyer is either paying an above market price or an above market interest rate.
April 29th, 2009 at 9:58 AM
Armoth:
That’s a weak answer. It was you who proclaimed that you had found this job. I just want to know the details. Does it pay 50k a year? Oooooh, maybe 55k? I’ll drop everything and leave today! What can I be doing in Saskatoon in order to afford a nice $350k home out in Willow Grove or Arbour Creek or some neighborhood comparable to here in Calgary (where I can buy the same home for $350k)?
I looked on Petrobank’s website and found that all the head office jobs seem to be in Calgary. If you can’t give me any details, then I’ll assume that you agree with the fact that average home prices have far outstripped average incomes in Saskatoon.
April 29th, 2009 at 9:59 AM
Bill,
There are many factors which could be considered in market valuations. What a buyer paid for a property is not one of them. Supply and demand will dictate where the market goes.
April 29th, 2009 at 9:59 AM
I think it’s time to get the flaming and the vitriol under control, no? We’re here to help educate and learn from each other, I hope.
I look at this blog as an opportunity to share some knowledge, educate, and learn from those who are interested. I think it’s fantastic that this blog is here, and that it is as open as it is. If you’re clearly not interested in intelligent discussion, I’m not sure what your agenda is, other than getting enjoyment from rattling cages.
Yes, I am rather bearish on the global economy and financial system at present, but I’m not trying to convince anyone to hold off on buying a house. Your money, your life. I am smart enough to realize that the power to stop a housing/RE correction is not in my hands, nor anyone else’s. There are a certain number of people who have the incomes and the downpayments to buy houses without overlevaraging themselves, even in a declining market. I’d wager, though, that those people are rather few and far between these days. Even if I COULD convince most of them to wait (which I think is sensible, but again, not my life or my money), it wouldn’t make a dent in what the market ultimately does. Likewise, you can yell and scream all you want, but even if you convinced all of those buyers to jump in, they won’t be able to stem the tide of this correction. This is a macroeconomic issue we’re dealing with here, and no amount of blogging is going to affect things one way or another. What you paid for your house last year isn’t going to matter either.
The only thing that will stabilize the market is average prices coming in line with average incomes, and the average buyer not having to resort to “fancy” financing. If it takes you 40 years to pay for something, clearly you should not be buying it. People should not have to sell out their future to pay for the present. That’s just nuts.
April 29th, 2009 at 9:59 AM
Warren,
Last time I checked im not your career counselor and the job pays way more than 50k. Why dont you also check out Potash Corp with the new negotiations the miners will be making over over 100k + bonuses. And for the headquarters issue I know its hard to wrap your head around it but some companies are based out of Calgary but work somewhere else whoa blew your mind. And home prices havent outstripped average incomes its actually slightly above which a 10% correction would fix.
April 29th, 2009 at 10:01 AM
Ryan,
No subprime lending in Canada?
“Numbers tell the tale of the two countries. In the U.S., subprime mortgages account for 20 per cent of the market, while here they make up less than 5 per cent, Murphy said.”
http://www.thestar.com/article/208229
I will agree that subprime lending was more conservative here and did not last as long. But subprime was only one symptom of the list of factors that led to the US housing bubble.
What caused Phoenix’s bubble?
Media and RE industry manipulation of scaring potential buyers of being priced out forever and the belief that housing is always a good investment
Speculation- “a record 62,000 new homes went up in metro Phoenix during 2005 but only about 40,000 of those were bought by people who moved into them.”
http://housingdoom.com/category/phoenix-market/
Bidding wars- caused huge runups in prices in 04 and 05
Historically Low Interest rates- http://mortgage-x.com/trends.htm
Lax lending standards and faulty mortgage products
Phoenix uses the undervalued argument in 05!
“Home prices have been relatively flat for the 1980′s and 1990′s. So part of the recent increase is due to the ‘catch up effect’”
http://www.thompsonsrealty.com/Phoenix_Real_Estate_Bubble/page_1148887.html
http://www.usatoday.com/money/economy/housing/2005-11-01-real-estate-usat_x.htm
“What we will see is a dramatic slowing in price appreciation,” he says. Only a few, high-risk markets, he predicts, will experience price declines”
Where have we seen this lately?
April 29th, 2009 at 10:02 AM
Norm, how are the number of sales stacking up this week?
Thanks, from the one and only Mr. Lamborghini Face
April 29th, 2009 at 10:02 AM
Face,
Mid 40′s before today. Should be an average kind of week.
April 29th, 2009 at 10:02 AM
Alberta now leading nation in housing price decline:
http://www.financialpost.com/story.html?id=723628
10.1% reduction in price in Calgary; 8% in Edmonton.
Vancouver is even down 0.7%.
April 29th, 2009 at 10:02 AM
http://www.citypa.ca/Commerce/CompetitiveClimate/AverageHousePrices/tabid/252/Default.aspx
Average house price in Saskatoon in 1998 was 104k.
Wow!
Crikey, could you make a graph of Saskatoon house prices the last 10 years? I would but do not know how.
April 29th, 2009 at 10:03 AM
George,
There is one of those on my other website at
http://www.teamfisher.com/Saskatoon_at_a_Glance/page_1723426.html
April 29th, 2009 at 10:03 AM
George,
Thanks for your posts.
Norm said “August is typically expected to produce above average unit sales”…. “just 38 properties, were reported firmly sold”…. “Only 135 properties were listed for sale”… “total active listings found a new high point at 1,555.”
Bulls will endlessly bring up what “was” (allegedly, undervalued RE) and what “will be” (allegedly, (near) endless booming economy and investment) but not what *IS* – huge supply and tiny demand.
Supply and demand people. We’ve passed equilibrium. Prices will retract until demand picks up again.
Norm,
Great analysis of the ML report. I believe housing is overvalued; but the Saskatoon/Regina points you brought up are quite interesting.
April 29th, 2009 at 10:03 AM
guy_in_regina,
I couldn’t call it an analysis as there really isn’t much to analyze.
The market comparisons get me most. Given the average selling price difference between our two markets, and the higher wages in Regina, the guy is really saying “but Regina is even crappier than Saskatoon so they still get a close to 50% overvaluation.”
Careful with the numbers. They are all subject to significant swings from one week to the next. The week prior produced 80 units sold and July saw 348 units total. Demand is reasonably good. Supply is ceratinly taking it’s toll.
April 29th, 2009 at 10:04 AM
guy_in_regina said:
“Bulls will endlessly bring up what “was” (allegedly, undervalued RE) and what “will be” (allegedly, (near) endless booming economy and investment) but not what *IS* – huge supply and tiny demand.
Supply and demand people. We’ve passed equilibrium. Prices will retract until demand picks up again.”
So far as I know, the “bulls” aren’t disputing that “we’ve passed equilibrium”, or that prices will retract. But I think your characterization of demand as “tiny” is just plain wrong. Check Norm’s summary of last month’s sales as compared to normal (i.e. 2005/2006) numbers, and you’ll find they look quite healthy.
Supply is way, way, up- no one can dispute that. But your characterization of demand looks either misinformed, ill-intended, or both
April 29th, 2009 at 10:04 AM
Norm,
According to Drake’s link above, Regina is still on fire (in terms of prices anyway). Perhaps ML were forecasting a bit? I can’t see it, but who knows eh?
RE: careful with numbers.
You’re right. I guess it’s the imbalance between supply and demand that’s troubling.
“but Regina is even crappier than Saskatoon”
And that’s not flying in the Bridge City?
April 29th, 2009 at 10:05 AM
guy_in_regina,
Don’t get me wrong. That’s not my opinion, but it’s clearly David Wolf’s. How else can it be explained? According to my calculations (and a lot of this is simple math) Regina appears to be decent value, at least.
April 29th, 2009 at 10:05 AM
Here’s one for you Ryan http://www4.bmo.com/personal/0,2273,35649_36703,00.html
I know TD was offering it as well. As we all know, if one or more major lender carries it then the rest do to stay competitive.
Fortunately I don’t think EVERYONE was going for these ARMs in Canada. I was thinking to myself when I saw the TD ad for this “I hope nobody really believes this is that good of a deal”.
Also, the USA also have a mandatory PMI. It’s just not called CMHC. http://personalinsure.about.com/cs/homeowners/a/aa040703a.htm
Do banks in Canada often lend exceeding 42% tdsr. Of course they do!!! However, in many cases they have sufficient collateral (at the time of lending). In the case of the USA some of the houses took such a large dip that the huge downpayment was still not enough to keep them in positive equity. Sometimes they’ll bend the rules in rentals and take in rental income into the equation even when the rental is vacant (my friends did this with Royal bank).
George, I don’t know for sure whether you know what you are talking about or not but you’re not necessarily either.
It’s very interesting to see that people are just beginning to argue that there was no sub-prime on the Saskatoon blog. These are the same arguments we saw on the Calgary blogs last year before we saw a big dip in our market. Saskatoon has some differences but I haven’t figured it if it’s for the good or bad yet.
However, as similiar as these markets will be I don’t believe we will see any sort of 50% crash either. It will probably be a small correction of 10-15% and then maybe flatten out for a few years. Of course I could be out to lunch too.
Armoth,
I think you are missing Warren’s point. He is not asking you to find him a job nor is he saying there are no 100k/year jobs in Sask. What he is saying is to get an office job with his experience in Sask there is no way he would get anything near his current pay.
You seem to be a very intelligent guy but also one whose emotions tend take control when posting your thoughts. I used to be like that when I was a bit younger. You might want to sit back and cool off before you post. Then before you hit the “submit” button re-read it and ask if you would be offended if someone sent this to you.
Why am I posting on this site if I’m from Calgary? There are so many great debates going on here that I could resist it. Keep it up guys. Good job keeping this up Norm.
April 29th, 2009 at 10:05 AM
George, read your link again. It repeated everything I posted as to why your comparisons are invalid.
re: http://www.thestar.com/article/208229
Vinny, thanks for the reference. That is the first one I’ve seen and to be honest it doesn’t concern me.
All it does is help out with the closing costs on a home which are always shocking. You still need to qualify at the full long term rate unlike what was done in the US. It was the qualification on the introductory rates that caused the problem in the US. We’d don’t have this issue here.
If you REDEFINE the subprime problem to include long term mortgages at subprime (ie 5yrs @ .5% below prime) or mortgages to self employed people (as was done in George’s link above) you can argue successfully that sub primes exist in our market. You’d be comparing apples (renamed oranges) to oranges though.
In regards to TDR you are off the mark a little. Banks do not lend out above that. They will take other income into account as they should; it is income. Although in the case of rentals they only allow 50% of the income amount to be considered. For things like bonus and profit sharing they take the average of the last 3 years into account.
Lastly Vinny I agree completely with you in regards to correction. It will be in the order of magnitude you’ve suggested.
April 29th, 2009 at 10:06 AM
Vinny said:
“Do banks in Canada often lend exceeding 42% tdsr. Of course they do!!! However, in many cases they have sufficient collateral (at the time of lending). ”
I don’t know enough to make a broad statement, but I know when we did our own loan application the tds/gds numbers were a hard cap we couldn’t get past. Our mortgage guy told us (and I believe him) that the bank would have done our loan in a heart beat, but because CMHC wouldn’t insure anything that fell within the required ratios, we couldn’t get the loan we originally applied for, despite perfect credit and lots of collateral.
As an aside, collateral is completely irrelevant, is it not?. A mortgage loan for the purchase price of a primary residence, not purchased by a corporation, is secured only by the property being mortgaged (see discussion above). So there’s no such thing as collateral, only assets, which are not pledged as security in any way against the loan, and the bank has absolutely no legal claim against.
Am I wrong?
April 29th, 2009 at 10:08 AM
talkingguy,
I couldn’t get past the TDS either or what not. They said that is the MAX u can borrow with the wage you have. MAX. Didn’t have anything to do with credit. The interest rate maybe did, but at the time they were offering me the interest rate at the time. Collateral didn’t make a difference in my case either. I mean I suppose if you had a house paid for that would be of use as collateral but yeah. I know Armoth told me I must have gotten less because of my credit but their calculation was a direct calculation of a certain percentage of my gross income that i could spend on monthly payments and that arrived at my ALLOWED number.
April 29th, 2009 at 10:08 AM
Ryan,
Subprime in Canada= getting attacked by a pitbull in a backyard
Subprime in US= getting attacked by a shark in deep waters
Both that were bought at the peak will take a financial pasting but way more attacks in the water than the few in the backyard.
The correction of 10-15% from the peak and then level growth? I would love to see an example of a market such as ours go up 100% in two years and then a 15% correction and then flat growth. Cause I have searched and searched, all I can find prices reverted back to pre boom levels. Please help.
April 29th, 2009 at 10:09 AM
Hey I was just wondering I have a 700 sqf sfh house in confederation is that an average house? If not what is considered average house?
April 29th, 2009 at 10:10 AM
Guys,
If I’m not mistaken, the “ratios” are set by CMHC and apply only to insured mortgages. Each lender likely has guidelines for loans which are not insured and there would be some flexibility in those instances. Even though there are protections which limit liability on default for principal residences purchased by natural persons the lender will consider your assets, liabilities and credit when determining if you are a reasonable risk outside of their lending guidelines. While they may not be able to secure the loan with other assets, these things all say something about the probability that you’ll repay the loan. If you have a strong net worth and pay your bills as promised you are a lesser risk.
April 29th, 2009 at 10:11 AM
I have two examples of TDSR being exceeded. They are pretty much the same situation. When my parents came to Calgary at the end of 2005 (right as the boom was starting to see some steam) they were unemployed and the bank was going to give them a mortgage. Mind you they they were looking at a 200k house and had 100k down.
My situation was almost the same but not quite TDSR. We had just moved from Vancouver. I hadn’t even started my job yet but had just signed a contract but would be on a 3 month probation. Because I had almost 40% down on a smaller house I was approved.
I can’t say everyone would be approved in this case and perhaps today this might no longer happen as I think banks have tightened their lending practises even more now.
As for my friend’s rental they just qualified for 42% TDSR only because the bank created a rental income that did not exist at that time on a house they were planning to buy. They were basing it on the fact that it would exist down the road. Obviously that was why they were buying that house too but the bank should know that if they suddenly hit a glut where they couldn’t rent it out they’d be stretched very thin…possibly 70% tdsr.
There might have been other factors but that’s what he told me. The thing i found scary is that they only put 10% down for a rental and I thought banks aren’t supposed to do that unless you had 20% down.
April 29th, 2009 at 10:13 AM
Norm:
Spot on. But the ratios set by CMHC are going to come into play on what percentage of first-time buyers’ mortgage loans? My guess is the number is extremely high.
George said:
“The correction of 10-15% from the peak and then level growth? I would love to see an example of a market such as ours go up 100% in two years and then a 15% correction and then flat growth. Cause I have searched and searched, all I can find prices reverted back to pre boom levels. Please help.”
George, can you point us towards the examples you’re talking about, where real estate prices go up 100% in two years and then prices revert to pre-boom levels? Preferably with a lending environment close to Canada’s, but I won’t be picky.
April 29th, 2009 at 10:13 AM
talking guy,
I worded my post poorly. When I said collateral I meant to say downpayment. my bad. see my post about getting a mortgage based on larger down payment.
good point about qualifying on the tdsr on introductory rate Ryan. I never actually looked into it. I just saw different posters about it all over the city.
April 29th, 2009 at 10:14 AM
Vinny,
Thx for the advice and your right I am a hothead I will try that strategy next time I post =op
April 29th, 2009 at 10:14 AM
“Meantime, consider this. Saskatoon is apparently “as much as 50% overvalued” and Regina, where the average selling price is $50,000 lower and the average income is nearly 10% higher is “48%” overvalued.”
April 29th, 2009 at 10:15 AM
Norm, the banks also have TDSR for regular loans (and uninsured mortgages). When I was younger I bumped into it from time to time. I don’t know if this is a federal rule (similar to max interest rate) or internal. I do believe they are a couple points higher though. Most banks also require central office approval on any TDSR over 40%.
Vinny I can’t really comment on your first two examples as I don’t have enough details. I suspect the bank used T4s for both you and your parent’s incomes. As a self employed person that is what they use for me. Again similar to bonuses it is usually an average of the last 3 years.
Your example on a rental is standard practice. re: due to variable vacancy only 50% income of rental is considered for TDSR. They don’t care if it is currently rented or not. I do believe it needs to be a legal suit to qualify for income though. It sounds like the rental property was part of their primary residence, down payment would be based on that. If it was not part of their primary residence something is fishy.
George I can’t comment on ‘short term’ (1-5 years) future growth after a correction. It’ll depend on the economy, inflation, and interest rates over the future. I can imagine a number of very unlikely situations which would devistate our economy. However if things remain constant I’d expect some nominal growth.
I’ve now said my piece on the ML report, about the difference between the US and Canadian lending markets, and have now exceeded my weekly ‘allowance’ on blogging. Thus I’ll evaporate for another couple weeks.
April 29th, 2009 at 10:15 AM
Ryan,
To be clear, I have probably jumped the gun. And to say they will revert to pre boom levels was probably wrong. Inflation adjusted, I believe they will be close. There are places in the states that have reverted to below preboom levels But they are neighborhoods that were built during the boom and now, they are ghost towns, so I won’t use them.
Here are some excellent links from past Canadian RE. I know others will see it different than I and thats ok. I think we are all here to learn. I used to be one of the bulls on here.
Vancouver-This one is not inflation adjusted,
http://www.affordablevancouverhomes.com/4a_custpage_416.html
Calgary-This one is inflation adjusted
http://photos1.blogger.com/blogger/4027/164/1600/History%20of%20Calgary%20RE%20prices%20-%201973%20to%20today.jpg
Toronto-Took until 2002 to reach the peak from 89
http://www.mississauga4sale.com/avgprices.JPG
Edmonton-Not inflation adjusted
http://www.chrisdavies.ca/2008/07/edmonton-historical-price-trends-since-1962/
http://spreadsheets.google.com/pub?key=pKhf_Qhx1jfrbTbcuR-dHSw&gid=1
Norm, do you have prices from the 70′s for Saskatoon?
April 29th, 2009 at 10:16 AM
No prob Armoth. I actually have to take my own advice because i still catch myself sometimes.
Ryan,
I don’t know all the full details on my folks situation either.
As for the rental I am really not sure how. I must be missing some details because it was not their primary residence. They owned their primary in addition. When I asked my friend about it he didn’t even remember what he signed at the lawyer’s office. However, I know LOTS of people signed up for “creative” financing the last few years.
I personally can’t make any analysis on how much of a correction you will see in Stoon. I haven’t really followed the boom there closely so it’s tough for me to tell. People say that the faster it goes up the faster it falls. At the same time, I also find that might have meant that less people had time to overleverage themselves. That’s my theory. If only I could predict the future…
April 29th, 2009 at 10:16 AM
I am not sure what to think about our economy related to construction . 500 lots a year was too low, but over 2500 is probably too high. Some where around 1000-1500?
Right now we have record inventory and this year we have had record housing starts. Demand has slowed down but it is still there. First time buyers and investors are basically shut out, leaving only migrants to eat into the supply. Trade up buyers will always be there but this will not eat into supply. Many of the housing starts earlier this year will be ready to be moved into. This will lead to supply growing again in the fall
I believe a lot of our housing starts was false demand. ( speculators and houses built on spec). It will be corrected. It takes about 4 full time jobs per year to plan, service and build a house. If we revert back to 1000 homes a year, that is quite a few jobs lost.
But if prices come back down to earth, there will be more demand and more people moving here with the other aspects of our economy
April 29th, 2009 at 10:16 AM
George,
Data is only available into the 80′s on the computer system. I’m sure I could dig it up but I’m half way out the door for a vacation. Sorry.
April 29th, 2009 at 10:17 AM
Hey, enjoy your vacation Norm!
April 29th, 2009 at 10:18 AM
Armoth:
You really aren’t getting the point I’m trying to explain to you. It is quite simple – the “average” family can no longer afford the “average” home in Saskatoon. There simply are not the high paying jobs in Saskatoon to justify prices being where they are.
I mentioned Petrobank’s head office being in Calgary, because (typically) the highest paid employees of a company will work in the head office. Pretty simple idea. My company has gas stations across the United States – but the guy working the counter in Toledo isn’t quite taking home what the CFO in Houston is. Does that better explain the importance of head offices?
But I have to hand it to you – you did finally give me a hard number of how much I could expect to earn if I moved back to Saskatchewan. Unfortunately, it’s laughably incorrect:
“Why dont you also check out Potash Corp with the new negotiations the miners will be making over over 100k + bonuses.”
I’ve posted this before, but it was a while ago – I grew up in a small town with two potash mines within a half hour. I know many people who work at potash mines. I have family who work at potash mines. It’s great money (especially for the amount of education many of them have). It’s no $100k a year.
http://www.canada.com/vancouversun/news/business/story.html?id=a60d3ee9-5272-4bbc-9c2c-271e7163f561
“The union went on to say that while Potash Corp receives far more profit per worker than most mining companies, it pays wages that are lower than many other major Canadian mining operations.”
http://www.icis.com/Articles/2008/07/26/9143338/potashcorp-plans-no-weekend-strike-talk.html
“The union wanted to see minimum wages for select certified employees at the plants increased from $31/hour (€20/hour) to $41/hour, Edwards said.”
So “select certified employees” are currently starting off around $65,000 a year (plus overtime, bonuses, etc). The union wants to see $85,000 and PCS is offering closer to $70,000.
As I said, good money – but not $100k as you claim.
And yes, you will make more after you’ve been there for 10 years and are topping out your pay scale – that’s not the point.
Here’s a great website if you’d like to learn about the income distribution of Saskatchewan employees:
http://www40.statcan.ca/l01/cst01/famil105i.htm
As you can see, from the 2006 tax year, just 22,100 Saskatchewanians made over $100,000. That’s 3.05%. Just 20% of Saskatchewan tax returns were over $50,000 of annual income.
Yes, these numbers are a little over a year old – and yes, they aggregrate the entire province. But keep in mind that it’s a well proven fact that Regina has higher incomes than Saskatoon, so it’s not like Saskatoon is skewing the numbers up by itself.
So take these numbers, play around with a mortgage calculator, and explain again to me how you think that home price appreciation did not outstrip incomes??
April 29th, 2009 at 10:19 AM
Troy,
I would think that a 700 square foot home is probably a little smaller than “average”. As far as bungalows are concerned, 1000 squares is probably somewhere closer to average.
guy_in regina,
Thanks! I think I will.
April 29th, 2009 at 10:19 AM
Warren,
great link, always wanted to know the difference in wages at the upper end Sask vs Alb. No contest!
Even though they are 4 times our the size of us, they have almost 3 quarter of a million making 50k or more, we have about 3 quarters of a million making 5k.
April 29th, 2009 at 10:19 AM
Warren,
I have a employee from the mines installing lights and my over the range microwave yes the Potash mines. The agreement offered by Potash Corp was 35% annual increase and bonuses do the math and you will find that is over 100k. Now they didnt accept that agreement the union asked for 75% pay increase along with 25K per quarter bonus now do you just want to give it up and ask your family or friends again since you are mistaken.
April 29th, 2009 at 10:21 AM
(sigh)…
http://www.canada.com/reginaleaderpost/news/story.html?id=348d8675-a197-4e1a-b527-f5c6b4c08bfe
“We made an offer we thought was extremely fair and reasonable,” Johnson said, noting the company had proposed wage increases of up to 35 per cent over three years.
That’s 35% over THREE years Armoth…not a “35% annual increase”. So more along the lines of 10% a year. Get it?
So again, your “facts” are horribly wrong.
A $25,000 bonus per quarter?? Lol – so you were told that the union is asking for $100,000 just in bonus for its members? Plus salary?? And you believed it?Wow.
btw, did I mention that only 3% of Saskatchewan makes over $100,000 a year?? I think I did. I’ll repeat myself – only 3% of Saskatchewan makes over $100,000 a year. Apparantly you believe that they all work in potash mines.
April 29th, 2009 at 10:22 AM
Warren,
Of course Warren a potash employee would lie to me cause its in his best interest of course it makes so much sense. How bout for the sake of not arguing we assume I was wrong and the offer was 35% over 3 years and the unions counter offer was 75% over 3 years and where does the math bring you on som1 who makes 75k without bonuses there. Just wait until the new contract is finished if im wrong ill shove my foot in my mouth. And if im right you send a resume to Potash Corp good day sir!
p.s.
thx vinny i have taken your advice and the third draft was much more appropriate .
April 29th, 2009 at 10:22 AM
“I have a employee from the mines installing lights and my over the range microwave yes the Potash mines.”
LOL!!
Great posts Warren.
April 29th, 2009 at 10:28 AM
If the union monkeys at the mine are given the 75% increase + a 100 grand annual bonus I forsee the Potash mines following the same fate as the GM and the dinosaurs. It won’t end well.
April 29th, 2009 at 10:28 AM
I never meant to imply that he was lying to you. I was trying to imply that one of you was misunderstood. Just stop and think about what you wrote for a second. $100,000 in bonuses for union members on top of their salaries? Does that sound reasonable to you? Their salaries nearly doubling in 3 years? Does this pass a reasonable litmus test for you?
“Where the math brings me” is that by your own admission, a miner (which is one of the more premium jobs in a potash mine) is making around $75,000 before bonuses right now. I emphasize the words “right now”. As in “right now” with housing costing what it does.
Bonuses run around 10%, so let’s even round up and say that it’s $85,000.
I have been making the argument that home prices have gotten ridiculouly out of whack with incomes in Saskatoon. You disagree. I asked for proof of high paying jobs in Saskatoon (to be specific, I asked for high paying jobs that would utilize one or both of my degrees) to justify the price of homes. You have finally countered with working in a potash mine for $85,000/year. What they may make a year from now, or two years from now, or whenever is irrelevant. The point is trying to compare current incomes with current home prices.
So with a conventional mortgage (10% down, 25 years, 5.5%), this miner can afford a MAXIMUM home price of $333,132 (from RBC’s online calculator). And the average price of a SFH in Saskatoon for July was $322,715.
So this premier job you have submitted to me can barely afford the average Saskatoon home. What does that say about the 92.4% of the province (again, from StatsCan’s numbers) who make LESS than $75,000/year? I encourage you again to look at the StatsCan numbers. They don’t lie.
The whole gist of my argument is that I hear constant comparisons of how Saskatchewan is/was cheap compared to the other places (mostly Alberta). Housing was cheap because everything else was reflective of that. Now housing has skyrocketed and incomes have not followed suit. If the potash workers do take the 10%+ annual increase that PCS is offering them – it will be (to my knowledge) one of the sweetest increases Saskatchewan employees have seen in a long, long time.
You asked me to send in a resume if I prove to be wrong and miners do end up making $100,000 after this contract is renegotiated. I wouldn’t send in a resume to PCS to make $100,000 because I don’t want to take a pay cut from my current compensation. Well that and the awful, awful shift work (3/2′s are one of the cruelest things man has ever inflicted upon itself). I’m not saying this to sound cocky, or make myself out to be special – just the opposite. I’m trying to illustrate the point that I am not unique in Calgary. Very fortunate, but not some sort of a statistical error. There is a lot of disparity, that is there are a lot of people here making not a lot of money who can barely get by (I believe our homeless rate is the highest in Canada), but at the other end of the scale there are a lot of people making very generous amounts of money. Housing prices were high in Calgary because many salaries are high. And even still, we’re down 10-20% (depending on what numbers you’re looking at) from the peak already.
I’m not saying this to bash Saskatchewan. Don’t get me wrong – I don’t like Calgary. For many people there is more to life than money, and Calgary does not offer a lot in terms of those “other things”. But we are talking about home prices, which require money to buy. There are many things that Saskatchewan has going for it. But one of those things (as has been mentioned on here before) was an affordable cost of living. That “Saskatchewan advantage” has now disappeared in a bubble of greed and envy.
April 29th, 2009 at 10:29 AM
Warren,
That was a good post and I think the union offer is a push to get PCS to meet them in the middle. And I think you are right on most and I wish housing was as cheap as when I bought it but I dont think we will ever be at those levels again unless something dramatic happens to the world. And it has to happen globally not just to the USA because contrary to their belief they are not the center of the universe <—(I am j/k)
April 29th, 2009 at 10:29 AM
Average house is 2,000 sq ft in Canada (in Macleans July 7th) 700 sq ft is well below average so $300 thousand for 700 sq ft, 675 actually a couple months ago, not a bargain
April 29th, 2009 at 10:30 AM
Macleans,
Just did a little checking and the average size of a home sold here this year is 1,108. I can’t imagine that the average size of a Canadian home is 2,000 unless they include basement in that.
Warren,
Some great points.
“What they may make a year from now, or two years from now, or whenever is irrelevant.”
I agree that this is not relevant to today’s price of a home in Saskatchewan but is this type of increase indicative of a wage trend? I believe our nurses just negotiated 30%+ over three years. Looks like 35+ is a slam dunk for potash. Who’s next, and where does it end? Could this be a sign that things are about to change over the next few years? Interested to know if anyone can speak to that. Are there any similarities to how things unfolded in Alberta when incomes started to grow faster than the rest of the country?
April 29th, 2009 at 10:30 AM
Warren;
Very good post. Your references to the disparity and quality of life issues in Calgary reflectr what is at the heart of my discontent here. I am leaving Calgary for Saskatchewan. Luckily I’m in a position where the money is slightly better and I think some lifestyle issues will be greatly improved. I will most likely be back as I love Alberta but after a number of years in Calgary I need to recharge my batteries.
April 29th, 2009 at 10:31 AM
Warren,
Any chance you work for BP?
April 29th, 2009 at 10:31 AM
Great posts, Warren. I did occur to me it would be a bit odd for a “highly compensated mine worker” installing lights in Armoth’s microwave. Oh well.
I thought abbout something when George asked for the graph of home prices over the last decade or so. I think we’re all looking for a little perspective on this thing, and I’m not all that familiar with the Saskatchewan/Saskatoon market in particular. I know inventory is higher than Norm has seen it in (15?) years, and sales have slowed (certainly from last year).
I know Norm is on holiday, but it may help lend some perspective to look at inventory vs. sales ratios in the past, including past recessions in 1982 and 1990. The one in the 80′s was particularly severe. If the inventory vs. sales ratio is about the same as in past “slowdowns”, then we have some historical perspective. If, however, the ratio is higher than it’s ever been, well- that would be “interesting” too. No?
April 29th, 2009 at 10:32 AM
Crikey,
Your right it is weird maybe when he comes to visit I will tell him that Crikey said he is supposed to be at home doing nothing when he is on strike and to not leave his home. On a lighter note do you want to know something interesting I made more than Merril Lynch and Jp Morgan combined im so rich and you are too. Maybe they will write a report for us that im 50% overvalued…
April 29th, 2009 at 10:32 AM
You’re obviously WAY more than 50% overvalued, Armouth. Closer to 100%, actually.
April 29th, 2009 at 10:33 AM
RE: wages,
I recently graduated with a Masters of Public Administration. It’s a fairly in-demand degree – I had no trouble getting a job. I make $61K. I have $27K student loan debt. My job is a one year term, which seems to be the norm at my level; My co-worker just got on permenant after 4 1-year terms.
Wages are increasing (in some sectors anyway), but only a small proportion of people are making the kind of money that Bill and Armoth are quoting ($100K+). I imagine the “average job” pays less than half that.
April 29th, 2009 at 10:33 AM
Interesting article on home equity loans:
http://www.nytimes.com/2008/08/15/business/15sell.html?_r=2&ref=business&pagewanted=all&oref=slogin#
And we have the “you’re richer than you think” slogan. Hmmm.
Armoth,
“I will tell him that Crikey said he is supposed to be at home doing nothing when he is on strike and to not leave his home”
Where did I say any such thing?
April 29th, 2009 at 10:33 AM
Another anecdotal wages story.
I currently rent. My neighbour works full-time as administrative support for an autobody repair shop. She was having trouble covering her rent (which has gone up quite a bit in the last 9 months) along with other rising costs (primarily energy). She threatened to quit and move back to small town SK. Her boss gave her a $1 raise (per hour). She decided to stay, but had to take a second job at Mark’s Work Wearhouse.
We’re talking rent here – nevermind owning her own home or even saving up for a down payment.
It really made me appreciate where I’m at.
April 29th, 2009 at 10:34 AM
Crikey,
“I did occur to me it would be a bit odd for a “highly compensated mine worker” installing lights in Armoth’s microwave. Oh well.” What does that imply?
Grrr,
Thank you for seeing me more valuable than I really am hopefully the market doesnt correct and I dont become as worthless as a Merrill Lynch economist thank you.
April 29th, 2009 at 10:34 AM
“So with a conventional mortgage (10% down, 25 years, 5.5%), this miner can afford a MAXIMUM home price of $333,132 (from RBC’s online calculator). And the average price of a SFH in Saskatoon for July was $322,715.”
I see what you are saying, but your argument is a little one sided. Not all people are single income first time home buyers. Whether it was a good deal or not, people purchasing homes in Saskatoon during July had the ability to fork out $260/sf.
On another note: Vegas, a city that largely depends on disposable incomes, has dropped 29% since its peak. Merrill Lynch says that our home prices are overvalued by 50%? I think they missed a decimal place.
April 29th, 2009 at 10:35 AM
Armoth,
“I did occur to me it would be a bit odd for a “highly compensated mine worker” installing lights in Armoth’s microwave. Oh well.” What does that imply?”
It implies I think it’s odd. Not that “he is supposed to be at home doing nothing when he is on strike and to not leave his home”.
Please, give us a break. You don’t need to take everything as a person affront to your humanity. Chill.
April 29th, 2009 at 10:35 AM
Crikey,
Dont get mad when I call you on crap just because im unlearned doesnt mean im always wrong. If you didnt mean what I and probably others thought you meant please enlighten us or dont dish out if you cant take it =o|
April 29th, 2009 at 10:35 AM
Thanks for the info Norm. By the way my friend who works as an electrition at the mine wired in my microwave and stove lol.
April 29th, 2009 at 10:36 AM
What happens when this real estate bubble pops and people are left paying 300k mortgages on properties appraised at 140k? Simple, I move out of province, buying cheap American property, then when the rest of you get steamrolled by the economy, I move back and purchase your 500k mortgage for 300k