Saskatoon real estate: Week in review (July 21-25 2008)
It was just a slight push that produced a net gain of seven active residential real estate listings on the Saskatoon multiple listing service but it was enough to push the total inventory past the 1,500 mark for the first time. At the end of the week there are 1,506 residential properties displaying the “active” flag including 976 single-family homes (houses) and 430 condominiums. While inventories are at an all time high, it seems clear at this point that listing activity has started to moderate through July. I expect that when the dust settles, July will likely produce the smallest gains we’ve seen in several months.
Residential real estate sales also weakened some last week with just 61 units trading hands including 59 single-family homes and condos, a drop of 12 units compared to the week before. Area 1 remained fairly strong in comparison to recent weeks claiming 22 of 59 Saskatoon home sales recorded. Another 43 properties are marked “conditionally sold.”
Overbidding activity almost fell off of the map with just one sale recorded above the asking price. There was only one other week this year where overbids fell to one, and this week’s average overbid of just $100 is the lowest on record this year.
The average underbid increased to $11,763, one of the highest points on record this year but it was largely skewed by two exceptional area 2 sales, one of which sold $50K below list, and a second at more than 80K below.
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
216 comments so far. We'd love to hear your thoughts.
April 30th, 2009 at 10:24 AM
Well, an official count of 1500 — there’s a milestone.
This is one too: “two exceptional area 2 sales, one of which sold $50K below list, and a second at more than 80K below”
So the Area two underbid is at 22,000 because of
these?
That’s amazing — I didn’t think the ‘wishing price’ people were open to negotiation at all? Were these in Stonebridge, by any chance?
April 30th, 2009 at 10:25 AM
And what’s with the 100 buck overbid? Someone decided that they wanted the chandelier after all?
April 30th, 2009 at 10:25 AM
Norm:
My friends and I were talking about homes last night while out for drinks.
The common consensus is that traditionally speaking, the slowest times of the year for home sales are (in order):
December, November, July, August
While the quickest are (roughly in order):
March, April, May, September, October, June, February, January
Any truth to that?
April 30th, 2009 at 10:25 AM
The market is going/has gone into “bear” mode – the bull run is over – there are 93 homes on my street – 7 are for sale, some of them for over 6 months, and the prices have dropped 50 k on 2 of them. It is time sellers realized the quick money is a thing of the past and to price your home accordingly. 1500 homes for sale means you better do your homework, price accordingly, and clean the place up !
I viewed a townhouse this week that had such a bad pet urine odor that I walked out after 3 minutes, yet the agent claimed it was ” professionally cleaned”. Note to agent – Did you pay the cleaner yet ? I would stop payment on the cheque.
The bottom line, a well maintained house will sell, as long as it is priced accordingly.
MVA
April 30th, 2009 at 10:26 AM
jrochest,
The smaller of the two underbids was in Stonbridge. The other was a big dollar listing in Nutana.
Speaking of Stonebridge, things are actually looking up there. Still 51 single-family homes for sale, but there have also been 19 sales in the past 60 days. Looks like there’s roughly 5 months supply which is about on par with the rest of Saskatoon.
Joe,
“Any truth to that?”
No, not really.
March, April, May, June, July and August are all typically above average months. January and December are typically the slowest.
Here’s a graph showing unit sales by month over the past few years. The straight lines represent the average number of sales per month for each given year.
Click here to see the graph
April 30th, 2009 at 10:27 AM
MVA,
“1500 homes for sale means you better do your homework, price accordingly, and clean the place up!”
Bingo! Couldn’t have said it any better. Testing the market at a “too high” price is almost certainly going to cost the seller some cash.
Lol. Pet urine is a pretty tough sell and truthfully, the best carpet cleaners will tell you, “don’t bother” unless it’s one little accident in a spot that can be identified.
April 30th, 2009 at 10:27 AM
Under bid amounts are a bit deceiving, I know a friend who was looking at a place in Lakeridge (view?) price just REDUCED $80,000. They are thinking of offering about half that under the new reduced price. So to take a huge amount under list – maybe planning on a reduction anyway. Only one over list, wow. Some pretty big reductions out there.
I wonder if only 59 sales is from the slower time of year? Caution before the new mortgage rules? Taking time to think after finding out Saskatoon is actually losing population? Realization market/prices are on way down, at least some level? All of the above? New home buyers deciding to move elsewhere (Regina?) instead.
April 30th, 2009 at 10:27 AM
Norm, looks to me like in both 2005 and 2006 on your graph, July/August had below average sales.
Also, didn’t house prices take a 10% drop last August?
April 30th, 2009 at 10:30 AM
Dan —
You have an odd way of looking at the chart. The straight lines indicate the average monthly sales for that year. Any point over that line is ‘above average’.
What you mean by ‘below average’ is ‘lower than the highest monthly sales’, which is not the same thing at all.
And number of sales and listings drop in the fall and winter, although it will be interesting to see what’s left on the market in January this time.
Also — it’s pretty interesting to plot 2008 onto that graph, eh?
Sales are *bad* this year.
April 30th, 2009 at 10:31 AM
What I mean by that last comment, is that this year’s pattern does *not* conform to the norm. February and May had exactly the same number of sales — 367 — and January, with 300 sales, and June with 321, are very close too.
The peak was April, with 418 sales.
Instead of looking like a mountain, this year looks like a ski jump.
April 30th, 2009 at 10:31 AM
Dan,
I think jrochest has you covered on the question about the averages.
Please note that this chart is unit sales, and not prices, but for the very last time
, prices did not drop 10% last August. Average sale prices can fluctuate quite a bit from one month to the next depending on what has sold. For instance, the average price was $302K in May, and 310K in June. I’m sure we can agree that prices did not increase 8K in June. Right?
jrochest,
That’s for fielding that one.
I did not include 2008 figures because it didn’t speak to the question at hand which was about busiest months of the year.
I’ll take issue with your comment that “sales are bad this year.” I think it’s a little early to make that call. In fact, year to date sales are ahead of 2005 and 2006 significantly.
I’ve prepared a new graph, just for you which includes the 2008 sales numbers. While 2008 sales definitely look different from 2007, I think you’ll agree that ’07 is actually the anomaly. It’s the only year that looks like a “mountain.”
New sales by month graph made especially for jrochest
April 30th, 2009 at 10:32 AM
The mountain graph, or this year’s mountain (jroch’s ski jump) seems to confirm that this time of year is one of declining sales from peak months in early spring.
Add to that a weakening market and disappointing population numbers with a big increase in inventory – even when sales were stronger earlier this year, and I bet August sees even more of a drop off that last year, when prices declined.
April 30th, 2009 at 10:32 AM
What were prices down by last August?
I’d say not “below average” but previous years looks like sales are falling pretty consistently from the peak of early spring. I’d think it would be worse this year because of the big run up in inventory. And people moving out of Saskatoon since January 2007.
April 30th, 2009 at 10:32 AM
And in your new graph, looks like 2008 May and June sales were the slowest in the last 4 years.
April 30th, 2009 at 10:34 AM
Okay, Norm, I’ll change my terminology: 2007 looks like a mountain.
2005 and 2006 look like hills.
But I still maintain that 2008 is shaping up to look like Blackstrap.
The first two months are higher than the 2007 sales: the last two, lower than the 2005 & 06 sales. I’d say that the bubble was still operating in January and February, but that the buyers mentality has now changed.
And when you add the inventory into the mix, I’d say prices are going to give.
April 30th, 2009 at 10:35 AM
jrochest,
No arguments here.
Doug, or do you prefer Jim?
Listen. I’m going to spell this out for you one more time, with every bit of politeness I can muster, but let me assure you that this will be the last warning I’ll issue before I start using the delete button on your comments. You have raised the “population” issue three times in 8 minutes between this thread and the last. If you’d like to participate in an intelligent discussion you’re welcome to do so. If you’re just going to repeat the same few points over and over again I will have to assume that you are only interested in spreading propaganda.
Please, do me a favour. Here is a link to all of the MLS stats for the last four years. Please bookmark it for future reference. That way, you won’t have to ask “How much did prices drop last August?” in every post.
http://www.teamfisher.com/MLS__Stats/page_1723681.html
April 30th, 2009 at 10:36 AM
Just to eliminate confusion:
2008 started lowish, as is typical for that time of year
No spring peak, as has happened in past
Now, sales on way down, from low peak
May and June worst in 4
Just, so I don’t get called out on January 2008 sales > January 2007 sales, the key is sales this year failed to increase in the spring, and as of late, are well below the past 3 years, 2005 and early 2006 not even boom years
April 30th, 2009 at 10:36 AM
Oh, and when you say it’s early to make that call, I agree in principle: it’s theoretically possible, (although highly unlikely) that sales would pick up again in the last half of the year.
However I don’t think they’ll pick up much: I don’t even think they’ll wind up matching 05, let alone 07.
If they do, I have this hat here, and some ketchup…
April 30th, 2009 at 10:37 AM
Dan, or do you prefer Doug, or Jim,
I’m glad that I have “you guy(s)” around to state the obvious.
April 30th, 2009 at 10:37 AM
jrochest,
Okay, I’m writing the hat thing down.
Frankly, I’ll be surprised if we match 2007 numbers in the next three years. I suspect we’ll be 15 points under the five year average for unit sales come December 31.
April 30th, 2009 at 10:37 AM
Dan
The weird thing is that 08 started high, not low — January sales were twice those of 2005.
But you’re right — sales are falling in the spring when they normally rise.
That’s what marks it as an anomaly.
And Doug — while I don’t share Norm’s exasperation, I don’t think the ‘falling population’ stat is needed to make the argument that there’s downward pressure on prices. Even if the population is static or growing slightly, nobody is buying houses.
April 30th, 2009 at 10:38 AM
jrochest,
“nobody is buying houses.”
Awe, man! Not you too? We have 280 sales recorded for July with four business days remaining in the month. In fact, it’s probable that July will have as many units sold as July ’05 and ’06 (or damned close). I hate to break it to you man, but some people are buying houses.
April 30th, 2009 at 10:38 AM
Okay, okay — compared to last year, *fewer* people are buying houses.
Better?
‘course, there’s still that pesky inventory problem…
April 30th, 2009 at 11:03 AM
“In fact, it’s probable that July will have as many units sold as July ’05 and ’06 (or damned close).”
Nope. Not unless there are more than 60 sales in those last 4 days: July 05 = 340, and July 06 = 335.
Close, possibly. But I’ll bet that it’ll sit at 300 or so. The same as January, which is just *weird*.
April 30th, 2009 at 11:03 AM
Well, I think compared to last year, everything will be slow
I don’t think using anomaly years for statistical purposes makes much sense.
April 30th, 2009 at 11:05 AM
Possibly Saskatchewan’s best tourist attraction, huge Rider win.
I’ve been called worse than Dan, or Jim, or even Crikey (Dale some how thought we were the same person!). Think whatever you want. Admittedly, Dan and I feed off each other’s comments.
Agree to disagree on population loss being a legit and separate argument. Maybe a reason for why increased inventory?
My comments today seem reasonable to me. Seriously
And just wanted a reminder re last August prices going down, remember that it made the news, somebody else brought it up here first. Sorry for not doing my own independent research. Sorry for not being as witty as jroch, Crikey or Jim. Not my style. Kind of a simple straight forward guy. Will try to consolidate comments into one big one so no repetition responding to different posts.
And why can’t jroch say no one is buying houses? Less than 2005? Weren’t we a smaller city back then? I’d mention what this means, but probably would get deleted!
April 30th, 2009 at 11:09 AM
jrochest,
Better?
Better
“‘course, there’s still that pesky inventory problem…”
Oh, ya. There is that.
Nothing has changed in my mind as far as predictions are concerned and I realize that inventory will continue to be a challenge for sellers and prices. I’m just trying to keep the discussion honest. Demand is reasonable for the Saskatoon market.
“Nope. Not unless there are more than 60 sales in those last 4 days: July 05 = 340, and July 06 = 335.”
With 43 conditional sales on the books by Friday afternoon 60 sales is not out of the question. I’m guessing that the purple line mingles pretty closely with the others for the balance of the year.
Doug,
“Agree to disagree on population loss.”
I never disagreed that we lost 2,000 people and I don’t disagree that it’s not a very positive bit of news. I disagree with you raising it three times in eight minutes. If you were a bull, people would be calling you wicked and evil for these kinds of tactics.
“And why can’t jrochest say no one is buying houses?”
He can, and he did. Is there any reason I can’t challenge his comment with the facts?
April 30th, 2009 at 11:09 AM
…and Doug,
Go Riders. Wasn’t that sweet? Guys are bustin’ bones left and right but they still march on. 5-0. Not too shabby
April 30th, 2009 at 11:10 AM
I have to admit, I’m finding this whole “population loss” thing interesting, but I’m not sure this bit of news deserves the argumentative banter it seems to be getting on this blog.
Even if it were accurate, would the “loss” of 2000 people significantly affect the price of real estate? If the trend kept up, yes, probably. If one keeps an eye on larger economic issues, though, this wouldn’t even be a drop in the bucket of reasons why the number is sales are lower and inventory is higher almost EVERYWHERE. Or why credit is contacting almost everywhere, or why asset deflation is happening almost everywhere. C’mon.
Yeah, go Riders. Heh.
April 30th, 2009 at 11:10 AM
Btw, are we still doing the bet thing for July 2009, or has that fallen to the wayside?
If we are, I’m in.
April 30th, 2009 at 11:10 AM
Crikey,
“drop in the bucket of reasons why the number is sales are lower and inventory is higher almost EVERYWHERE. Or why credit is contacting almost everywhere, or why asset deflation is happening almost everywhere.”
As always, I’m eager to discuss any of these issues including population loss. What I don’t appreciate is repetitive “talking point” comments that add nothing to the discussion.
The guessing game kind of got lost there. I should start a post that is dedicated to that. Thanks for the reminder,
April 30th, 2009 at 11:10 AM
Aw yeah, lets throw a federal election into the mix, and then see what happens this fall.
April 30th, 2009 at 11:11 AM
Who’s still buying? Maybe this gives a hint:
http://vancouvercondo.info/?p=522#comment-23368
Apparently not everyone is as bearish as we are.
April 30th, 2009 at 11:11 AM
Not to mention it again, but in response to Crikey/Norm. Agreed you haven’t argued that Sasktoon lost population. Agreed my 2 comments on 2 different posts here could have been consolidated, but I often respond to a post before reading all of them. Guessing from all the other back to back posts, I’m guessing I’m not alone.
Crikey, usually agree with most of your stuff, I respectfully disagree about the 2,000 being a drop in the bucket/nbd. I think it’s a big deal, 1% loss of population during a “boom” when house prices experienced their steepest increase, in explaining decreased sales aren’t just from people sitting on the sidelines, they’re just plain leaving. Residents waiting for prices to go down, maybe sales go up when prices are down a bit, but if people say enough is enough, and have already moved to Regina, for whatever reasons, it’s going to be tough to get them back and maybe the market takes longer to recover than in cities which are still growing, whether that’s Regina or Calgary.
That’s it, that’s all, back to post game coverage.
April 30th, 2009 at 11:17 AM
Scared Renter –
Is that the “Saskatoon is BOOMING” comment, # 79?
There are similar comments on Garth Turner’s blog — and I think they’re joking. Vancouverites are not likely to take the idea that Saskatoon will ‘take over’ from Vancouver as Canada’s most overvalued market.
It’s either that, or the world’s most clueless speculator.
And I know Norm doesn’t like people repeating the Captcha, but mine is “Street bears”
April 30th, 2009 at 11:17 AM
My callum captcha is “280k December”. Funny I dreamed about that last night too…
April 30th, 2009 at 11:17 AM
Well im gonna revise my previous guess of the future house price in the month of December too…. duh duh duh…275k not too expensive and not too cheap either 4 times average salary so the market could bear it.
April 30th, 2009 at 11:18 AM
Doug & Crikey,
I’ll go with Doug on the potential importance of the population loss. Granted, it’s a small number but we’ve all been led to believe that this city is growing. Weren’t we supposed to be booming since January 2007? This is why it’s such hard news to get one’s head around.
Scared renter,
That guy probably actually has five homes that he bought in April listed for sale in Saskatoon. He spends most of his days shaking, vomiting and posting market spin.
jrochest,
“It’s either that, or the world’s most clueless speculator.”
Some of them are still calling. While I have managed to avoid them over the past 18 months I feel like selling them some property now.
By the way, I have no probs with the captcha posts but then I’m easily entertained.
April 30th, 2009 at 11:18 AM
Hey Norm, question for you re: the 430 MLS listings for condominiums. How does this compare to the number of condos (as a %) available at any point in 2005, 2006 or 2007?
Regarding the population debate, I’m surprised that no one’s commented on this quote: “…it appears more people ages 45-64 are moving in and more people ages 30-44 are leaving. That’s indicated by real estate data suggesting higher-end houses are selling better than starter homes…”
With probably 50% of the single-family homes listed being in excess of the “starter home” price, isn’t this actually a positive development for that segment of the housing market?
April 30th, 2009 at 11:19 AM
Hi Norm,
When do the 43 properties are marked “conditionally sold.” show up in the weekly total of properties sold?
when the conditions on the property are removed?
April 30th, 2009 at 11:19 AM
Thought/commentary… is it possible that MLS (typically used) listing are down this year because we’ve actually seen a *record* number of (new) housing starts? (if memory serves me it was something like 2,500 and change in 2008)
The vast, vast majority of these sales will never appear on any MLS stats as most are direct builder or developer-to-buyer (although I would agree that towards the end of a project any unsold units typically make their way onto MLS, and that a small percentage of new housing sales probably end up being re-listed through MLS within 6-12 months).
Further, is it conceivable that first-time home buyers (as well as other market segments) simply have greater selection to choose from in terms of new lots, builders to go with, and many cutting edge features that new developments tend to offer, such as higher energy efficiency, green aspects, etc.)
April 30th, 2009 at 11:20 AM
Drake,
“re: the 430 MLS listings for condominiums. How does this compare to the number of condos (as a %) available at any point in 2005, 2006 or 2007?”
Unfortunately, there is no way for me to return to a place in time for that kind of a snapshot.
Over that period of time, the peak number of active listings was 738, and most of the time it was much lower. That would have included all types of residential listings. Of course, through most of 2007 there was really nothing available at any given time. On and off in a flash.
“I’m surprised that no one’s commented on this quote”
There was some discussion on that in the previous post.
“With probably 50% of the single-family homes listed being in excess of the “starter home” price, isn’t this actually a positive development for that segment of the housing market?”
Perhaps in the short term, though there’s certainly no shortage of competition for sellers in that category. Ultimately, your entry level market needs to be healthy if you’re going to have a good upper end market.
Carl,
Yes, when conditions are removed the status changes to “sold” and they make the reports.
Drake again,
No doubt that there has been a lot of builder inventory sold direct over the past year. Probably not as much right now. I don’t think buyers are lining up at their doors right now.
April 30th, 2009 at 11:21 AM
Drake — unless this is a typo
“is it possible that MLS (typically used) listing are down this year because we’ve actually seen a *record* number of (new) housing starts?”
you seem to be arguing that the MLS listings are *down*.
If this is your idea of down, I really don’t want to know what your idea of up is!
Seriously, though: if direct sales from builders are undercutting sales of other properties to that extent, then they are glutting their own market.
April 30th, 2009 at 11:21 AM
jrochest, yes, what I meant (and should have) said was “MLS Sales” are done this year compared to last (and 2005, 2006…). Sorry for the typo. MLS Listings are in fact, up (overall) in 2008. I wasn’t trying to infer (or suggest) that direct builder sales were undercutting sales of existing (MLS) properties, rather that new home can sometimes offer distinct benefits over used (even renovated) properties and that with a record number of housing starts this year, the total MLS sales for the year (or in any given month) may not necessarily paint the entire picture of the housing sector.
And yes, I would agree that overbuilding (in any market, not just Saskatoon) has the potential to dump a glut of newly or partially-constructed homes on the market. We’ve seen this happen in Phoenix, AZ, it’s now happening in Vancouver with condominiums and there sure seems to be a lot of the same kind of development ongoing in Saskatoon (both new developments and conversions).
April 30th, 2009 at 11:22 AM
I live in Stonebridge and thought I would share my experiences. The smart Albertans got in early, flipped the houses and made an easy $100,000. This happened to 5 houses near me. Easy money then attracted the idiots. The type of people who most likely bought BreX at the end.
There is one house on our street, the speculator paid $290,000. It sat vacant for 6 months. He tried to sell it for $470,000. It’s now listed for $380,000 and rented. There are 3 houses on our block that are rented – no lawns, weeds everywhere. An these are not the skinny houses.
One house in our area was bought by a BC couple. They moved back after one winter. Another was bought by a Calgary couple. They just sold (I heard for $100,000 under list) and moved back.
There are still 2 other houses that have just been completed and are being flipped by Albertans.
On Borlaise, most houses are specs. Offer $30,000 to $50,000 less than asking and it may be accepted.
Jastek is building too many condos on spec. I had heard a few weeks ago that they hadn’t sold a condo in 2.5 months. Hopefully this isn’t true or Jastek is soon to become one of Saskatoon’s largest landlords.
You can’t fault Dundee, they offer $1000 rebate to landscape the front lawns. They have done a very good job of landscaping the area.
The area architecture is well designed.
I moved in fairly early and am very happy with my house. But I would like to see the speculation stop. Those days are over. Fill the houses with owners that will help develop the area.
April 30th, 2009 at 11:22 AM
Ah, so the argument is that there are all these extra sales going on via builders websites & direct sales centres.
The condos seem to be being sold through MLS.
So that leaves the housing developments on the outside of town: how many properties does that add up to over the last six months?
Newer developments are much more prone to price drops than older, central locations, though: it’s the margins that show the greatest loss of value in the US.
April 30th, 2009 at 11:22 AM
This kind of bidding is what I was expecting a month ago, but better late than never. It takes awhile for joe public to catch on. :’)
jrochest,
Norm’s always been a fan of Captcha’s!
April 30th, 2009 at 11:23 AM
Is there any way to know how many/what type of newly built housing units are coming on the market and when? It would be intersting to know how much new capacity is hitting the market from this source.
As for our local population drop. I do think that we need to have a look at a slightly longer trend before giving one snap shot too much relevance. Is a follow up anlysis planned? I am supposing that the local population will wax and wane as University students leave town or come back for the start of the academic year.
April 30th, 2009 at 11:23 AM
Sam Johnson:
“the population will wax and wane as University students leave town or come back” — I assume that too, although I think more students are keeping their apartments over the summer, since getting something in August is now extremely stressful.
And I just realized that Norm’s says he’s STILL fielding calls from speculators who want to buy? That’s hysterical.
It also explains why the bulls here get so mad at bears (or, as I like to call them, people pointing out the obvious) If out-of-towners read something that contradicts HappySpin, they’ll back off from the market.
April 30th, 2009 at 11:24 AM
Hi Norm,
So, with all this talk of listing and selling, etc, can anyone tell me when the best time to attempt to sell my townhouse in Wildwood would be between now and December? I was thinking that the student market might be picking up now…? Thoughts?
Thanks!
April 30th, 2009 at 11:26 AM
“I feel like selling them some property now.”
Wouldn’t that be like speculating off of the speculators?
Ha Ha. At least you won’t lose your shirt.
April 30th, 2009 at 11:26 AM
Canada may face own housing crisis: economist
http://www.canada.com/saskatoonstarphoenix/news/personal_finance/story.html?id=51bb8074-e542-411c-b490-f9af550de0d8
April 30th, 2009 at 11:26 AM
Rude question, ignore or delete if it’s unethical.
This little house that was ‘arsoned’ last night looks very familiar: I think it was listed until recently?
I remember the bright blue and white siding, mainly.
http://www.canada.com/saskatoonstarphoenix/news/local/story.html?id=803b8ba8-4786-46c2-8a98-180dc234ce2f
April 30th, 2009 at 11:27 AM
Dayna, I think that would really depend on several factors. Are you currently living in your townhouse and selling to purchase another property or is it being rented out? Not a lot of people like to move in December or January, and I think someone else mentioned these are the two slowest months for sales of the year.
Yes, things do pick-up in August when students begin looking for accommodations (rental or otherwise), but this has historically impacted Area 2 the most (although arguably with such a low vacancy I think all areas will be impacted equally). From an investment standpoint I know a lot of parents and students were looking as early as April/May, but I think that many of them may have sat on the sidelines while the housing market corrected over the summer.
I would estimate that August through early September is your ideal market (after Sept 15 many banks will no longer be offering 40-year mortgages with 0% down; in fact, many have started rescinding those, so this will contribute to a reduced buyer pool).
April 30th, 2009 at 11:28 AM
And I’ve got to say: while some parents might be buying their kids a house or apartment, I think a lot of them will look at the prices and think twice. Lots of people used to, but that was when the little cheapo crappo condos in Varsity View were going for 80,000 or so. Now they’re listed at twice that, and there’s a glut on the market.
But stuff that is well priced is moving, and I think earlier rather than later has to be best. Just be prepared to have the price break your heart.
April 30th, 2009 at 11:40 AM
Norm, what’s happening with Areas 3, 4 and 5 (in particular, 4 and 5)? Sales have been way off for the past several weeks even though the number of new listings is fairly consistent among all areas.
jrochest, there have not been any ‘cheap crappy condos’ in Varsity View for quite some time, although there appears to be a new development going up on College Drive which, based on the size, I’m guessing is gonna be condos. Joy.
Dayna, I’d also like to add that this is now (and has been for some time) a “buyer’s market”, so price your home and gauge accordingly. One of the things I suggested to a friend is giving anyone making a potential offer 48-72 hours to consider any counter offer that you make. A lot of times this 24-hour/shotgun approach results in a lot of quick decisions, egos, etc. entering into the fray.
April 30th, 2009 at 11:42 AM
“there appears to be a new development going up on College Drive which, based on the size, I’m guessing is gonna be condos. Joy.”
Oy. I was hoping these were going to be Univeristy residences.
Please tell me they’re not condos!! The poor students need somewhere to live!!
April 30th, 2009 at 11:42 AM
George,
Here is a link of why were safe from a meltdown and please dont link a star pheonix reporter that obviously is trying to make a story out of nothing.
http://www.mortgagebrokers.com/knowledgecentre/pressrelease/pr20080130.pdf
Jrochest,
Here is the happyspin and tell me and link me some stuff to prove im wrong. We arent in a credit crisis or in a housing meltdown the only thing thats different is the variety of choice in buying a home now. If you take a look at the various sales graphs the demand has hardly changed its pretty normal and sometimes above average. There is investment going on in Saskatchewan will give jobs and tax breaks in the years to come and some of the major ones are gonna be finished in 3 years. Here is another fact sorta related to real estate. If you check out the TSX lately we’ve been tanking pretty bad making for some beautiful buying opportunities. The term talking urselves into a recession is happening and will make some for wonderful opportunities for home upgrades, cheaper prices, and sales which i look forward too.
April 30th, 2009 at 11:44 AM
Crikey, I don’t think they’re going to be University residences. I’m hoping their condos vs. apartments, but would have preferred something like the townhouse development they did on 11th street. There’s enough of a parking problem (from University students) in the area already…
April 30th, 2009 at 11:45 AM
Armoth, thanks for the article. Being a recently converted “bull” (now a bear, but more like a koala than a grizzly) and having closely scrutinized both sides of the argument I am tending to lean towards the viewpoint that George (and others) share. And there are primarily two reasons for this:
1. Yes, no sub-primes, but I’m not sure a 40-year mortgage with 0% down to someone that didn’t qualify 6 months earlier at 25 or 30-years is that much different. At the end of the day banks are still going to be on the hook for these over-inflated loans. And let’s not forget that Canadian banks still continue to post losses and write-downs due to exposure to (failed US) sub-prime investments
2. There’s been *mass* overbuilding by developers, and this expansion has occurred during an unprecedented time of labour shortages and high construction costs. This includes “hot” markets like Victoria, Vancouver, Calgary, Edmonton, Toronto and Saskatoon (all of which are now seeing a 5-15% correction).
April 30th, 2009 at 11:45 AM
Thanks everyone. So based on the ‘price accordingly’ mentality, what range would you recommend pricing a Wildwood Village townhouse, 2 bedrooms plus den, 1.5 bath, 1140 sq ft end unit with fenced backyard, year old renos including: new kitchen, new appliances, new flooring, new bathroom fixtures(including jet tub), new light fixtures, new blinds, new closet organizers, one additional bedroom in unfinished basement…?
April 30th, 2009 at 11:46 AM
Thanks everyone. So based on the ‘price accordingly’ mentality, what range would you recommend pricing a 2-storey Wildwood Village townhouse, 2 bedrooms plus den, 1.5 bath, 1140 sq ft end unit with fenced backyard, year old renos including: new kitchen, new appliances, new flooring, new bathroom fixtures(including jet tub), new light fixtures, new blinds, new closet organizers, one additional bedroom in unfinished basement…?
April 30th, 2009 at 11:47 AM
jrochest,
With due respect, I think it would be difficult for anyone with a functioning brain to misunderstand the market after reading this blog.
Dayna,
In my opinion, sooner is better than later. The general consensus seems to be that prices will likely be lower in December. It’s just my opinion.
Drake,
“Norm, what’s happening with Areas 3, 4 and 5 (in particular, 4 and 5)?”
My monthly review will follow in about a week’s time. I’ll dig a little deeper and offer my thoughts then. These three areas often have less action.
Crikey,
“Please tell me they’re not condos!!”
Was in my car this weekend and happened to catch Emde on News Talk Radio. There is a “luxury condo” project planned for that site. $500K – $1,000,000. Sorry.
April 30th, 2009 at 11:47 AM
Armoth,
it was not a Star Phoenix reporter. It mentions a report from an economist.
Stories like this were printed in the states in 2006.
The article you linked from mortgagebrokers.com is seriously outdated. They pump the 40 year mortgage while everybody now knows this was a mistake to have entered into the market.
” current rates, available mortgage products and projected rate cuts in Canada will actually make the market more active”
This statement is now so wrong. Lending is tightening up, and rates are slowly climbing up ( hopefully not too high) and the housing market in Canada has seen increased listings and decreased sales this year.
Subprime was only a sympton of the problem in the states. There were many other factors that contributed to the bubble in the states. Those same factors are also here.
April 30th, 2009 at 11:47 AM
Drake,
I believe I read in this morning’s paper that 37% of buyers utilized a mortgage which was greater than 25 years. Given the short period of time that these were available, I’m not sure that the implications could rise to the same level as the U.S. housing crisis where they pumped out hundreds of thousands of these mortgages to anyone who would take one.
April 30th, 2009 at 11:48 AM
That report was put out in January.
By a mortgage broker company.
Things have changed in 7 months.
From a sellers market to whatever you wanna call it now.
How about something current and not produced by someone who’s bread and butter is directly related to a ‘hot’ market.
from the ‘article’:
“I expect lower rates in Canada for 2008. Also New underwriting policies introduced by both the CMCH and Genworth, in conjunction with longer amortizations of 40-45 years introduced to the Canadian housing and mortgage markets lead us to assume that the affordability of buying and owning a home has not changed that much.”
WRONG AND WRONG AGAIN.
How much value can you put in their ‘research’ when they can’t even get CMHC’s acronym right. (They call it CMCH a bunch of times!)
April 30th, 2009 at 11:48 AM
Dayna,
Consult with a Realtor or an appraisal. With due respect to my readers, I don’t think you want to price your home based on anonymous comments from anonymous commenters.
April 30th, 2009 at 11:48 AM
Armoth,
can you please show me a real estate market that usually followed the rate of inflation, then in 2 years increased 100%, had a minor correction (10-15%) for a couple of years then had steady growth after that ?
All I can find is that there are over 35 countries in the developed world experiencing a correction to an all out housing bust. The countries fairing better are the ones that did not see the huge run up in prices.
April 30th, 2009 at 11:49 AM
“I don’t think you want to price your home based on anonymous comments from anonymous commenters.”
That is so hilarious. So, so true, and so hilarious…
Totally off topic, but what do you think the chances are for 1/2 to 1 million “luxury” condos to go like hotcakes next year?
No one really needs to answer that, btw.
April 30th, 2009 at 11:50 AM
Norm, (first comment), yes, 37% seems to be quoted fairly consistently. I’ll bite. However, these were rolled out in early 2006 when the government deregulated the market, so we’ve had close to a 3-year run. I’d say 2 in 5 is on-par with the ratio of sub-prime/regular mortgages in the US. And don’t forget that a lot of banks were pushing 40-year mortgages as alternatives to standard home equity lines of credit. A lot of people have leveraged themselves *heavily*.
Dayna (and with all deference and respect to Norm), you should do your own market research and then weigh that with professional and independent opinions. I would also add that a professional real estate agent (such as… Norm!) can provide you with a market analysis of comparable units that have sold in your area, which will help you gauge the best price to list at. Ultimately, though, if you want a quick sale, there have been some helpful tips (Norm, can’t recall if you posted the link? Something to the effect of ‘buyers are looking for a reason to be sold on why they should consider your house, and if not, you’re selling them on why they should skip over it to the next one).
April 30th, 2009 at 11:51 AM
Jroch, “was when the little cheapo crappo condos in Varsity View were going for 80,000 or so. Now they’re listed at twice that”
I wish, for 160,000 I’d think about getting one, many above 200,000, i’ve heard some went for 240,000 @ the peak (not sure if I believe that one)
April 30th, 2009 at 11:51 AM
Hey Crickey ask the people who built those luxury lofts off Idylwyld by the city bus depot what they think.
April 30th, 2009 at 11:51 AM
Wesco,
just to think some of those went for 105k just a few years ago. KEY-RAZY
April 30th, 2009 at 11:52 AM
Dayna, found this great article on CNN you might find helpful.
http://money.cnn.com/galleries/2008/real_estate/0807/gallery.selling_tips.toh/index.html
April 30th, 2009 at 11:52 AM
Stock chart of the company that put out that report in January… Just as an FYI.
http://www.stockhouse.com/tools/?page=%2FFinancialTools%2Fsn_overview.asp%3Fsymbol%3DMBKR%26table%3DLIST
April 30th, 2009 at 11:52 AM
Drake,
“However, these were rolled out in early 2006 when the government deregulated the market, so we’ve had close to a 3-year run.”
My best recollection is that availability of the 40-year mortgage in Canada was announced on November 27, 2006.
Sorry, I don’t recall the other discussion your referenced.
Crikey,
Lol.
I’m going to sell a few to real estate speculators. Should be a good profit in those baby’s!
Anyone from Caaaaalgry wanna invest some money?
April 30th, 2009 at 11:53 AM
Dayna – I just had an appraisal done on my home last week. It cost exactly $315. It’s well worth the money. A realtor does not exactly ‘appraise’ your home. They give you a dollar value that they think they can sell it for. These numbers likely won’t match your appraised value, but it’s nice to have an appraisal in your hand before you speak to a realtor; just to give you a reference point regarding value. Also, I quickly found out that realtor’s fees are somewhat flexible. You may be able to negotiate a slightly better deal than what is initially offered to you in terms of rates. Last suggestion I have is to use a big, well known realtor (like Norm if you haven’t already decided to call him). They are better connected than the little guys, and most have “buyers in their pockets”. The new realtors, try as they might, are not able to give you the same exposure. I think everyone on here would agree with me in reccomending Norm wholeheartedly. His listings are excellent, his homes are well staged (I’m sure it’s not just all his sellers being super picky – it’s him), and his homes are priced well, so they tend to sell in a reasonable time frame. Good luck to you. List it as soon as you’re done cleaning it and getting your appraisal. Seriously.
April 30th, 2009 at 11:53 AM
ringo,
You’re one of our smartest readers.
Thank you.
April 30th, 2009 at 11:54 AM
I agree that the 40 years, 0 down, and other innovative products that were here for the short time were not as bad as the subprime in the states.
But these innovative mortgage products did quite a bit of damage. I can’t help but notice affordability is the same or even worse here at the moment compared to some of the bubble markets in the states at their peak.
This is from 2005. It shows the least affordable US markets at the time. Saskatoon is just over 40%. Where would it rank?
http://www.realestatejournal.com/buysell/markettrends/20051223-simon.html
April 30th, 2009 at 11:54 AM
Norm, is the new 35-year mortgage with 5% down really any better? Or altogether that different? (a lot of 40-year mortgages did require at least 5% down). Am I alone in thinking that a 25-year mortgage limit (if imposed this year or early next year) would certainly crash the housing market next year?
April 30th, 2009 at 11:54 AM
Drake,
a 25 year limit will not crash the housing market. Maybe lead to a bigger correction. I think high inflation (= higher mortgage rates) will do more harm.
It seems our economy is based on the commodities that are leading us into higher inflation. A double-edged sword for RE here.
April 30th, 2009 at 11:55 AM
Drake,
I’m not sharp enough to know if going back to 25 year mortgages would “crash the market” or not. I’ll tell you this though, we survived with 25 year mortgages and a minimum 5% down for a long time before they were introduced. I think it was a mistake to introduce these “innovations” in the first place. Canadian housing was doing fine without them.
George,
Good points. A half point interest hike would have a greater impact on the monthly payment for the average Saskatoon home than going from 40-years to 35-years.
April 30th, 2009 at 11:55 AM
Hey Doug — about this comment:
“roch, “was when the little cheapo crappo condos in Varsity View were going for 80,000 or so. Now they’re listed at twice that”
I wish, for 160,000 I’d think about getting one, many above 200,000, i’ve heard some went for 240,000 @ the peak (not sure if I believe that one)”
well, I’m talking *really* cheapo crappo, not the usual condo conversion: there are some elderly unrenoed buildings that have been sold as own-to-rent investment places for quite a while, and they’re dreadful. They have far worse maintenance and curb appeal than any rental unit I’ve seen: peeling siding, visible cracks in the foundation, crumbling balconies, leaks…
These were the bottom of the condo market a few years ago, and yep, they were 70 grand or so; I looked at some when I first got here. And laughed and laughed and laughed…:)
Now, some are listed for 160,000 or less, but you’re right, most are over 180.
There are also lots and lots of well maintained rentals and a number of very nice purpose-built condos, much more expensive, in the same area. I’m not twacking everything in that section of town by any means.
April 30th, 2009 at 11:56 AM
350K over 40 years at 6% = 1907/month
315K (subtracted the 5% down) over 35 years at 6% = 1780/month.
Not a big payment difference to most homeowners. However, saving 35K takes time. I don’t think it’ll impact affordability, but it will significantly cool the market for first time buyers for a few years. Maybe impact all the new car leases as folks now have to save for down payments instead. In the end, I don’t think too many people are pushing their debt ratios to the max when buying so as not to be able to afford the extra $100 and change, but you’ve also got to remember that these are people who until recently knew they COULD buy with zero down, and fully intended to. They haven’t already been saving a down payment and almost have enough. They simply don’t have it. Most folks have about a paycheque saved right?? I know my husband doesn’t make 35K in a paycheque lol.
6% seems high for an estimate too – just for the sake of a number. Neither of our mortgages are anywhere near that rate. Just a disclaimer before anyone jumps on me for that one lol.
April 30th, 2009 at 11:56 AM
Well since im on a 40 year mortgage ill tell you guys if i go broke ok? In case your wandering what im doing with the extra money i saved with a 40 mortgage ill tell ya. Investing it all into the index after I made some money on Bqi. XIU.TO is the index I chose and it tracks the tsx 60. Now there is alot of gifted people on this blog so i have a challenge to put out for y’all.
Compare for me the average payments per month of a 35 year mortgage.
vs
Compare for me the monthly payments of a 40 year mortgage with the savings from a 35 year being directly invested into the index fund averaging 10.5% since inception.
and if you want to get crazzzzzy do it also for the 25 year and 30 year mortgages I will be excited to see the results! Im sure every1 would be interested in this information =)
p.s.
I passed my kidney stone and im feeling so much better a kidney stone is the equivelant of giving birth the nurse told me =o)
p.s.s
it was a boy
April 30th, 2009 at 12:01 PM
Sorry folks – I plugged in a 10% down payment in that calculation rather than a 5%. So about 50 bucks a month. But 17.5K is still hard to find. Maybe if I check under the couch cushions . . .
April 30th, 2009 at 1:08 PM
Ouch! Armoth, sorry to hear about the kidney stones, those suck.
Oh, and Armoth — here’s the ‘UnhappySpin” from CREA that the Mortgage Brokers site you linked to is trying to counter.
http://www.theglobeandmail.com/servlet/story/RTGAM.20080728.whomesales0728/BNStory/Business/home
I linked to the Globe & Mail’s coverage vz the Star Phoenix’s, out of deference to your wishes.
Things are going down all over; there’s not going to be a Special Exemption for Saskatoon.
April 30th, 2009 at 1:08 PM
Jrochest,
I could see a huge decrease in condo’s in this city but I just dont see houses go down as much. As on the graphs some people have presented as well as in the article you posted demand is now the same as it was in previous years and some people are just late coming to the party.
Anybody who cares,
Ive got a good question that I cant remember if i asked or not but forgive if i did. Dont you have to pay taxes on a new house when u purchase it?
April 30th, 2009 at 1:09 PM
Armoth,
Please remind us, when did you take out your HELOC and invest in bqi?
April 30th, 2009 at 1:09 PM
Drake said:
“This includes “hot” markets like Victoria, Vancouver, Calgary, Edmonton, Toronto and Saskatoon (all of which are now seeing a 5-15% correction).”
Oh that is just total BS – Vancouver avg price for June is 9% higher than June/07. Stoon avg is way up, the only ones falling are Calg and Edm. None of them have fallen 15%. State your numbers and your source or you’re just fear-mongering.
April 30th, 2009 at 1:12 PM
Dr Cornwallis,
I cashed out at 6.69 and was waiting because there was too much hype especially with many analysts including Jim Cramer pumping it up. As I check today it was a good decision because current close price is 4.66 which thanks to you I actually might buy the stock again since the price is more in tune with similiar companies. But to be honest dont know wtf is “HELOC” is but please do tell im interested =)
April 30th, 2009 at 1:13 PM
Dr Cornwallis,
Do you mean home equity line of credit? Because I did a refinance to 230k and did some home reno’s and the recent stock I have been buying is the etf i posted. XIU.TO which should be interesting cause they announced a 4:1 split for the stock.
April 30th, 2009 at 1:13 PM
http://www.greaterfool.ca/
http://www.vreb.org/mls_statistics/current_statistics.html
http://www.canada.com/vancouversun/news/business/story.html?id=eb96cfa3-c78e-4860-8322-4c5b5a88ecab
Sales in Canada are down -13.1% when compared to the first 6 months in 2007. Home sales are down -43% in Vancouver. -11% in Victoria. Unit sales in BC and Alberta topped -20%.
“What lies ahead? As I have said, a 15% decline in the national average selling price from the 2007 peak will be with us by this time next year, and possibly sooner. Some markets which have already sustained a 10% – 12% drop are on their way to 30%. Sales activity will slide further until we may see a stunning 30%-40% in deals from 2007 levels.”
http://www.srar.ca/Srarstats.php3#Month
Sales in Saskatoon are down -32% for the month of June.
http://www.jimsparrow.com/market-stats.php
Sales in Calgary are down -12.1% year over year. Medium prices for June/08: houses (-7.1%), Condos (-7.5%).
April 30th, 2009 at 1:14 PM
Drake,
Strangely I believe that website name perfectly describes Garth Turner maybe you should follow everything he says….lol
April 30th, 2009 at 1:22 PM
Armoth,
From the articles I’ve read, they state it’s wiser to pay off your mortgage first rather than putting that “extra” money towards other investments such as mutual funds. Generally the return doesn’t match/surpass the amount of $$$ you’d save in interest over the long run by paying your mortgage down faster.
IMO 35 year mortgages are not that much better than 40 year mortgages. I’m with Norm – take it back down to 25!!!
If anyone needs a reminder of what’s really important, last night I watched the Michael Moore documentary “Sicko”. Thank GOD for Tommy Douglas! (And props to SK) The U.S. healthcare system is really messed up…
April 30th, 2009 at 1:22 PM
Armoth,
Yes, I was referring tro a Home Equity Line of Credit.
IMO, its a pretty risky strategy to use home equity to invest in equities – particularly these days.
However, you must knwo what you’re doing, selling off your bqi within a few cents of the 52 week high. I hope you did’t go directly to TSE index though, since it began tanking at the same time bqi peaked. I also have some bqi, but I look at that as long-term peak oil play.
As far as the housing goes in Saskatoon, I think prices need to come down to match inclmes. High prices don’t do any good except for people selling and moving to another market IMO.
April 30th, 2009 at 1:24 PM
Dr Cornwallis,
If I was putting most of my money in BQI it would be dangerous I admit and thats why I sold the stock was making too much money too fast meaning I could lose it just as fast too much risk. But Index funds have been proven over the long term to safely grow your money. I was running some numbers because noone did my challenge yet and it seems the way im doing it now I will come out ahead rather than paying down my mortgage. And im going to reinvest soon again into BQI because ive never seen a company with so much potential its crazy when you look at what they own and the independant estimates of oil reserves.
April 30th, 2009 at 1:24 PM
“Now there is alot of gifted people on this blog so i have a challenge to put out for y’all.
Compare for me the average payments per month of a 35 year mortgage.
vs
Compare for me the monthly payments of a 40 year mortgage with the savings from a 35 year being directly invested into the index fund averaging 10.5% since inception.”
Well, Armoth, there are a lot of gifted people on this blog, but I’d be willing to wager that none of them can see into the future, and I’m sure you’re well aware of that, too.
The fact that your index fund has averaged 10.5% since inception does not mean that it is going to continue to do so- the past is not always a good predictor of the future.
Consider the turkey living on a farm, who is fed on schedule every day for a thousand days. He thinks his life is pretty darned good and stable, becasue all of his past experience tells him that he will continue to get fed. He isn’t aware that on the 1001st day is the day before Thanksgiving, and he is going to be beheaded and roasted. Could he have predicted what was going to happen? No, he didn’t have the correct information. The farmer did, but the poor turkey didn’t.
The moral of this story is to not be the turkey in life.
Realize that unpridictable things happen, and try to mitigate your risk. If you are investing, keep 85-90% of your investments in low-risk investments (Canada Savings Bonds, Guaranteed Investment Certificates, money market funds, etc.). Yes, you will get a comparitively low rate of return, but you’re not going to lose everything if the market heads south, either. Use the other 10-15% of your investment portfolio to do what you like with- even if it is high risk and you lose, you’re largely still okay. If you happen to make a killing, good for you. Just keep the ratio steady. You might be doing this already, and if you are, keep it up.
As to the being very highly leveraged with RE (or anything, for that matter, particulary in the current economy), I’m sure you know how I feel on that front from past posts. I think it’s a disaster waiting to happen, but it’s your life and your money.
Congrats on the bouncing baby kidney stone, by the way!!
HUGE GIANT BIG FAT DISCLAIMER: Nothing on this post should be construed as investment advice or guidance. It is not intended as investment advice or guidance, nor is it offered as such. It is solely the opinion of the writer, who is NOT an investment counselor/professional. All the content of this post is posted as free-of-charge opinion and commentary, and is for entertainment purposes only. If you seek investment advice, consult a registered, qualified investment counselor (As with any other professional service, confirm their track record and referrals).
April 30th, 2009 at 1:25 PM
Wesco,
whats your take on Oilsands Quest? I think you would have the most information on this. I’m curious as are others.
April 30th, 2009 at 1:25 PM
Australian banking sector crumbles
http://www.financialpost.com/story.html?id=686119
“In a scenario that may sound familiar to Canadians, the resource-heavy Australian economy has been flying high in recent years as skyrocketing commodity prices and booming real estate combined to boost growth across most sectors.”
Interesting read.
April 30th, 2009 at 1:25 PM
George,
It’s tough to determine anything right now in regards to oilsands quest, to me they are far to early in Oilsands development to gauge the merit of their organization. They are only in the first phase of implementing a S.A.G.D operation and it will definitely take some time to develop the type of facilities required to extract the oil from the tar sands efficiently and cost effectively. I’m not sure on their location (next to the border) but I have heard recently that northern Sask oilsands will be quite a bit more difficult to extract that oilsands around Fort McMurray.
At first glance I would say they are promising organization with lots of work ahead of them to create a lucrative oilsands development. Oilsands development is a costly and time consuming process, but I think they are on the right track.
April 30th, 2009 at 1:26 PM
This is waaaaaaay off topic but…
Can anyone explain, in simple terms what the different zonings mean when I’m looking at listings? I see R2 and R3 and such and have NO clue what they mean.
April 30th, 2009 at 1:27 PM
R2 and R3 are multi-family residential zonings.
There’s a list of zoning bylaws and a map for the City of Saskatoon at this link:
http://www.city.saskatoon.sk.ca/org/clerks_office/bylaws/7800.asp
And Crikey — love the turkey analogy. Curiously applicable, in this case.
I’m starting to think Armoth may be a cunningly fashioned piece of performance art.
April 30th, 2009 at 1:28 PM
As a recent seller of a condo, I can tell you this much. I bought my place last year and sold it this weekdend. I broke even after my renovation cost. Final sale price was almost 30,000 down from what I had hoped for originally, considering it’s only a two bedroom condo in Forest Grove. My point is that there are buyers out there. The number of listings keep going up is because of the listing price being unreasonable. Agents hate to bring the bad news to sellers, because they don’t want to loose them.
April 30th, 2009 at 1:28 PM
jrochest,
“I’m starting to think Armoth may be a cunningly fashioned piece of performance art”
Wow, if he were, that would be really depressing. Think of all the time I would have wasted!! In any case, he can’t beat Michael from “the other blog” for pure entertainment value, though.
April 30th, 2009 at 1:28 PM
Jrochest and Crikey,
Well if I crash and burn and lose everything Ill post it for your enjoyment =p But the truth remains I am diversifying myself from just real estate to tsx 60 and real estate lessening my risk to w/e happens in both. I know some of you are probably wondering why I didnt choose a full index fund instead of an ETF. The answer is simple liquidity….if I need the money incase I lose my job I can immediately sell my holdings and have the cash in my bank account in 24 hours with a max charge of $29 Its not so easy with lets say the RBC Index Canadian Equity fund because of the hidden fee’s they dont tell u about. And since I am building my cash in sort of a super savings account if my job goes sour I have the money to make the mortgage payments for at least 6 months. And if you look at the 10 year chart for the ETF you will see it is not as volatile as one may think it doesnt lose half its value in a year and never recovers but then again it doesnt almost triple in price like my house did so you give some and you lose some but I think my plan is well thought out for my age.
Dr. Cornwallis
I bought XIU.TO at 81.75
April 30th, 2009 at 1:29 PM
Norm Said:
“I’m not sharp enough to know if going back to 25 year mortgages would “crash the market” or not. I’ll tell you this though, we survived with 25 year mortgages and a minimum 5% down for a long time before they were introduced. I think it was a mistake to introduce these “innovations” in the first place. Canadian housing was doing fine without them.”
I won’t wager a guess at it either. However, as a young lawyer who works with plenty of first-time, young buyers, I can tell you for certain that they would be out of THIS market in a flash if it went back to 25 years, let alone a required down payment.
Educated young persons in this province will land jobs between 30-60K for the first few years, and that makes a 25 year amortization on the “average” house in Saskatoon impossible, or at least highly unaffordable. You could argue that they buy on the lower end, fair enough. Let’s say they shoot for the $200K range (pretty bottom of the barrel these days) – that still requires $10,000.00 for a down payment, and mortgage payments in excess of $1100.00 per month.
Place on top of this that most recent students come out of school with a heavy debt load already . . .
April 30th, 2009 at 1:29 PM
Armoth — You will only have diversified yourself when you’ve paid off the HELOC. Until then, you’ve leveraged your stock holdings with your house, which is not a good idea, to put it mildly.
Investing is great, yes. But not under these circumstances.
April 30th, 2009 at 1:29 PM
Armoth,
Sounds like you’ve split your risk between the Titanic and the Hindenburg. Just joking, but I really don’t have faith in returns from real estate or equities (particularly financials)for the next couple of years or more. Then again, I’ve never been labelled an optimist.
April 30th, 2009 at 1:30 PM
And again, I reiterate Crikey’s rider: I am not giving you investment advice or guidance.
I am simply telling you that I think this is a mistake. A great big fat one.
April 30th, 2009 at 1:30 PM
Apparently: Regina is gaining a huge new Loblaw’s warehouse/distribution center …
Apparently: Saskatoon is losing Western Grocers to Regina,
2 years ago, the second headline would have been used, now a days, “boom” it’s the first
April 30th, 2009 at 1:30 PM
Gin sodden wretch that I am, I posted this in an old thread. Sorry for the duplication.
To put what is happening in Saskatoon and Canada in a larger context here is an article from The Times.
http://business.timesonline.co.uk/tol/business/economics/article4421630.ece
One should always be aware of the larger picture and not rely on the hope that somehow Saskatoon will emerge unscathed from a global shake out. I hope it does, but am not expecting us to emerge unscathed.
I was just remarking today to a fellow that I would like to purchase a house in Saskatoon, but I see enough signs to make me take a very long wait and see attitude. Particularly as the Bank of Canada seems to be enaging in some spectularly idiotic collateral accumulation.
April 30th, 2009 at 1:31 PM
What is the “other blog”, Crikey mentioned?
April 30th, 2009 at 1:31 PM
Armoth
What is the mortgage amount and interest rate?
I can plug them into my calculator.
Garth Turner is a mouthpiece for the mutual fund industry.
If funds paid 10.5% interest per year forever, why would banks lend mortgage money at 6%? They would just invest in these funds.
April 30th, 2009 at 1:31 PM
Sam Johnson,
“Bank of Canada seems to be engaging in some spectacularly idiotic collateral accumulation”
Wow, you said it. Here’s the link to some info about it:
Central bank to take riskier assets as collateral
http://www.globeinvestor.com/servlet/story/RTGAM.20080726.wrboc26/GIStory/
No one in their right mind should want to replicate the failed policies of Ben Bernanke/the US Fed. Indeed, common sense alone would suggest that any program designed to swap good assets for bad, when they eventually have to be swapped back is an exercise in futility, indeed worse.
So why is the Canadian Central Bank embarking down the same silly path? Does anyone out there have a possible answer? Very worrisome indeed.
April 30th, 2009 at 1:32 PM
Armoth,
Property taxes are payable on new homes though it gets assessed in various stages as the improvements are completes. At the outset it’s just the land.
Crikey,
The turkey talk is beautiful. Well done.
“No one in their right mind should want to replicate the failed policies of Ben Bernanke/the US Fed. Indeed, common sense alone would suggest that any program designed to swap good assets for bad, when they eventually have to be swapped back is an exercise in futility, indeed worse.”
Perhaps you’ll have an opportunity to pay for an overvalued house after all.
Seems to be happening all over America right now. Everybody is in at the end of the day and that’s really what makes this crap so sad.
Drake,
“Sales in Saskatoon are down -32% for the month of June.”
They were actually down 33%. I think someone took some liberties in rounding to arrive at 32%. They were down 37% in May. That said, I think it’s also important to note that sales were up 46% last May and 24% last June. Again, 2007 was the anomaly and even the most optimistic didn’t expect to trump those numbers. Demand in Saskatoon has been fairly close to what would be considered more normal levels. July will come in within a few percentage points of 05 and 06 sales levels. Inventory seems to be the only serious issue right now which will effect prices (of the supply/demand equation). Expect to see a significant adjustment to the average when the July numbers come out but there are still a good number of buyers who are warm to the market. I think things are unfolding pretty much exactly as they should given what occurred last year.
April 30th, 2009 at 1:33 PM
The Bank of Canada policy discussed in the Globe and Mail story is here. See July 26, 2008 – under Finance department and Bank of Canada
http://gazetteducanada.gc.ca/partI/index-e.html
April 30th, 2009 at 1:33 PM
Accounting Guy,
230k at 5.49% 5 year fixed rate
Jrochest,
Can’t expect much from a simpleton… I guess any1 that has different views than you is considered a piece of performance art
April 30th, 2009 at 1:34 PM
My apologies Drake, I didn’t catch that you were talking sales numbers, I was thinking avg prices for some reason. Yup sales are down. When a bear roars that the market is down 15% – I naturally assume they are talking price. My bad. Anywhoo, no one’s gotta crystal ball, but my gut feeling is that the buyer has disappeared and will come back for another look in September. September numbers will be down, but how much?
April 30th, 2009 at 1:34 PM
Interesting stuff going on. I was back in Saskatchewan last week for a break from work and met with a lot of friends on the vacation. The sentiment I found seems to be that Saskatchewan is now a very expensive place to live. Kind of sad, I talked to a friend I graduated University with who bought a place because she couldn’t afford her last rent increase (although her mortgage payment is 41% more than her rent was, before taxes and everything else! – she went from living alone to taking on a roommate to help pay for it). She says all she’s gotten the last two years with the company she works for are 3% annual raises – and now it’s hard to make the payments. I still have to wonder what the banks have been thinking lending money the way they were. Crazy.
Armoth’s comments are…interesting.
He wrote:
“There is investment going on in Saskatchewan will give jobs and tax breaks in the years to come and some of the major ones are gonna be finished in 3 years.”
K, so I have two degrees – a B.Comm. in Finance and a B.A. in Pol Sci. I came out to Calgary two years ago and was making six figures by the end of my first year in a O&G head office. My challenge for you is to tell me what sort of a white collar job and salary I could get in Saskatoon right now. Because I looked before I left and I didn’t want to make $32,000 a year working in a bank (which is why I moved – it’s certainly not for the “quality of life” in Cowtown). I’m curious what sort of salaries you think justify the price of homes in Saskatoon?
April 30th, 2009 at 1:36 PM
Sam Johnson — gin sodden wretch or no, that’s an excellent link. The credit and banking issues, and the resulting housing issues, are global ones. Saskatoon is not going to be different.
Ryan S. — Crikey and I both visit Garth Turner’s blog, which had a Saskatoon commentator who kept insisting that Saskatoon RE values were going to double again in a year. Richly amusing.
Callum — August is often marginally better than July, but September is usually much lower. I tell you want, if sales are up significantly MOM in September, I’ve got this hat here, and some ketchup…
(If this works out wrong, I’m really going to have to buy a second hat. And find some recipes for felt.)
Warren — yep, I think that a lot of people are finding this place harder to live in than before. And there are always other options, as you point out.
Far more people will simply leave rather than come here to comment.
April 30th, 2009 at 1:36 PM
Haha, don’t choke on the plastic jro…
Wow, the captacha said jroneedstobuckledownandwritehisthesisalready
April 30th, 2009 at 1:36 PM
Warren,
4 times your salary is the house you could afford thats how I justify it. Enoy Alberta while it lasts all the easy oil is gone now the only hope of sustaining their wages and low taxes is a new oil discovery or more technology to make oilsand extraction more feasible. My take on Alberta is 10-15 years Saskatchewan will be the new Alberta and they will have a bunch of whiners on their blog like ours.
April 30th, 2009 at 1:37 PM
“Ringo said
Ummm . . . this may be ridiculous, but is it possible those people could have just . . . uh . . . died?? Everyone around here seems OLD! Has anyone skimmed the obits any time recently?? Used to be 1 page, max. Now you turn the page, and there’s at least half a dozen there too. Gone to Market Mall recently?? The food court is an absolute sea of white, grey, and blue hair (I’m not kidding).
Is it possible that our population is simply getting old, and a lot of young families have left in the past, which means maybe not as many young people to keep up the population? I don’t know. Just a thought. 2000 heads isn’t an awful lot, so I thought I’d just throw it out there.
# July 29, 2008 1:10 PM”
Statistics Canada reports the numbers of deaths in the Quarterly Demographic Reports. The first quarter report says that the most recent year where the numbers are “final” as opposed to “preliminary” is 2004:
January to March – 2,341
April to June – 2,159
July to September – 2,139
October to December – 2,198
The final quarter of 2004 is a bit low compared to the final quarters of 2002 and 2003 which showed (in order) 2,352 and 2,461 deaths.
Here are the preliminary numbers for 2007 and early 2008:
January to March 07 – 2,426
April to June 07 – 2,421
July to September 07 – 2,223
October to December 07 – 2,286
January to March 08 – 2,481
These are province wide figures. If Saskatoon specific figures are available, it would be interesting if they indicated whether the people who died were Saskatoon residents or were just present in Saskatoon (such as in hospital) at the time of their death.
April 30th, 2009 at 1:38 PM
Stats,
The birth rate seems to be averaging around 3,000 a quarter over the last number of years. Of course, these new citizens tend to stick fairly close to their parents for a number of years before selecting a province in which to live.
http://www40.statcan.ca/l01/cst01/demo04a.htm
April 30th, 2009 at 1:38 PM
Norm you beat me to it!
Yes, provincial births for January 2007 to March 2008 show about 2,870 to 3,150 per quarter.
So while the province’s population may be aging, there are more births than deaths.
April 30th, 2009 at 1:39 PM
Armoth:
I’m not enjoying Alberta “while it lasts” – I’m here for one reason and one reason alone – the direct deposit cheque that comes twice a month.
You’re not doing very well at my challenge. Please give me an example of a job that I could be doing if I came back to Saskatoon – and the salary that I could expect? “Four times salary” is an irrelevant number if you won’t give me an income I can expect.
P.S. For about the seven thousandth time that I’ve said this on this blog and others – Alberta is not an oil province, it’s a gas province. Read some government statistics please. We live and die out here by the AECO hub price, not by what a barrel of WTI is worth. Ironically, Saskatchewan is a much bigger oil producer than gas.
April 30th, 2009 at 1:40 PM
Crikey,
Perhaps “Michael” is seeing things differently now?
http://www.greaterfool.ca/2008/07/22/too-late/#comment-3195
If this guy is for real he exemplifies the greater fool.
April 30th, 2009 at 1:40 PM
LOL!!!! That is hilarious,”some smart aleck had spray painted Snoopcherry, our french poodle, with blue paint”, I can almost bet it was the young kids next door that didn’t appreciate his red ball cap!!! LOL!!!! And appreciate 50K, yeah that’s hilarious, this guy is crazy. If I was him I would be happy to get my money back and get out.
April 30th, 2009 at 1:41 PM
Wesco,
“appreciate 50K, yeah that’s hilarious, this guy is crazy.”
I said he was “seeing things differently” and in no way meant to imply that he isn’t delusional. By the time the paint comes off of Snoopcherry he’ll have experienced another reality shift.
April 30th, 2009 at 1:50 PM
That is hilarious!!
April 30th, 2009 at 1:50 PM
Was the red ballcap issue becuase of gang colours? Just curious.
April 30th, 2009 at 1:52 PM
I think that post was written as a parody: I said as much, a little further down the same thread. Especially because his earlier posts suggested he’d bought a condo, not a bungalow in Pleasant Hill.
But the earlier “Michael” posts were equally bad, and seem to be absolutely serious. I particularly like the one here:
http://www.greaterfool.ca/2008/06/22/pleasantville-leslieville/#comment-2045
And I think this is the first one: the commentary that follows it is particularly amusing. Crikey makes the first one.
http://www.greaterfool.ca/2008/05/23/ya-think/#comment-1317
Callum — I did my thesis years ago: these are publications.
But you’re right.
April 30th, 2009 at 1:53 PM
Meanwhile,
Mining drives city-area job growth.
http://tinyurl.com/5pxj8y
Saskatchewan leads country in employment growth.
http://tinyurl.com/6rat8a
Saskatchewan posts impressive income gains. Yes, behind Alberta again but substantially higher than the national average.
http://tinyurl.com/57p5yf
April 30th, 2009 at 1:53 PM
jrochest,
Look like Michael is fairly “alone” in his point of view. Big change from a year ago. Thanks for sharing this.
April 30th, 2009 at 1:54 PM
I found antoher article
Saskatchewan potash miners vote to strike at three sites
http://tinyurl.com/5ekvum
I had a convo with a woman I work with, she’s middle aged, and said how there is so much money to be made in the potash sector, that her friend makes over $1000 a day. Of course her friend is a manager and has been in the workforce 30 years. Thing is the mentality from her was that hey everything is wonderful in the province from a couple examples of things.
I wonder how skewed ‘average wages’ are because of managers getting huge huge HUGE wages and bonuses…A six figure wage can make the 3 people under the manager, if you averaged out the wages, seem like it’s a decent paying sector… Say if manager / owner gets $200,000 and the 3 people under him get $32,000 a year. those 4 people on average $74,000 a year. I wonder how much it’s skewed. I’m not just talking about Sask either but just in general.
I need a coffee.
April 30th, 2009 at 1:55 PM
@Norm,
“Perhaps you’ll have an opportunity to pay for an overvalued house after all.
”
Yes, I’m sad to say, we all may end up being homeowners after all. Whether we want to or not. Whether we can afford to or not.
Ahh, there’s nothing like the thought of bailing out the fiscally irresponsible to make your heart leap (defibrillate) in your chest.
April 30th, 2009 at 2:03 PM
I love the comment ” drank too much Saskatchewan Kool-aid”
Armoth,
4 times salary for estimating house prices is way too high especially with the higher interest rates right now.
The max the banks will give someone is 3.5 with no debts over 25 years at 6%.
With the average Saskatoon household income at 70k, this calculation gets 241,000.
Their first comment is ” you will be surprised by how much you can borrow”
Healthy borrowing would be 2 times salary with some debt maybe up to 3 times with no debt. Interest rates come into play here, though
But is borrowing money ever healthy?
April 30th, 2009 at 2:07 PM
George,
I apologize to you and everyone else for being so un-doomy today because deep inside I am really feeling it, but I think the average household income is probably higher than $70K. Two “average earners” would produce nearly $80K based on StatsCans average weekly earnings. Perhaps there’s something wrong with how I’m looking at that, but if not, $273,000 would meet the 3.5 times income mark. In any case, really anything between 3.1 and 4 is still considered “moderately unaffordable” according to Demographia Housing Affordability Ratings. 3 times or lower meets their measure for affordable. I suspect that most home buyers would be thankful to be in moderately unaffordable environment.
April 30th, 2009 at 2:07 PM
Norm,
no problem. Yeah, I am probably a little short on average household income.
I revisited that Demographia study which took place in the third quarter of 2007. The median income was 60,900 for Saskatoon, median home was 212,900. We were at 3.5 then. Interesting to see where we end up next study.
April 30th, 2009 at 2:09 PM
Norm, sorry about being gloomy. I am not actually like this in real life. My wife thinks I am never serious, I am always too goofy!
I have mentioned I see dark clouds coming to RE in Saskatoon.
But it is a matter of perspective.
So I am going to look at things a little different from now on.
For example if I was a first time buyer or investor in the US I see the US housing market getting healthier by the day.
Doesn’t mean I won’t try warn others. I feel I have some good view points, but they are just my opinions.
Thanks for the blog, I everybody who posts and reads here appreciates it
April 30th, 2009 at 2:10 PM
Norm wrote: “Two “average earners” would produce nearly $80K based on StatsCans average weekly earnings.”
When I purchased my house six years ago for ~$133k, it was just outside the limit of my (personally imposed) range – two and a half times my own salary of ~$52k. It’s a nice house, though, so I was comfortable going outside my budget by a bit. At that level of debt, my wife was able to stay home with the kid (soon to be kids) and raise them. This was important to us.
Since then, I have switched to a better job, and now earn ~$72k annually. This same house, with decent maintenance and only one significant renovation (a bathroom), has had its ‘worth’ inflated to $300k or more in the last 18 months.
In other words, even though my real wages have gone up, this house would no longer be affordable to this family if I had to re-purchase it again today… not unless there were two working adults living in it.
And this, right there, sounds the death-knell of Saskatoon as one of the few ‘family friendly’ cities left in Canada. Sure, wages weren’t on par with the larger centers, but one could still have single-income families where the focus was on *raising* those families. I have watched a number of young families at my office struggle with this same equation and come to the same conclusion: in order to be able to afford anything liveable (my house is by no means a mansion), both parents *must* work.
Call me old-fashioned, I guess, but I find that sad.
April 30th, 2009 at 2:11 PM
George,
That was not intended to be an attack on your disposition, or anyone else’s. At the same time, I recognize that it’s the kind of news that some people here may be inclined to overlook. As you said, it’s all a matter of perspective and I think that requires as much valid information as we can bring together in one place. I hate to be the one always bringing the good news forward but it seems that many of the others have me covered on the bad. I feel like a ray of sunshine around here.
Your point of view is always valid and I appreciate you sharing it here.
Bookrat,
You have no idea how well I can relate. Mine has been a single income household for much of the time that my kids were growing up, and like you, I’d be hard-pressed to really be able to “afford” my own home today. I’m not expecting any big raises in the near future.
April 30th, 2009 at 2:12 PM
Bookrat,
I know what you mean. I’m expecting my first child in December, and should a certain delorean complete with flux capacitor come my way, so i could go back in time three years, I’d be able to ensure a better life for my child and wife. At my current level of earnings there is no way I could buy anything but the smallest of condos on one income.
April 30th, 2009 at 2:12 PM
Armoth
Quick calculations. Mortgage $230,000 (present value) Interest 5.49%, 40 years.
40 years – payment is $14,315/yr
35 years – $14,926
30 years – $15,808
25 years – $17,130
$14,926 – $14,315 = $611 x 40 years at 10.5% = future value of $309,931
Investing $14,926 for 5 years at 10.5% = $92,036.
Ask the Calgary guy with the finance degree to confirm.
Tax implications: investment income might be taxable, could potentially deduct interest expense.
Don’t believe 10.5% annually is realistic. 5.49% or greater mortgage rate is. One of my mutual funds is down 9% last year.
Check with your bank. If you borrow money against your house, you are probably not subject to the protection of foreclosure. Foreclosure can take more than a year.
I personally paid off my mortgage as soon as possible and will not borrow against the property. At some point I might consider a reversible mortgage as I near retirement. But by then, the banks will probably own more houses than they want.
I am a business owner, not a tax accountant.
April 30th, 2009 at 2:13 PM
Just had to share this funny cartoon with the regulars on here: http://farm3.static.flickr.com/2035/2342776191_ac11b53851_o.jpg
April 30th, 2009 at 2:14 PM
Accounting guy,
Don’t forget that over 25 years, Armoth would be paying $191,166.00 in interest to the bank on a 5.49% loan (assuming the interest rate will stay that low, which I would wager it won’t, but that’s another matter altogether).
As he is paying off the loan over 40 years, he will be paying $334,758 in interest over the term of the loan (which is more than the principal, sadly), unless he accelerates his payments. Anyhoo, by paying over 25 years, he will be paying out an extra $143,592.
April 30th, 2009 at 2:21 PM
“Anyhoo, by paying over 25 years, he will be paying out an extra $143,592.”
Sorry, that sentence should read: by paying over 40 years, he will be paying out an extra $143,592.
Cheers!
April 30th, 2009 at 2:24 PM
Accounting Guy,
Thx for the stats I didnt borrow against my home when I switched banks I did a refinance for a lump sum which I did some house renos and started putting more money into investing. So its still only one payments I thought about doing margins but thats a little too risky for me. I just hate how some people are saying Im going to die penniless cause Im putting money into the stock market and having a 230k mortgage on my income of 45k. For 1 im only 25 years old so if I do lose everything I have plenty of time to recover. 2 The index im investing in tracks the TSX 60 XIU.TO. Frankly if I lose half my money in the index im pretty sure Canada is screwed not to mention me since all the major companies are in the toilet. To be realistic I think the return I will get will be between 7-9% if its more I will be happy =p
April 30th, 2009 at 2:31 PM
Doom & gloom from the Leader-Post:
http://www.canada.com/reginaleaderpost/news/story.html?id=6f3a4d60-db7d-4395-89ee-d9dca96e81c9
Saskatchewan is riding a wave; but perhaps the tide is turning?
Armoth,
You got ka-honees man… I hope you pull it off!
The right investments over the next few years could really pay off.
April 30th, 2009 at 2:31 PM
guy in regina,
Some sad news from America and the company i currently work for is American and its struggling also. I hope things turn around in the States and that we dont feel the full force of what they are experiencing.
April 30th, 2009 at 2:32 PM
Accounting Guy, Armoth and anyone else interested in borrowing money to invest.
Borrowing money to invest can be a great investment strategy, but borrowing money to buy a Beamer to impress the Jone’s is not.
Check out this blog
http://www.milliondollarjourney.com/
Lots of good tips on how to properly use borrowed funds to increase your bank account balance.
April 30th, 2009 at 2:33 PM
Silently reading this blog, which I quite enjoy. Thank-you Norm. Okay, for what it is worth here is my advice based on my experiences re: investing in real estate.
For anyone like Armoth with a 40-year mortgage and thinking of spending money elsewhere, look to your mortgage first.
First, investing in stocks has risk, whereas paying off a mortgage has a guaranteed “return” to your net worth. Sure you might beat your mortgage rate of return in the stock market, but that is not guaranteed. You won’t find a GIC like your mortgage rate anywhere, and if given the choice of a guaranteed investment at say 5.5% or 6.0% and the stock market right now, I know what I would do.
Second, for those that have yet to crack the 50% principle 50% interest payment plan on your mortgage (i.e., those with new mortgages)…take some time to play with an amortization payment table…there are several online, e.g.:
http://www.resmor.com/cgi-bin/mortgage-calculator/index.cgi
and see how much you will save if, right now, you increase your principle payment by $100-$200/month. It will astound you, because of how much you are now paying in interest each month. Better yet, take out a line of credit and drop your 40-year mortgage to 30 years…it won’t take much, maybe a 10-20K loan. The savings will surprise you. You have to do it now though…this is because your payments are heading almost entirely to interest at the moment. It doesn’t work as well if you are 20 years in and paying half interest, half principle. THEN play the stock market for a better return.
E.g., I just laid down 14K on a 169K, 39 year mortgage. Dropped it to 29 years and saved 80K in interest. It will not cost me 66K to pay back this 14K, because I would never allow myself to do it over 40 years (easy to do it in five years without too much hardship…actually, the minimum monthly payments alone will force me to pay it, unless I cave in to buy something one month here and there…then 10 years max)! I am forced to win on this. I couldn’t qualify on a 30 year mortgage at the time I bought, but a 40 year mortgage + qualifying for an LOC after the fact does the same thing (an LOC is easier to get than a mortgage!). You probably can’t make as big a dent by asking the mortgage company to increase your monthly payments because of their rules on the most you can add to the payment plan (each year). Still, I’ve also added another $170/m to my principle payments…and this drops the mortgage to 19 years and interest savings to $130K. Not chump change. Could I turn 14K plus an additional $170/m into enough money to payout an investment loan plus my home to own it free and clear in 19 years by investing in the stock market instead? Perhaps, but again the stock market option has risk, whereas the other strategy has none. Zero. In fact, I’m pretty sure you would have to buy on margin to come out ahead in the stock market. There is value in the zero-risk option: you sleep good at night, you aren’t constantly checking and trading your stocks, and this leaves more time to spent with your family (or read blogs). Save your exposure to the stock market to that coming through the company pension plan! If you can’t do both the LOC and increase the monthly payments, do only one (but do something). 40 year mortgages can seriously impact your retirement.
Finally: like all investments, even RE should be diversified. We now have three homes: a condo in Victoria (bought in 2003), a townhouse in Saskatoon (bought in 2001), and guess where I bought this past fall? Beautiful Wolfville, Nova Scotia of course, where a renovated detached home on half an acre with apple trees and grapes goes for less than 200K. I lost money big time with the 2000 dot com bust, and I swore I would never follow the herd again. That is why I bought in Nova Scotia in the fall, not the west. Why these choices you ask? All locations have universities, so rent is always there. And all are what I consider to be nice places. We’ll eventually pick one place to retire, with Wolfville the front runner at the moment! Actually, to be totally truthful…we rent Vic and Wolfville out furnished for 8 month school years only to pay the mortgages, and use them when we can in the summer! Gram said enjoy life when you’re young (we’re 35)! I’ll say one plus for RE as an investment…you can live in it!
All the best to everyone. Sorry for the long entry!!
April 30th, 2009 at 2:33 PM
Neil,
Nice read thx =) Ill try to buy a beamer when im 40 lol
April 30th, 2009 at 2:33 PM
Armoth:
I’m only 27 and I certainly wouldn’t be doing what you’re doing, but that’s just me. I hope it works out for you.
I fully expect a well diversified equities portfolio to return 7-9%. If there is one thing I believe in it’s historical trends, like the historical trend that since the end of World War II, housing has beat inflation by around 1-2% a year. Historically speaking, the stock market has generated returns in the range that you quote. The problem though is that 7-9% can be over a very, very long average.
With a 45k income and a 230k mortgage, I don’t see you having enough cushion to absorb a temporary downturn. Look at the Shanghai Index, or even the S&P500 – 20% down can happen pretty damn quick. I’m very bullish on O&G, but that’s not to say that a quick 30% selloff wouldn’t completely devastate the Canadian markets.
At 5.49%, that $230000 mortgage is costing you $1175.07 (according to the handy-dandy RBC mortgage Calculator). That’s before Saskatoon’s atrociously high property taxes.
Handy-dandy calculator #2 (https://apps.cra-arc.gc.ca/ebci/rhpd/startLanguage.do?lang=English) tells me that you’re taking home around $2,762 a month after taxes.
So after your mortgage, property taxes, utilities, and home insurance you have around $1,100 – $1,200 a month for food, entertainment, car payment, gasoline, other loans, clothing, vacations, savings, and all the other things we humans spend money on.
I’m not trying to come off as a @$$, it’s just that I don’t think you should be leveraging up to invest in the markets with as small as a cushion as you have. I think any financial planner would tell you the same advice.
I invest with the same attitude I go to Vegas with – never risk more than you can afford to lose. I understand that you’re only 25, but I think you’re risking a lot. I don’t even know how you got the mortgage in the first place – another RBC mortgage calculator spat out $156,587 as the maximum that a $45,000 annual income, zero debt lender could carry. But it is a free country and your life to live as you choose. Just don’t turn into Saskatoon’s Casey Serin.
April 30th, 2009 at 2:34 PM
Payitdown,
The reason Im doing stock market with ETF is for a cushion of safety. If I do the LOC after I do a 40 year mortgage whats the interest rate on the LOC? If I default on the LOC is my principle residence on the hook for the amount? I think thats pretty much like putting all your eggs in one basket(Real Estate). But it looks like your very wealthy at a young age so I give you props (hands props).
April 30th, 2009 at 2:34 PM
Warren,
Well I do have some good news regarding my income. Me and my wife both received raises at work bringing out pretax income to $49920 then my wife’s previous hubby has been ordered to pay child support of $600 per month but thats random when he makes payments cause he’s a deadbeat like my father was. Furthermore Im clueless about Casey Serin please explain =o)
p.s.
Forgot to say no car payment only debt we have right now is a 4k student loan my wife had payments 60 dollars a month. The car gas luckily is pretty cheap we both work same place so I carpool everyday with the most beautiful woman in the world man im lucky =)
April 30th, 2009 at 2:34 PM
Armoth,
6-8% on an LOC. Defaulting on an LOC would not be good, but I’m not sure if they could force you to sell your principal residence to pay it back though. I am not talking about a home equity loan. If you’re worried, increase the monthly payment on the mortgage instead. There is no better time to do this than at the start of a 40-year mortgage. Crunch the numbers with an amortization table, and compare that with your best-case scenario using the stock market. Compare your net worth in 40 years, all else being equal. Then ask yourself is the risk of one strategy over another worth it?
April 30th, 2009 at 2:35 PM
It was Flavor-Aid.
Bookrat,
It’s amazing how one’s preconceived mortgage amount can increase dramatically to correspond with the market. I never in my wildest dreams thought I’d be pulling out a 1/4 mil loan at my age. *gah* With declining affordability comes sacrifices. One being more couples will need to continue earning dual-income to pay for the mortgage. No more staying at home after the first year to raise children.
April 30th, 2009 at 2:35 PM
I keep reading all these calculations, all these investment strategies and I can’t help but think…what good is an investment when you aren’t willing to, or never, cash in on it. And when you do you end up being 65 or more…
I mean a home is a home! Looking at a home as a home is one thing but to look at it like an investment is another. My parents own a house. Sure if they sold it right now they’d get 5x what they paid for it. But problem is they’d have to move somewhere else…and virtually speaking it’s like taking the cost of something 30 years ago and just inflating it to what it’s ‘worth’ now…you aren’t really ‘getting ahead’…of course if you have multiple houses then of course it’s a completely different story…
My parents though? They won’t sell, like most people they are happy where they are..so technically if they won’t sell, and I don’t have a house, really the only ‘gain’ over my situation is that their bills are a litte less than i’m paying in rent per month. It’s like having an issue of the first superman comic…worth LOTS of money..but i’ll never sell it…so does that mean i have that much money?
April 30th, 2009 at 2:36 PM
Jesse G.,
it is perceived value. If my house dropped from 325k in value to 150k it doesn’t make me any more poorer. Just like the jump we have experienced the last 2 years does not make me any richer. ( actually my taxes went up, so I am poorer with the increase)
You are right, a house is just a house. I couldn’t do what Armoth is doing by taking out equity to invest with the way the markets are right now. I think it is way too much risk for very little gain.
On another note, I figured my house affordability idex is at 1.5 with some debt and some investments each month. And I would have to say we don’t really blow our money except for a trip once a year
I honestly don’t know how other people do it these days.
April 30th, 2009 at 2:36 PM
Yeah it’s crazy these days…just odd when people say it’s an investment (money wise and not life wise) to buy a house…
April 30th, 2009 at 2:37 PM
A couple links that show how some cities are fairing in the US from their peak
http://bp1.blogger.com/_nSTO-vZpSgc/SJERFOVWwlI/AAAAAAAAC_U/mWDqjgSkWqE/s1600-h/case-shiller-2008-05-TC-Futures.png
http://bp0.blogger.com/_nSTO-vZpSgc/SJCnobwBHeI/AAAAAAAAC_E/BmNVkIDqYwU/s1600-h/case-shiller-2008-05-TC-Base.png
April 30th, 2009 at 2:39 PM
George, can you tell us more about how the first link’s “Trough months” and “Trough prices” were gathered/calculated?
Being that it’s the first link you posted, and that it suggests some alarming declines without clearly indicating that it’s a prediction based on unknown data, I’d say it would be proper to include some background, unless the goal was to scare people.
April 30th, 2009 at 2:41 PM
Law Guy –
The chart’s compiled using the Case-Shiller data, which is all available from Standard & Poor, here:
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,2,0,0,0,0,0.html
The charts linked to above are from Mike Shedlock’s blog http://globaleconomicanalysis.blogspot.com/2008/06/case-shiller-futures-suggest-2010.html
and yes, they’re trying to call a projected bottom so people can short things, I assume. You’re right that the chart is speculation. The Case-Shiller data itself isn’t, though.
April 30th, 2009 at 2:41 PM
Lawtalkingguy,
Wanna see something really scary? This isn’t speculative, either, this is information to date:
http://bp3.blogger.com/_nSTO-vZpSgc/SJHnHPPUu_I/AAAAAAAAC_k/cLEoXcgSagM/s1600-h/Totol-Borrowings-From-Fed.png
Nothing like this amount of fiscal turpitude has been seen in recorded history. This information if FROM the Fed, who I assume would have no reason to make information more pessimistic than necessary.
April 30th, 2009 at 2:41 PM
sorry lawtalkingguy,
The first chart is speculation, the 2nd is not.
Just as jrochest said
Given that the US is probably only half way through their downturn in housing and housing historically is about 1-2% above inflation every year, the first chart could be close. But it is just an estimate. I should mentioned that.
I didn’t mean to scare anybody. Actually if you are first time buyer or investor there, there is plenty of hope.
Its a matter of perspective
April 30th, 2009 at 2:43 PM
Thanks for the further information, guys.
Interesting to note that, according to the blog link that Jrochest posted, the futures market (since we’re using that data) has recently moved to predict a price bottoming almost three years earlier than it been before.
i.e., futures markets previously thought the U.S. market would continue sinking until 2013; now they’re thinking more like late 2010. (Still pretty scary, if you put much stock in futures markets)
Anyway, I’m going to step away from the negativity for just a moment (sorry, Bears)
While it’s probably still true that Canada is a financial “mouse in bed with an elephant” when it comes to the States, I think there’s plenty of reason to believe that things won’t get nearly as bad here.
Much discussion here has been on 40-year mortgages vs. sub-prime in the States, with people suggesting that 40-years will have the same effect on the Canadian housing market as sub-primes have down south.
I suggest that they won’t. I will support that with anecdotal, unscientific evidence, if that’s okay with everyone. (Past posting indicates it’s more than okay)
My name is lawtalkingguy, and I have a 40-year mortgage. Well, at least it’s called a 40-year mortgage; I’d be surprised it takes as long as twenty years to pay off.
You see, my spouse and I are poor students who could not afford a 25-year amortization, at least according to the bank. You see, while there are strict guidelines about how much mortgagors can afford, no one prevents you from paying 50-60% of income on RENT, which is what we were doing before- so that our mortgage payment is about the same we had been previously paying to rent.
Also, banks (understandably, I suppose) make no allowance for how frugal a person is. We could easily afford the payments of a 25-year mortgage if the bank would have let us, since we have no consumer debt, share our house with two roommates (this is the big one) and eschew toys and gadgets in favour of paying down debt.
Our incomes will quite literally skyrocket over the next few years, allowing us to easily increase our mortgage payments. We are both full-time students as of now, and still have no trouble making enough to pay our mortgage, insurance, taxes and utilities, totaling almost $2000 per month. When we actually have incomes to justify all our educational spending, we’ll be in even better shape.
Are all 40-year mortgages as safe as ours? Probably not. But with a 40-year mortgage, there is plenty of possibility to be responsible and forward thinking; 40-years is just the label attached to the product.
Subprimes are a different monster entirely, and it’s easy to see why they’ve done so much damage. I can’t recall the number, but something like 30-40% of homes sold is parts of the U.S. are sold by banks right now, at get-this-property-off-my hands prices. That sort of supply glut will devastate a market. I just don’t see any way that that could happen here, especially since rents are closing the gap between what a house’s mortgage payment and what it can rent for in many parts of the city.
April 30th, 2009 at 2:43 PM
Lawtalking guy,
What you are doing certainly seems like it’s going to work for you, but would you say you are “typical” in terms of the type of client who is taking out 40-year mortgages? Do you think most people taking out these mortgages can expect their incomes to “skyrocket”? I’d be very surprised if the answer was yes.
In the past, students would not have been able to buy a house. I’m not saying that your being able to by a house *now* won’t work out great for you, but again, I’d wager that you are not the typical 40-year amortization user. So many people who would have remained as renters in their 20′s or during their “studenthood” during the last couple of years were instead encouraged to buy homes over long amortization periods with little money down. In earlier times, this portion of the population would have rented until they saved up enough to acquire a home. Not in the last couple of years. As a result, a significant number of families that would have normally entered the home buying market over the next 5 or more years are already homeowners (albeit burdened by mortgage debt they may not be able to afford- and I’m not saying this is you).
I think, essentially, the extraordinary demand created by the last couple of years’ “special and creative financing” will not reappear until an entirely new cadre of young people can save up enough to truly “afford” a home, now that 40-year amortizations are going to be a thing of the past. I think having introduced these types of mortgages is going to decrease the supply of buyers, at least in the short term.
What do others think? Any thoughts about this would be kindly appreciated.
April 30th, 2009 at 2:43 PM
lawtalkingguy,
I am thinking you bought because you were scared to be priced out. I’m sure there are many more out there as well and that is sad. People should never have been pressured to buy. Its like be pressured to marry someone you are not sure of. Not usually a happy ending.
Having a 40 year mortgage and forced to have two roomates means you could not afford the place. There is a reason why the government stepped in and changed the 40 year and I we will see that in the coming years. It should never have been implemented in the first place.
I agree we will not see the decreases like the states have and will continue to see, but remember subprime was only a symptom of the real problem down there.
House prices rose too fast for incomes to justify the increases in house prices.
Now prices are coming back down to earth there. A 30% average drop from the peak is not out of the question in the states until the bottom is reached.
April 30th, 2009 at 2:44 PM
Crikey,
I think you have hit something there I have not thought of. Because it will harder to get a mortgage in the future ( Oct15) there will be less buyers we know that. But I have not thought about the people that are pre-mature homeowners. ( does that work?) There won’t be that future demand.
For the hockey players it works like this
NHL only accepts 20 year olds and over into the league for many years
Then for two years they allow some 18 year olds.
Then they go back to allowing 20 year olds.
As you can see future 20 year olds coming into the league would be suppressed for a few years.
I think we can relate that what happened here the last couple years. Hope it makes sense.
April 30th, 2009 at 2:44 PM
Crikey:
I agree with everything that you said- I tried to emphasize that we were likely not the typical 40-year mortagor. Though even Armoth (at the “riskier” end of the 40-year spectrum dut to leveraging), who you guys like to rag on for his financial outlook, seems to have his shizz together more than some here would admit.
George: I bought in part because we were scared of getting priced out, yes. That does suck, and I’ve expressed my displeasure before at the bulls on this board who underemphasize the human toll of rising house prices.
But as for “Having a 40 year mortgage and forced to have two roomates means you could not afford the place”, I heartily disagree. I think my disgustingly long post above should show that we can very comfortably afford the place. Just because you believe that the only way to live in/afford a house is without roommates, don’t make it true.
I think it’s funny that a skill nobody talks about- the ability to live happily with others- is one of the most financially rewarding skills out there. Living with two adult, respectful roommates “costs” me virtually nothing, and pays quite handsomely.
Teach your kids to get along well with others, folks.
April 30th, 2009 at 2:46 PM
Also, George, when you say:
“subprime was only a symptom of the real problem down there. House prices rose too fast for incomes to justify the increases in house prices.”
I think you’re coming at it a bit backwards.
In my opinion, the problem in the States was that
a) people were willing to pay higher and higher prices for real estate based on the erroneous belief that “real estate prices only go up, and could never go down”
and b) Banks- through vehicles like subprime mortgages- were willing to lend those suffering from belief a) the money to buy the properties. (due in part to the banks suffering from delusion a) themselves)
I think most would agree (I know I do) that there’s been some element of a) in Saskatoon. But I don’t believe there’s been enough of b) to cause the kind of devastation we’re seeing in the States. the banking industry is very different here, and while I agree that 40-year zero down mortgages should not have been CMHC insured in the first place, I don’t think that less than two years of their presence is going to blow up the market.
April 30th, 2009 at 2:46 PM
Lawtalkingguy –
Actually, I think you probably *are* typical 40 year mortgagors. I know a couple of people who jumped into the market because they were scared a) of being ‘priced out’ and b) of rents that were rising too high, at an unpredictable rate.
They’ve all taken out 40 year mortgages; they aren’t all students, but they’re all starting in their careers and they have substantial debt ratios and no or low down payments.
Living with roommates is a wonderful cost savings, assuming you all get along (and it’s fun, too, when it works) but still, I’ve got to agree with Crikey: the fact that you need the extra 800-1000 a month that two roomies provide suggests that you probably shouldn’t have pulled the trigger just yet.
And you know — I suspect that you’re paying more in interest, taxes, insurance and maintenance than you would have been in rent. Even with the rent run-ups, I think a couple would be able to house themselves quite comfortably for much less than two grand a month.
I don’t think rents will stay at this level once this correction comes, as I’ve said many times.
April 30th, 2009 at 2:47 PM
Haven’t seen this posted yet. Anyone interested in 40 year mortgages going away might like to know they’re not necessarily going away for good:
http://www.reportonbusiness.com/servlet/story/RTGAM.20080731.wrmortgages0731/BNStory/Business/home?cid=al_gam_mostview
April 30th, 2009 at 2:48 PM
Just for the sake of numbers:
Our mortgage payment = $1225 ($230,850/40 years)
Taxes = 216
Utilities = 300ish
Insurance = 100/mo (with additional coverage for the roomies)
Grand total = $1841 per month
This is for a 5 bedroom house, with a heated 24X36 garage, on a 50 foot lot.
Our previous rental, which I believe will be torn down next spring, cost us $1150/mo. This is well before rents went crazy.
The rental had 3 bedrooms, no garage, and was generally in pretty crappy condition. It was, however, very close to the university, meaning we were fairly happy to pay $1150/ mo to live in a tear-down.
So we’re paying almost $700 per month more, plus being on the hook for repairs and upgrades (which is a biggie, no doubt).
BUT,
We live a larger house, which allows us to rent out two rooms, gaining $790 in rent. It will be 3 roommates in September, and $1190 in rent. We simply could not have done this in our rental.
We have insurance for our belongings, which we didn’t have before.
We know we won’t be kicked out of the place we’re living in because of our dog (note to prospective beagle owners: budget extensively for all of your stuff that they’re going to eat), and we know that we can have another dog if we please.
We have the ability to take on renovation projects, which quickly remind me why I did not become a skilled tradesperson.
Oh- also, as many have pointed out, in 20 or 40 years, my mortgage payment likely won’t have changed much, if at all. Rent payments certainly will, even if there’s a small dip in the next 3 or 4 years.
You can say the old renting+investing>owning stuff, but even if I fully agreed with that argument, I’d still rather be a homeowner than a renter with slightly more investment income.
Bottom line: Our house currently costs us $1024/mo, leaving appreciation and repairs out of the equation. In September that will be $624/mo.
I am fully confident that we can afford that, despite the contrary opinions.
April 30th, 2009 at 2:48 PM
lawtalkingguy,
These are the reasons I see why the states have a housing bubble.
Low interest rates- after the dot com crash and 911, interest rates were at the lowest in the history. Rates had nowhere to go but up since then
Speculation was rampant in some parts of the country. Miami, Phoenix and Vegas it was bad. Other places it was not so bad. The markets with the worst speculation had or have about 40% of their listings because of speculation.
Easy access to credit- many homeowners and investors were allowed to pick 2, 3 or more properties.
Bidding wars happened because of the belief that RE always goes up. Interest rates were low and basically anybody could get another mortgage. Greed was also a factor in the bidding wars.
RE was pumped in the media, mortgage industry and the talk with neighbors and on the street was about RE and the perceived wealth.
Subprime was a factor as well but I repeat not THE factor in the housing bubble in the states. It was just one of probably 7-8 factors that led to house prices rising too high for the fundamentals.
Now just relate these factors to Saskatoons RE and its future.
One question, if the states bubble happened because of subprime why are there over 35 countries in the developed world experiencing a downturn in housing right now and many of them had less subprime than Canada? ( remember Canada’s subprime was 5%of all mortgages in 2006 ( states was 25%) before the 40 year mortgage)
April 30th, 2009 at 2:49 PM
I am even less of an economist than I am a lawyer, but I’d say that it has to do with the fact that so many multinational banks are so heavily involved in the United States’ economy. A credit crunch in the States has the ability to knock over dominoes all over the world.
Why wouldn’t that mean Canada too? Well, it certainly doesn’t help our financial institutions when the States is floundering, but every report I’ve seen indicates that the big five were relatively uninvolved with U.S. subprime, and that the damage that was done has already shown up on the books.
So in short, my guess is that other countries financials suffered more from the States’ credit crunch.
But even if that weren’t true, there’s the fact that Canada’s economy (especially out West, and perhaps even more especially here in Saskatoon) has some built in protection against global downturns in the nature of our economy.
I realize that what I’m arguing- our economy is unique, and we won’t experience what everyone else has been experiencing- sounds a little naive at first, but I still believe it. So do a boatload of economists, for that matter.
April 30th, 2009 at 2:49 PM
George “Speculation was rampant in some parts of the country”
Kind of like Saskatoon, where everyone and their dog bought a condo and a bunch of vacant town houses have saskhouses signs with Alberta phone numbers …
I know a few people who own a few condos/townhouses, and are trying to get out now, afraid prices go down a bit more and they start losing money
April 30th, 2009 at 2:50 PM
hummm — my previous comment got eaten by the void.
I’m not sure the Canadian economy can withstand a global economic downturn, which is what seems to be on the way. Demand for commodities drops off too, and mostly we sell to the US, who aren’t in the best of shape.
I’d say that the Beagle makes a difference, and not just to the state of your furniture.
The Beagle = nature’s disposal service! comes complete with liquid eyes and innate lovability, which probably accounts for their continued survival. Otherwise they would all wind up at the pound the first time they chewed the leg off of an heirloom piano. I once dogsat one that ate a large lump of road tar, seemingly with no ill effects — although poop and scoop the next morning was interesting.
Anyway, a dog means you need a house and a yard, which means you pay high utilities and hydro even as a renter; it’s the high end of the market. You can’t have a beagle in an apartment. So for you guys buying makes sense — provided you don’t have trouble refinancing, you don’t have to sell to move after your studies are done, and provided you can tolerate living with roommates for, well, a long time. And provided your property value doesn’t plummet, which would make it hard to refinance.
April 30th, 2009 at 2:50 PM
Jrochest:
Agreed on everything you said. Especially the beagle critique.
All the provisos that you mentioned about our buying decision are correct, in my opinion. And every one of them appears to be working out our way, for now.
April 30th, 2009 at 2:51 PM
Re: my agreeing with everything you said
I guess there was one thing I don’t agree with; I think our economy IS fairly resistant to a global economic downturn, due the commodities we provide. People are going to need food (potash), energy and uranium whether the economy is on an up- or down- swing.
April 30th, 2009 at 2:51 PM
Doug,
most people know there was quite a bit of speculation in Saskatoon, you can tell by the runup of the high prices in such a short time. This is a common theme in places such Phoenix, Vegas, Miami and Calgary.
But I’d like to think when the correction comes, not too many people in Saskatoon will be affected. The runup in RE has only been 2 years in Saskatoon while in Alberta it has been about 4, Vancouver, Victoria 6.
Sure there will be people who bought at the peak and I feel sorry for them. But for the speculators, they will be hurting. And there are quite afew speculators from Alberta. Who remembers the “bought sight unseen” and “investors from out of province”?
The smart money was quietly leaving town when everybody else was saying “buy now, or forever be priced out”
April 30th, 2009 at 2:52 PM
lawtalkingguy,
it was different in Phoenix, according to this realtor in 06. We know how this is playing out.
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=114
I think it is great that our economy and province is finally doing well after so many years of crappity crap. A healthy local economy is paramount in a healthy RE market, but the economy is not the only factor.
Example: Calgary has had probably the best economy in Canada the last 10 years and it is still hot.
If you bought an averaged priced house at the peak last July and sold now (if you could) you are out 100k inflation adjusted.
Prices have dropped about 60k from the peak, inventories are way higher than last July. You would think there would be more sales right, well no.
It seems the pool of buyers is starting to dry up there, I think Crikey has figured something more about this.
Long story, but what I am getting at, is that the economy is not going to save Calgary’s RE.
A local economy is just one factor ( a big one) among several in a local RE market.
April 30th, 2009 at 2:52 PM
George:
I agree in principle with most of what you said. However, I’m going to focus on the stuff I disagree with here in my reply.
1) That blogger had a vested interest in pumping up the Phoenix market. While some might say I have a similar interest since I own a house in S’toon, all I can do is assure you that I invested in real estate here because I believe in Saskatoon/Saskatchewan’s economy rather than the other way around.
2) I think there’s more to the Calgary market numbers than you’re letting on. First, if you buy a house and sell it a year later, you should damn ell expect to lose money. Second, if you’re counting inflation against, you should probably calculate equity built as well, n’est pas? Third, and most importantly, average-priced house statistics CAN NOT be used the way you just used them. The average-priced house is not the same house it was a year ago in Calgary- that number shifts more with changes in what TYPE of houses people are buying than with changes in the price a particular house can expect to fetch, at least in the short term.
Interestingly enough, that stat problem is usually misused by the bulls instead, saying OMG, the average house price increased XXX% since 1955! What they fail to mention is that the average house sold in 1955 was a hell of a lot different than the average house sold in 2008.
When prices go up and up and up like they have, they’re naturally going to go back down at some point. It appears you believe what has happened in Calgary, and what is happening is Saskatoon, is the start of a much larger drop in value, whereas I see it as the market having its wrist slapped as it attempted to push past where affordability and the economy would support.
Does anyone, Bears included, think that Saskatoon homes will be down five years from now, as compared to right now? I haven’t heard even the ultra-bears commit to that sort of prediction.
April 30th, 2009 at 2:53 PM
I just thought I would throw out some info about a few of the first time buyers out there. Before the big jump in prices my husband and I had been looking at buying a house but our circumstances prevented it from happening. Once we got more secure in our jobs and were able to look at buying a house the market had gone crazy. By that I mean the 100,000 dollar house we had been looking at had now doubled in price. This put us in a position where we can’t now properly afford a house. I suppose we could do what lawtalkingguy did but we want to have a baby and I would like a bigger cushion in case we have unexpected expense or one of us loses their job. So now until we either make more money or housing prices go down we can’t afford to buy, and we are not the only people in this position I have fellow co-workers that say the exact same thing. based on this I do expect the market to either stay flat or even drop, then when wages catch up to house prices or when house prices come down more first time buyers will be out there.
April 30th, 2009 at 2:53 PM
lawtalkingguy,
“Does anyone, Bears included, think that Saskatoon homes will be down five years from now, as compared to right now? I haven’t heard even the ultra-bears commit to that sort of prediction.”
Someone will be along to answer your question any minute.
April 30th, 2009 at 2:53 PM
lawtalkingguy,
1) what I was getting at was that, was that for every housing market that shot up too quickly, there were and are people justifying that it won’t go down. That Phoenix blogger is just one of thousands past and present.
2)true, the numbers are not exact. Some will be worse some will be better. I have done the calculation before and it includes mortgage, taxes, utilities, everything to run it. Then realtor fees for selling including the inflation adjustment. I also included the equity, ( which is very little on a 40 year).
But there is a huge loss, at least 80k on a home that was bought for at least 500k
Remember this just over one year, not 15 or 25 years. So not too much will change with that house or area.
April 30th, 2009 at 2:54 PM
Sorry,
It took more than a minute, but yes, I do think that 5 years from now, house prices will be lower (inflation adjusted) than they are today.
In fact, I will wager that houses will be going for about what they were on the 2006 dollar by 2012.
Have a good night!
April 30th, 2009 at 2:54 PM
Crikey,
we won’t see prices like these inflation adjusted for another generation. The timing has to be just right.
Loose lending practices, low interest rates, bidding wars, speculation, greed, its different this time (here), “buy or forever be priced out”
have to all together at the same time. Kinda like 07 but maybe in 27-28
If you are looking at a number for 2012. I’d say a 30% correction from the peak, so 210k. Only if interest rates are the same and the economy is strong.
April 30th, 2009 at 2:55 PM
Bears,
So I guess you guys wont be buying houses for the next 5 years….well at least ill keep you company on the blog. I hope for all of us bears and bulls that every1 on this blog accomplishes their dreams so long as it does not destroy another’s.
April 30th, 2009 at 2:55 PM
I got a question…instead of trying to predict when housing will be low again…does anyone see the possibility of a down up down up effect? kind of like the market was pulled so far in the one direction these past couple years, will be pulled back down enough for people to go OH I GOTTA BUY NOW NOW NOW…causing the supply to shorten up again and causing builders to go mmmmm i can now charge more again and say its’ inflation…. and so on…? won’t a low market cause everyone that couldn’t or can’t buy now to jump on it?
i mean you won’t see ME doing that but i want outta the province (for MANY reasons…alwyas have..nothing against the province it just doesn’t have what i want) and if there is anything the past couple years has taught me is that it IS possible and financially able, TO live somewhere else. I don’t know about others but it was alwyas drilled into my head that ‘you can only afford to live here’…car insurance is cheaper here….rent is cheaper here….taxes are cheaper here…._________ is cheaper here…whether it was true or false.
It’ll be a thing worth watching either way.
April 30th, 2009 at 2:56 PM
nd so on…? won’t a low market cause everyone that couldn’t or can’t buy now to jump on it?
i meant to add……”and then drive it back up again.”
April 30th, 2009 at 2:57 PM
We’re in!! We’re finally in to our new (to us) north end home folks. Our tennants (against my better judgement honestly – not meaning the tennants, meaning holding the house) are into our confed home. Everyone has new bedrooms, and for now, everyone is happy lol! Our kids are snoozing in their new rooms (finally), and we’re almost ready to turn in too. Just for the ‘typical 40 year mortgagees’ question. I thought I’d add our little story.
We bought our silverwood house in early march, when things were looking up in the market still. We got an absolutely amazing deal on it (for the market at the time, which I admit has significantly changed). I still think that even in todays’ market, we made a pretty good deal.
We tried to sell our confed house after a few weeks (we were putting the finishing touches on the reno’s). We had an offer within days, but unfortunately after accepting it, it fell through several days later due to ‘financing’. The market quickly started shifting. We reduced price to be on top of it. ‘No action’ our realtor says. We reduced again (now total reduction 23K or almost 10%).
At this point I got VERY ill. We were 6 weeks into our for sale saga, and I could no longer keep the house in for sale condition. I remained sick for 6 weeks. Anyways, we had to look into keeping the house. We quickly found out that due to some interesting ideas from our broker, we could afford to keep both homes. The house was off the market within an hour.
We now have both houses. We were (barely) able to come up with 20% down on both homes to avoid CMHC’s ridiculous fees. Our tennants are (barely) making all the payments on the old house; at least until interest rates change; which I admit is coming soon as far as I can see.
The debt ratio margin only worked out if we took a 40 year mortgage on the new house. We have already maxed out the voluntary pre-payment option with the mortgage company, and when we do sell our old house, the proceeds will immediately go towards our current house. That should have the house paid off within 15 years.
We also have 2 small kids at home, so I don’t work. In 4 or 5 years, I will once again have a full time income, which again will only expedite the prepayment. So that’s our little 40 year mortgage holder story. I don’t think there would be a lot of 40 year mortgage holders out there that didn’t have alternate plans as to paying out the mortgage. I sincerely hope that there are not a lot of folks out there that actually think they’ll hold their mortgages for 40 years. It’s just sort of a band-aid fix until things significantly change for most (I think).
I honestly think folks would be completely insane to take out a 40 year mortgage and actually *intend* to take 40 years to pay it off. Sorry for the super long post. Just our little story.
April 30th, 2009 at 2:58 PM
George “The runup in RE has only been 2 years in Saskatoon while in Alberta it has been about 4, Vancouver, Victoria 6.”
I think this makes it worse for Saskatoon.
Our market basically doubled price wise in 2 years.
Not enough time for the economy to catch up.
Not even the nurses 35% matches double prices.
Now Vernon (retirement paradise) is cheaper,
so’s Toronto (“Property Virgins” TV show)
I think the 2 year run up, vs. more moderate gains EVERYWHERE else is a big part of our problem.
April 30th, 2009 at 2:58 PM
Like Ringo, I feel the longer mortgages are not all bad. If you intend to only hold the payments low for a brief time because of an anticipated increase in income – these longer amortization periods can be a godsend.
We bought april 07 ONLY to avoid a huge increase in our rent. Yes, our house is much more modest than our appartment was, but at least we knew our monthly expenses would be stable. Now that our household income has more than doubled (I now have a job), we can focus on paying down the principle with the yearly 30% to principle option we have on the mortgage. The only problem is the almost overwhelming temptation to spend on household improvements…..
April 30th, 2009 at 2:59 PM
jrochest,
I updated that “sales by month graph” to include the final figures for July 2008.
See it here
Interested to hear what you make of this.
April 30th, 2009 at 2:59 PM
Could you please post the monthly # of resitdential sales in areas 1-5 and the “average” selling price for those same areas?
Much obliged.
April 30th, 2009 at 3:00 PM
Wow, Norm — so there were more than 60 sales in the last four days?
That really does surprise me.
Sad for my ski jump
April 30th, 2009 at 3:00 PM
But in answer to the ‘will prices be down from where they are now in 5 years: yes, they will. You need to factor in inflation, but they will be down.
The huge spike of last year was all speculator-driven, and I’m still convinced that it’s going to be erased.
April 30th, 2009 at 3:01 PM
So according to some people the market is going to be spirally down, then some people say its just leveling off.
I’m in a situation that I will have to move very soon, so which is better. Is it better to pay $1350 a month for rent (have a disabled child no need 1st floor condo or bungalow, still close to their school) or is it better to spend $1450 on a mortgage (condo)? (I will need to find a place by Nov)
April 30th, 2009 at 3:02 PM
I’d rent, in your situation.
April 30th, 2009 at 3:02 PM
I would also rent in your situation too. Never know what could come up in the future and to have that high cost of owning a house with utilities etc…you can’t downsize if u need to…with renting there usually are other options somehow.
April 30th, 2009 at 3:03 PM
wondering,
$1450/mo condo + $200 (?) condo fees. That’s quite a bit more money per month comparitively. Lots of us on here are expecting the vacancy rate to improve as more property owners turn their condos into rentals. That means there shouldn’t be as much leverage for continued rent hikes either.
April 30th, 2009 at 3:03 PM
So basically July 2008 matched 2005 and 2006 (before the boom) in terms of sales, after trailing in the past couple months?
April 30th, 2009 at 3:04 PM
Crikey,
“Could you please post the monthly # of resitdential sales in areas 1-5 and the “average” selling price for those same areas?”
I’m going to wait for SRAR to post their monthly numbers and then I follow up quickly with a break down by area.
I need to give you a little time to enjoy the overall “average.”
jrochest,
Darned near 70. I think we’re picking up some units that weren’t reported last week. I suspect that the average over the two weeks will be around 70 units.
But hey, shouldn’t a ski jump have a little flip at the end?
Doug,
Basically.
April 30th, 2009 at 3:04 PM
No thats $1450 with condo fees
April 30th, 2009 at 3:05 PM
wondering,
By November you might be able to find a better deal and save an extra 10K on the asking price for a condo, although Jan/Feb would be ideal. I personally wouldn’t buy into the resale market right now, but my circumstances are different, I don’t have a child. Security and peace of mind are fairly valuable unto themselves.
April 30th, 2009 at 3:05 PM
Norm,
“I need to give you a little time to enjoy the overall “average.”
You’re a darned thoughtful guy.
I have another thing to order from the menu, sir:
Month end total # of residential listings.
No rush on that.
Thanks!
April 30th, 2009 at 3:05 PM
Jesse G.,
nobody has answered your question so I thought I would give it a try
“won’t a low market cause everyone that couldn’t or can’t buy now to jump on it?
i meant to add……”and then drive it back up again.”
This is a theory that people have used for many markets not only RE. Once it starts going down, the buyers don’t want to buying a depreciating asset. The same reasoning why there are usually more buyers 5% of the peak going up than 20% of the peak going down.
It won’t get driven up again, that happened because of the bidding wars ( you won’t see them, unless from sellers to one buyer)
April 30th, 2009 at 3:06 PM
From 2006 if we had growth tied to inflation, this is what certain house prices would like today according to George
East College Park average house ( like something I have) 160k
Silverspring 4 level split 300k ( these sold for 250-260k in 2006)
skinny house in the Hamptons 200k ( these sold for 165k in the fall of 05, I looked at a couple of them)
2 story house 1800 sq ft in Stonebridge 325-375k ( of course fully landscaped, with fence and deck
If I would have printed this in 2006 for 2008, most people would say with moderate growth tied to inflation, I’m in the ballpark.
Now, people will think I am nuts. But there are over 35 countries in the developed world experiencing a housing crisis of different sorts, we are no different.
Until first time buyers can enter the market and long term investors can actually cash flow a property we won’t see a balanced market for awhile.
April 30th, 2009 at 3:06 PM
I bought a house in aug of 2006 that was 1020sqf for 175,000 and another 980sqf for 180,000 in december of 2006 both in haultain area and most houses in the area for sale were all around the same price give or take a little. The prices in saskatoon were due for a %20 correction we were to low but the other %30 percent was speculation avg house should be 250,000 to 270,000 now that keeps us under the national avg and keeps to 3.5 the average family income.
April 30th, 2009 at 3:06 PM
And also I bought 1050sqf in may 2007 for 212,000 so they did jump fairly quickly after but I dont see the avg prices going below that ever again for that is very affordable for a nice area. I remember some radio station in B.C making fun of saskatchewan saying you could buy a house with your credit card so that cant be good either lol.
April 30th, 2009 at 3:07 PM
Sounds like ryan’s a speculator….
April 30th, 2009 at 3:07 PM
Were we too low, or were other places over valued in 2006?
Having low house prices is a good thing. Most people can then afford them and not be a slave to their house. They can then afford to go out, go on trips, invest. At least have disposable income after a house payment.
Nobody is priced out. Investors can cash flow a property, (not even close right now)
Our market was healthy until Jan 07. Smart money was leaving our market in the spring 07, gone by June 07.
April 30th, 2009 at 3:08 PM
Not a speculator, I am a long term investor. I agree with george that it is not feasible at the current prices to cash flow a property. But at 250 to 275 it is I dont want prices so high thats why I stop buying but if they go to 210 to 240 the speculators will just come back and buy up everything, and I will pick a few up myself. Like I said houses should be in the range that is affordable for 3.5 average incomes it has always worked best that way.