Saskatoon real estate: Week in review (July 28–August 1 2008)
On the heels of one of the poorest performing weeks for Saskatoon real estate, this past week produced 84 residential unit sales, including 80 single-family homes (houses) and condominiums, the highest volume of residential sales reported since the week of June 9-13.
Total new residential listings came in at 155, including 139 single-family homes and condos. Overall, active residential listings declined slightly to 1,500 units including 976 houses and 418 condos. Active single-family home listings are at the same level as last week while a stronger week of condominium sales caused inventory to drop by 12 units.
The average selling price for the week hit its lowest level since March 10-14, largely driven down by stronger condo sales, particularly in area one where 20 of 28 sales reported were condominiums.
Underbid activity reached one of its highest level this year with 74 of 80 home buyers managing to negotiate some kind of a discount from the asking price, but the average underbid dipped to its lowest level since the week of June 16-20.
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.
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Norm Fisher
Royal LePage Saskatoon Real Estate
168 comments so far. We'd love to hear your thoughts.
April 29th, 2009 at 11:17 AM
Well, that was pretty strong sales for the week. No doubt a lot of people are finally able to pick and choose some decent homes, instead of paying $300k for a pile of 800FT crap that was pissed all over with the cat
My guess?
Saskatoon settles and fluctuates in the range of 70-80% of its “peak” values for the next 3-5 years before slowly going up again at the rate of inflation ($230-250k range).
This makes sense as it falls in the traditional “4x Median Wage” territory that people should be buying homes at. Saskatoon is about $60k a year (and rising).
As well, the rumor is that the Bank of Canada will lower interest rates a further 1/4 to 1/2 point in September.
Still, even if I am correct, a $230-250k “average” also represents a correction of about 20%, which is significant.
Oh well, those who bought long term will be fine. You never can predict when the “right time” to buy is.
Shrug.
April 29th, 2009 at 11:17 AM
PS:
Does anybody else know a lot of people “testing” the market with their home?
I know 3 people in Regina alone that put their homes up for sale in July just to see if somebody will come buy it. Basically their attitude is “if I sell it, great, I will rent for 1 year while I build a new home. If it doesn’t sell, no big loss.”
Either way, a slight fall in prices is actually going to be GOOD for Saskatchewan long term and I believe it will act as an even bigger draw for the Province.
April 29th, 2009 at 11:18 AM
wondering if someone could give me some answers to a rental problem. my landlord dropped off a letter to me stating that his accountants are advising him to collect GST on the rent on his rental properties. So in 3 months I am supposed to pay 5% gst on my rent. I have lived in this rental apartment over a year and pay my own utilities, cable, phone, etc; it is my residence and I am the sole occupant. I have never heard of gst on rent before. any info anyone?
April 29th, 2009 at 11:18 AM
Sandy:
The bottom line is that your landlord can raise your rent as much as he wants, for whatever reason he wants, so long as they give you three+ months written notice.
What I suspect happened is that your landlord has been told that the property you’re renting will attract GST when he/she sells, and has decided to raise rents slightly to account for it.
If your letter states specifically that your increase will be a “GST payment”, I’d hold on to the letter in case of any dispute when you move out. But if it’s just being wrapped into a plain ‘ol rent increase, then it’s just a matter of deciding whether the increased rent is worth it.
April 29th, 2009 at 11:18 AM
Mithan,
“This makes sense as it falls in the traditional “4x Median Wage” territory that people should be buying homes at”
Actually, the tradition is 3x annual household income or less, historically.
http://www.demographia.com/db-uscity98.htm
“The Median Multiple measures the ratio of the median house price to the median annual household income. This measure has historically hovered around a value of 3.0 or less, but in recent years has risen dramatically, especially in markets with severe public policy constraints on land and development. The Demographia International Housing Affordability Survey uses the Median Multiple in its 6-nation report.”
I would also say that interest rates have nowhere to go but up. Where are you getting that information from? Just curious.
April 29th, 2009 at 11:18 AM
About interest rates:
Now that I think further about it, news came out on Friday that the Canadian economy shrank an annualized 0.3 percent in the first quarter, and data on Thursday showed it continued to founder in June, declining by 0.1 percent.
If the Canadian economic data remains soft, the BOC might have to pull the “please borrow more money” bunny out of their hats. Interesting. whatever the BOC does, however, will not have any direct impact on interest rates. This is a common misconception.
April 29th, 2009 at 11:19 AM
“whatever the BOC does, however, will not have any direct impact on interest rates”, meaning mortgage interest rates.
Reminder to self: proofreading is good.
April 29th, 2009 at 11:19 AM
Sandy,
Your landlord is either misinformed, stupid, or crooked. I suggest that we give him the benefit of the doubt and consider him misinformed.
GST is not payable on residential rents and you can confirm that with CCRA on Tuesday.
lawtalkingguy is correct that the landlord does not need a reason to raise the rent, but for goodness sake, let’s not let him get away with blaming the government for the increase. Call him on it. Perhaps it buys you some extra time at your current rent.
April 29th, 2009 at 11:20 AM
lawtalkingguy, thanks for your info. I looked up what is exempt from gst on canada customs and revenue agency. I looked up rental of residential property and it said that a landlord cannot charge gst on a residential rental property if the tenant has lived there more than a month. in the letter I got it clearly states I am being charged gst on my rent and states exactly how much I have to pay in three months. my rent is manageable right now but this really bothers me that my landlord thinks he can basically break federal taxation laws. I am keeping the letter. and he also built an illegal suite in the building where I live. any comments appreciated.
April 29th, 2009 at 11:20 AM
thanks Norm! I knew I would get some educated opinions here. I thought either my landlord is crooked or stupid or he thinks I am stupid.
April 29th, 2009 at 11:21 AM
Doug,
even though inflation is inching higher, the economy is in the crapper. It is possible BofC stays with the same rate or even lowers the rate but that does not mean an automatic mortgage rate reduction as we found out earlier this year.
I don’t envy them right now, raise rates to combat inflation or lower rates to help the economy.
April 29th, 2009 at 11:22 AM
Sandy:
Yikes. Just a guess, but based on that letter I’d say it’s likely that the Office of Residential Tenancies will not accept that as valid notice of a rent increase, and your landlord would have to give you a fresh notice next month (starting the three month clock once again)
April 29th, 2009 at 11:23 AM
Ya who knows.
I hope prices don’t fall too far, because while high prices are not good, market crashes certainly are not good either.
An average long term price in the $220-240k range is solid, and will represent homes that everybody can afford, from Starter Homes to more advanced Homes that people can grow into over time.
Of course, my concern is the Regina Market as that is what I bought into. I don’t want to see my ~$250k home being work $150k in 3 years from now. Of course, thats also represents an irrational worry because if that was to happen, it means our economy totally went *** up and I think the last of my worry would be my house…
However, the economic fundamentals for Regina are very strong and we were never as over valued, so I think that will keep us in for a much softer landing.
I still have trouble believing that even at our peak, we were about 30% less than you Saskatoon guys. Its amazing how out of whack the two cities got, but it also means we will be hurt less.
Eh who knows.
Its entirely possible if they start opening up the Oil Sands and all that other crap in the north over the next 5-10 years that a lot of these things will slowly start going back up.
Nobody knows what the future holds (good or bad).
April 29th, 2009 at 11:24 AM
lawtalkingguy, its just wait and see now. a landlord can raise the rent to whatever he may choose, but if he sets it too high he will not get a long term tenant, or he will have to rent to a group of people who split the rent just to afford it.that equals a lot of wear and tear and costly repairs. 10 years ago in regina a friend applied to rent a top floor of a house. among the others applying was a doctor. my friend thought it was a lost cause. the landlord rented the place to her with the reason that he knew the doctor would be looking to move as soon as the big salary rolled in. he wanted someone to stay long term. finding good tenants is not easy for a landlord , just as finding a good landlord can be a challenge.
April 29th, 2009 at 11:24 AM
Yep, Sandy: as you’ve already figured out, it’s a scam.
Talk to the office of the Rentalsman: their number is 933-5680. Leave a message explaining the problem and they’ll call you back: they can tell you if the letter is a legitimate rent increase or not, and what you should do.
Your landlord can raise the rent should he please, but you aren’t responsible for his taxes! Or his condo fees, or the cost of his repairs, or, or, or…
April 29th, 2009 at 11:25 AM
Oh, and that is a nice number! I guess there are some people silly enough to buy condos…
Mithan — your comment implies that they *are* intending to sell, eventually, since they’re planning on building something new.
I really don’t buy the idea that all these people aren’t really serious about trying to sell! That’s a very comforting idea to those who want to argue that ‘half the listings on the market aren’t real’, but it just doesn’t ring true. The only cases I can think of would be landlords who want to see if they can get more selling than renting. Speculators or owner/occupiers have to be serious before they list.
April 29th, 2009 at 11:26 AM
I don’t see that there will be a huge correction. In fact, I think the correction we were expecting may be already through the system as inventory increases seem to be moderating. The nunber of net listings seems to be stabilizing which tells that prices will be doing the same. I will say the rental market is stronger than last year and rent have gone up. There does not appear to be any recession in Saskatoon.
April 29th, 2009 at 11:26 AM
jro said: “Oh, and that is a nice number! I guess there are some people silly enough to buy condos…”
What is with this comment? Are you trying to scare people? Of course there is nothing silly about buying a condo. Just because you can’t or don’t want to there is no reason to denigrate those who do.
April 29th, 2009 at 11:27 AM
I think the month of August won’t be too shabby for unit sales as parents pull out a second mortgage so they can buy an overpriced condo for their kids to stay in while completing post-secondary. Once November rolls around all of that will be over with and prices will come down more over the winter months. It remains to be seen how many property owners are going to be renting for the next year (or five) but whichever way it swings, lower selling prices or higher vacancy rate, it’s all good.
April 29th, 2009 at 11:27 AM
Mark, Manitoba has always been much more aggressive with international immigration, and their house prices are still relatively very low.
Also, “forecast”s always peg Saskatchewan as some huge *potential* economy. But in 2006, the GDP shrunk, and in 2007 the actual GDP grew less than BC, Alberta or Manitoba. Predictions or *corrected* data aside, Saskatchewan has yet to actually deliver.
Callum, do you really think a condo is a good investment? now? A buddy sold a 20 year old 2 bedroom condo in Sutherland [Forest Grove] for $245,000 earlier this year – I bet the people who bought it have trouble selling it for $200,000. And now there are all those condo conversions to compete with. There are 40 town houses for sale within a couple blocks from my place. Not even a new area.
Heather D, I bet all those conversions get rented out when a lot of them won’t sell. Will temporarily decrease supply of for sale units, but will then decrease demand for cheap purchases, as rental available and middle class parents shy away from risking $245,000 (okay now $200,000) on a condo who’s value is highly suspect.
April 29th, 2009 at 11:29 AM
Steven said “I think the correction we were expecting may be already through the system as inventory increases seem to be moderating. The nunber of net listings seems to be stabilizing which tells that prices will be doing the same.”
Inventory is being rented out, not sold!
Look at Kijiji; there’s lots of properties with MLS photos up on the rentals pages. People are becoming unintentional landlords: they’re taking their properties off the market to rent them for the winter, with the intent of trying again (probably at the same price that it didn’t sell for this year!) in the Spring.
Some, like Ringo who posts on here, are homeowners who wanted to move to a new house but couldn’t sell the old one, are are now carrying two houses; some are speculators who expected to make an easy 100K and are now long-distance landlords; some are builders who converted a mess of condos and now can’t sell them for the price they want. NONE wanted to be landlords.
All this inventory is being deferred, not removed; it will all be back on the market next spring, plus the stuff that’s being built and converted now. This means that next years inventory will be as high as this years, if not higher.
Also, inventory isn’t going down in Calgary; it’s still nosebleed-high: the inventory can be found on this Realty Executives page:
http://www.realtyexecutivesapex.com/search_mls_map_form1.php
Prices are dropping in both Calgary and Edmonton.
Callum: There are too many condos, they are all overpriced and have little intrinsic value, and there are more on the way. None can rent for the cost of carrying. Anyone who buys one will pay twice more month-over-month than they would to rent a comparable unit, even at the higher rents, and when they come to sell them, they’ll be competing with all the conversions on the market.
Condos, as a class, are going to drop substantially in value.
April 29th, 2009 at 11:30 AM
I think the commentary here is way too negative about the Saskatoon market. The rental situation is actually very tight for tenants right now and rents are on the rise. There is no doubt that there are very serious problems in the North American economy – we have slow growth combined with high commodity prices. That’s not necessarily fatal or even negative to the Saskatoon economy – high food and energy prices are a positive, in fact. As such, the local economy should keep humming along for quite some time which will keep real estate prices and rents reasonably stable. I should also say I am a landlord and recently put my place up for rent. The interest was extremely strong (much stronger than last year) even with a small rent increase and quite a number of the potential tenants were folks who just moved to Saskatoon.
April 29th, 2009 at 11:31 AM
Ron –
The rental market is very tight, and it’s a good time to be a landlord if you want to be one. It’s just that most of the people who bought to flip didn’t intend to be!
The tight market is at least partly produced by the removal of rental units to sell as condos, more than massive in-migration. These units will eventually find their way back into the rental market — particularly the converted apartments. And this, combined with the higher rents that are making people double up with roommates, will bring rents down again. For people in your situation, there’s little to lose, but for someone who bought a 250,000 two bedroom apartment that costs 2,300 a month for mortgage, taxes, fees and insurance, that’s not going to be good.
The economic problems are global and systemic — and overdue, of course, since economies run in cycles. And they will effect everyone and all places; yes, Saskatoon sells energy and food, but when things get tight those don’t sell as well either.
Yes, I think people are moving to Saskatoon, students in particular, but I also think people are moving away again.
April 29th, 2009 at 11:31 AM
Just out of curiosity, what impact does the Milroy conversion have on the number of listings and sales?
April 29th, 2009 at 11:32 AM
Armoth — They’re silly because they will pay more than they need for something that has little intrinsic value.
“Let me ask you are you enjoying your latest rent increase which current condo owners dont have to worry about?”
What about condo fees, which usually cover heat and water? You don’t think heating costs are likely to rise over the next year? What about taxes — since the ‘value’ has gone up from 80,000 to 275,000? What about insurance? What about special assessments, since most of these converted apartment buildings have poor maintenance and tiny or non-existent reserve funds?
And, of course, the basic costs per month are much higher than rents, even these rents. If rents double again, they won’t be, but if rents double again, they’ll be higher than any other city in the country, and I don’t think many tenants will stick around to be fleeced.
April 29th, 2009 at 11:32 AM
jrochest,
So your saying the rent increases your experiencing are justified by the reasons you posted. Thanks for clarifying maybe you should make a renters blog calling every1 who buys a condo a “silly person”.
April 29th, 2009 at 11:33 AM
What would constitute a housing bubble in Saskatoon RE if we are not in one now?
How much higher would we have to go?
April 29th, 2009 at 11:34 AM
Nope, doubling rents aren’t justified by increases in heating costs or taxes. At the moment, landlords can charge much more and are doing so; there’s no justification needed.
In a year or two, when most of the conversions are back on the rental market, this won’t be the case.
Buying a condo at the moment is folly: I understand why people are doing it, since they can’t find a place, are scared of evictions or are just sick of them. But there’s little sense in choosing to pay more for the same product over the long haul. If (or in my view, when) rents fall again, tenants will be able to move to a cheaper place, but the person who has a condo is stuck with the payments.
April 29th, 2009 at 11:35 AM
armoth,been reading this blog off and on and one thing I have noticed about your posts is you take anything said, that is in your mind negative, as a personal affront. when someone does provide you with facts you are on the attack. I understand the need to look on the bright side and wish everything is going to come up roses for real estate values and the economy. but just as we had the roaring 20′s that turned into the dirty 30′s, things can seem just wonderful before the collapse of world financial markets, which are happening right now. putting your head in the sand will not stop the process. It is man made and is just starting. Do you think those mortgage brokers in the U.S. who brought on this subprime mess gave a crap what they were doing to the world’s economy? every mortgage they sold was money in their pocket by way of commission. the effects are hurting other industries in the world and just because we are in the middle of no where Canada dont think we will be untouched.
April 29th, 2009 at 11:36 AM
chris,
Not saying we wont be affected but when your province is now considered a “have” province and as well when your sitting on a fricken boatload of resources which are worth double what they were before and not just potash,uranium,gold,diamonds,wheat,oil and am i forgetting anything? When your country and its banking system are called the envy of the G7 is why im so optimistic. When almost every business you run across is starving for people and unemployment levels are at its lowest point in many years is why im so optimistic. Please all you depressed people please tell me why our province is crashing because so far what you have produced is jaded numbers including Ontario which is in the toilet. How bout some numbers of Saskatchewans current cash flow which does effect us im sure you will not find a way to skew our prosperous position.
April 29th, 2009 at 11:37 AM
Whenever I hear the ‘have’ province, I hear numbers of profits that come rolling in…
Then again there are the potash mine workers that are on strike lately.. They want more beucase the province/employer are making more…seems like employers aren’t willing to share the increased numbers… I think of things like that when i hear the ‘have province’ status…I mean dont’ get me wrong, I WANT this province to boom, I want a nice new waterfront, I want more retail that we don’t have, I want more healthy restaurants, more options for everything…more sports teams, more gyms, etc etc etc…I want things to take off like CRAZY here…so far we got a wal mart and another home depot. Have?! It’s hard to see what we have when there’s just a few more places and ‘career choices’ than there was 15 years ago when i was a kid looking into careers in the province.
April 29th, 2009 at 11:39 AM
Armoth:
I don’t think anybody is decrying that the economy in Sask is strong and will probably remain that way (with ups and downs) for a very many years to come, due to the fact that we now have a global market for our products and not just the United States. Hell, even the most bearish predictions say that Sask should enjoy “30 years” of economic “prosperity”, with its ups and downs.
The fact that 84 homes sold this week tells the story that a lot of people have money and are confident enough to buy and that is WITH the general knowledge now that prices are going to soften. The fact are confident and still buying says a lot.
However, lets face it, the bottom line is that home prices got out of whack. Thats just a fact.
Those prices could easily be justified over the next 10 years or so as the literally tens of billions that are going to be invested into Saskatchewan are realized and our tax situation and stuff improves, but many of those projects are just in the drawing stages, they didn’t justify home prices going up to insane levels TODAY.
Anyways, remember this blog does have good and educated people on it, but it also has a lot of negative and pessimistic sentiment and people tend to go for worst case scenarios here. How many people here say this is the next California, when we have absolutly nothing in common with the situation in California? (Last I checked, we are not giving $400k mortgages to people making $10 an hour). Just like the guys over on SKHomes are usually overly optomistic.
History shows that things usually end up in the middle, and that is where Saskatoon will probably end up.
Lets look at a couple facts:
-Saskatoon WAS under valued with regards to equitable cities in Canada by at least 25% at the time. Of course at the time 25% only ammounted to about $35000 dollars and wasn’t a big deal, but still.
-Prices essentially doubled in Saskatoon over 2 years.
-The economy is strong and while there will no doubt be some lost Home construction jobs in 2009, the other aspects that Saskatoon always had will be stronger over the long term.
-Prices are not going back to where they were in 2005 ($140k average). You are NOT going to see a housing collapse of 50% in Saskatoon baring a catastrophy, which only a complete moron would hope for and the moron would be the first to lose his job and be on the street anyways.
I would venture to say that your very worst case is that prices go back to an average of $180k-$200k, which is very significant, but not catastrophy for somebody who bought for the long term.
Are “worst cases” going to happen?
Probably not.
So my point is, if you live in your home for 10 or 15 years and can afford the mortgage payment, will the loss of $40-80k of its “value” in the short term really matter much to you?
Once you take a long term view of the situation, it isn’t that big of a deal. People piss away $50k on a car that does nothing but lose value without a second thought.
People get divorced and it costs them literally hundreds of thousands of dollars and they recover.
People piss away hundreds of thousands in the normal course of their lives, and we are going to worry about a few thousand lost on a house?
Worst case you live in your home for a few more years. So what? As long as you have a job and can afford the mortgages and are smart enough to toss some extra onto the principle (so you work harder for a few years) does it really matter?
Come on.
Don’t sweat it so much.
April 29th, 2009 at 11:40 AM
So, just my two bits – but it seems that people are always looking at the wrong reasons to justify price increases or decreases. It’s always about “xxx potash mines are opening in the next xxx years”, or “Saskatchewan’s GDP is forecast to increase xxxx%”. Or conversely, “Saskatoon’s population shrank by xxxx people”, or “Mortgage rates are going up by xxxx%”.
It’s the old adage that you can be so distracted by the forest that you don’t see the trees. One word people – fundamentals. There are a number of fundamentals that apply to housing (P/E ratio, prices to incomes, etc, etc). Run the numbers and see where Saskatoon’s prices fit. CNBC had a quick little back of the envelope calculation today – take the annual rent and multiply by 15. If the home price is greater than that – it’s overvalued. Everything eventually always go back to the fundamentals (remember John Templeton’s famous quote about the four most dangerous words of investing – “It’s different this time”). So there are one of two possible options – prices go down, or wages go up. Make your bet on which it will be.
One thing that confuses me is how when prices were going up, everyone seemed to be looking at Alberta as justification for increasing prices. Now that Alberta is tanking, why do so many people in Saskatchewan think that it can’t happen there? You can’t really have things both ways…
Armoth asked:
“Who are you to call som1′s condo purchase silly. Let me ask you are you enjoying your latest rent increase which current condo owners dont have to worry about? It gives piece of mind to have a permament place to rest your head in something you own and to some the prices now are right for that.”
Well, me personally – I’m an economist – so while I realize that a home purchase involves a lot of what is called “utility” (enjoyment of the purchase, or the “peace of mind” that you speak of), I can say that strictly financially speaking a condo purchase right now is pretty darn silly.
As for the rent increase, I wouldn’t know about that. But I DID enjoy negotiating my landlord DOWN on rent last month when I renewed my lease. Yes, down (in the “superheated” economy of Calgary). I don’t think that a lot of condo owners know what that feels like. But a lot of Calgary condo owners do know what it feels like to owe more on their “investment” than it’s worth – condo prices have fallen more than 10% in a little over a year here. Maybe you should ask them what that feels like?
April 29th, 2009 at 11:40 AM
Armoth,
I think it is great that are province is doing well and that if things keep up, the province will finally pay off the debt. YES! Regardless of the resources, our RE is way over valued and if not a crash, a major correction will be upon us. But a major correction is not a bad thing, people who were priced out can then afford a home and then actually have money left over to enjoy life and not be a slave to the home.
There is one thing I am scared of and that is the runup in prices of our resources. Where were they 50, 30,10 heck even 2 years ago? I have a feeling a lot of our resource boom is speculative. I just hope it lasts long enough to pay off the debt and then invest in our province so we have a sustaining economy for years.
April 29th, 2009 at 11:41 AM
Warren,
we are so out of whack right now if people plugged in the numbers for P/E ratio, prices to incomes, there would be some people having heart attacks. They will find out sooner or later. I’ll turn the paddles on to get ready
Saskatoons (un)affordability right now is only surpassed by Toronto ( just barely) Vancouver, Victoria in Canada. Ouch!
Toronto is beyond the affordability they had in 89 in their last housing bubble. And for people who want to know what happened to Toronto’s RE in the early 90′s just look at the RBC affordability index.
The one thing I find hard is that people believe that “yeah, we went too high, too quick and we may have a small correction and then good growth for the next xxx years, because of our resources” but nothing to really prove this. No historical analysis, or numbers that prove we are ok. Just because of our resources “It’s different this time”
History ALWAYS and I mean ALWAYS shows that any housing market that goes up that Saskatoon did in 2 years suffers a huge correction, some even go past to where the boom started.
April 29th, 2009 at 11:43 AM
After the bubble
http://online.wsj.com/article/SB121763228998406131.html
The scary thing is that there are quite a few places like this in the states. The common theme is that they were all new developments.
Basically most people bought at the peak for these neighborhoods and now the neighborhoods have gone to crap.
April 29th, 2009 at 11:44 AM
Hi Norm;
I want to correct some erroneous information that was posted here about the Calgary market:
“Also, inventory isn’t going down in Calgary; it’s still nosebleed-high”
Inventory is indeed dropping in Calgary and is down 14% since May. As I write this, the inventory is 8,935. That includes single family homes and condos in the city of Calgary.
The link that was posted shows inventory at 15,495. It includes most of Southern Alberta and includes acreages that are 200K from Calgary. Not exactly relevant.
Your blog is terrific!
April 29th, 2009 at 11:44 AM
So Calgary, after it’s drop in prices, and anemic condo market, has 8,935 places for sale?
Saskatoon has 1,500 (plus 407 on Saskhouses – I checked just once for the total!) about 2,000 to Calgary’s about 9,000. And Calgary is 5 times larger (over 1 million v. just over 200,000, if bigger, than including suburbs, and inventory much higher).
Seems like Saskatoon has about the same number of listings per population. Still trending upward inventory rise, ie just behind Calgary’s drop in prices, especially with still much weaker labour market. I know TV says our labour market is strong, but $10,000 a year less in Saskatoon … Calgary has better job prospects, and not much more expensive housing, probably even cheaper when wages are taken into account!
April 29th, 2009 at 11:44 AM
George,
I believe the reason our resources are climbing so high is emerging market demand and that will never stop unless China falls into the ocean…And here is another handy dandy link for that
http://www.canada.com/topics/news/features/ragstoresources/story.html?id=ac6da271-8b71-4c0a-9898-c492967480f7
April 29th, 2009 at 11:45 AM
Warren,
You make some interesting points. It’s silly (word of the week) when people try to justify Saskatoon’s house market with SK’s commodity potential. I feel that anyone who encourages price hikes (without better overall wages to offset) are damning all future generations to unaffordable living and hardship. It doesn’t benefit the community when more and more people are being shut out from owning.
Fundamentals have meant nothing in many markets across the world where it has become nearly impossible to afford real estate. The gap between lower class and wealthy keeps getting worse. Working class people who are helping keep SK prosperous are not seeing a fair return IMO.
Armoth,
It’s interesting that you mock renters. Aren’t you raising kids? If the rent-to-wage ratio worsens how do you expect them to save for a downpayment when most of their earnings will be going towards rent and other necessities? Maybe you’re planning on letting them stay at home into their 30′s so they can save up?
April 29th, 2009 at 11:45 AM
Armoth,
when something runs up in price like our commodities a person has to wonder how much is fundamentals, how much is speculative. For every link you post about fundamentals, I can post one that shows it is speculative. It would become a pissing match, I’m not looking to do that.
I do agree that there is more demand from places like China and India and we have what the world wants, no question. But there is speculation in these markets as well. So I think it is a bit of both right now.
April 29th, 2009 at 11:45 AM
In response to Bob Truman’s comment, here’s a link to the Calgary Real Estate Board’s own data:
http://www.creb.com/public/hbuyer/hb-stats-residential.htm
Anyone who is interested can click on the links and scroll through the data: yes, inventory is down a little from its very highest peak, but I think the term “nosebleed high” is still accurate. Go take a look.
Norm’s figures aren’t just limited to houses and Condos — although he doesn’t count the outlying regions.
The Realty Executives page is actually pretty close to the Calgary Boards total MLS figures.
April 29th, 2009 at 11:47 AM
Doug,
does 407 listings on saskhouses you mention include ones that are marked ‘offer pending’?
April 29th, 2009 at 11:47 AM
Jrochest,
“If (or in my view, when) rents fall again, tenants will be able to move to a cheaper place, but the person who has a condo is stuck with the payments.”
This is EXACTLY how I feel. I do NOT want to be stuck with a piece of crap, overpriced 300 square-foot apartment (I mean “condo”) for $200,000 (with $250 in “condo” fees) in this town.
April 29th, 2009 at 11:51 AM
Robin,
I am also in total agreement on the ‘condos’ in this city. Sometimes I think that people think that it’s going to keep climbing… Single family housing may until it’s upper limits, but these converted crappy condo’s? How high can they realistically go?!
If housing was to even go up 4% per year for the next 20 years do people think these condo’s are going to be worth $475 grand?
April 29th, 2009 at 11:51 AM
Jesse G,
these condo conversions are really only worth what you could get for renting them out.
I see there is a conversion on 103 or 104th 2 bedrooms is 169k. The mortgage is just over 1100, condo fees 200, taxes lets say 50 per month. So you need at least 1350 to break even if you are renting this out, which many will do when they can not find someone else to sell to. Max rent for these are maybe 800-900 right now. Every investor should cash flow a property, so that is a big hit every month. I wonder if there is at least one property on MLS that can cash flow.
April 29th, 2009 at 11:53 AM
Robin said
“This is EXACTLY how I feel. I do NOT want to be stuck with a piece of crap, overpriced 300 square-foot apartment (I mean “condo”) for $200,000 (with $250 in “condo” fees) in this town”
1) Where have you seen 300 square foot apartments for $200,000?
2) Could you explain what you’re implying with the quotation marks around “condo” in condo fees?
Jesse G.
“If housing was to even go up 4% per year for the next 20 years do people think these condo’s are going to be worth $475 grand?”
I posted the other day about not making this type of error. If the average house price goes up by 4% compounded over the next twenty years, it will be because newer, bigger, nicer houses are being built and sold. An existing property will NOT see the same increase; studies have indicated that existing houses go up at the rate of inflation only.
April 29th, 2009 at 11:53 AM
With the apartment-style condos, I’d be worried about the future condo fees. I’d think they’d go up quite substantially to cover the repairs on these older buildings. I’m sure the company doing the conversion won’t be doing a tear down and replacing everything – just the basics me thinks.
Wife and I drove through the west half of Hampton Village over the long weekend. If you want to see ‘For Sale’ signs, check it out. Wow – quite the site.
captcha = war immune
April 29th, 2009 at 11:55 AM
IMHO the Sakatchewan “economy” (I am not an economist but merely a slightly cranky Physician), no matter how allegedly hot it is can only insulate us from the current global economic recession/malaise/depression/melt down to a certain degree.
And I’m afraid that our Canadian banks have indeed been giving mortages to people who cannot afford them. If you can’t afford to put any money down on a home, I am so sorry, but you cannot afford it. These poor lending practices will come back to roost. What will happen when these mortgages re-set?
The last time I checked the CIBC and the RBC were in considerable trouble. One can safely assume that what is getting into the newpaper is the tip of the iceberg. If I had one cent in the CIBC I would be down there getting it out this very morning.
April 29th, 2009 at 11:55 AM
George,
Great point. I’m not an expert on cash flow but that sounds pretty sane of a practice. You are right on on the rents right now. They offered me to buy my condo in one of those buildings (as is in 1960′s decor) for that price…yet i’m paying $750 a month now (850 october) so it wouldn’t eevn be close to that carrying cost for the same place.
lawtalkingguy,
Great to hear. I would hope that there would be bigger newer places or at least some exit from the current ‘motel’ style condopartments. European layouts are SIGNIFICANTLY better planned out for the use of space. I think that’s the way we need to go.
ChrisH,
So far from what I’ve seen of conversions, if the roof isn’t leaking, they aren’t fixing them. (though they most likely will in the future esp if they are a 1960′s or 70′s building). Basics is right. Cheap carpeting, laminate flooring (which does look nice), paint, 8 feet of countertops and cabinets and usually new appliances / washerdryer combo. Also handrail height but if it’s like the place that bought our building, the handrail, carpet, and ohter code fixes are currently being paid by the people renting in the building as our rents go up up up. They won’t have dented the cost when they sell them as condo’s.
April 29th, 2009 at 11:56 AM
Sam Johnson:
slightly cranky position PLUS tireless fearmongerer
Don’t sell yourself short, after all.
April 29th, 2009 at 11:57 AM
lawtalkingguy,
“An existing property will NOT see the same increase; studies have indicated that existing houses go up at the rate of inflation only”
Have you been in a coma the last two years? What studies?
How does a house like mine which I bought in 05 for 160k go up with inflation, when a same sized with pretty well has everything like mine go for 319k in April of this year on the same street.
If our house went with growth tied to inflation, it is worth just over 180k, we have also done some reno’s as well. So maybe bump it up to 190k at the most. There have been 3 houses on our street listed and sold over 300k this spring. Tied to inflation I think not.
April 29th, 2009 at 11:57 AM
George:
It was a mistake to post that last part without finding the study first. My bad.
A quick google search didn;t turn it up, so it’ll have to wait until I’m not supposed to be working. A quick observation though- if a property rises at less than the rate of inflation for twenty or thirty years, then doubles in two years, it’s completely possible to still only have stayed with inflation over the long term.
Why would house prices have to move in lock-step with inflation, the way you seem to suggest they should in order for that statement to be true.
April 29th, 2009 at 11:58 AM
lawtalkingguy,
I dont’ have the numbers, but it would be great to have averages since the 80′s. Norm any help here.
I found this from 06
http://www.canada.com/saskatoonstarphoenix/columnists/story.html?id=1ee8e93f-866c-4876-b69e-d24bda20be15
“In Saskatoon, there’s smugness, too. House prices here are up an average of 34 per cent in the last five years. That’s three times the inflation rate.
House prices are going up faster than salaries.”
This was before the boom!
Add the prices vs inflation the last couple of years and it is not even close.
Nationally the housing boom started slowly in 98 and has crept up higher than inflation every year.
April 29th, 2009 at 11:59 AM
lawtalkingguy,
“Why would house prices have to move in lock-step with inflation, the way you seem to suggest they should in order for that statement to be true”
What’s your point, exactly?
Clearly, RE prices don’t “have to” move lock-step with inflation (and other measures, such as affordability), but they usually do. Ask any banker or economist. During this economic environment, however, inflation is rising, but house prices are falling. People are using up more of their income paying for food and gas, and can’t afford to pay more for a house. It’s also harder to get loans, as banks realize they are hemorrhaging money to people who can’t afford to pay it back. This is particularly the case in the US, the UK, Australia, NZ, India, and many other countries.To suggest we would be different seems ridiculous in the extreme. Did you just buy an overpriced house, per chance?
Credit was far too free-flowing, “asset” prices got way out of whack with fundamentals, now credit is contracting, and “assets” (i.e. assets that are actually largely debt) are falling. Debt does not equal assets.
I don’t get where you’re going here.
April 29th, 2009 at 11:59 AM
Fearmonger, moi? I prefer the to describe my view point as a healthy dose of caution and scepticism to what is being peddled in the mass media.
Rest assured, if the Royal Bank of Scotland can get into its current state it can happen to any chartered bank in Canada.
I may be picking on the poor CIBC but the last time I checked they were they most impacted Canadian Bank by the US sub-prime metlodwn and they are skirting the upcoming 0 down mortages by offering a 5% cash back option or some such thing.
Whatever happend to the notion of banks underwriting mortgages with their own capital?
http://www.thestar.com/Business/article/432860
http://bankimplode.com/blog/2008/06/23/canadian-imperial-bank-of-commerce-cm-32b/
April 29th, 2009 at 12:23 PM
All I know is this. I went to CIBC to see what I could afford. With my wage, the loan officer told me I would be able to afford a payment that would get me a house of $125grand if i went with the 40 year option. They paid for the 5% CMHC option but of course they just tack it on the loan reducing the amount one could get in house.
Personally, I didn’t get the ‘fearmonger’ vibe from Sam Johnson really. In a day and age where the states (and the world) is seeing bad things, mostly due to greed (of companies or individuals), and my past experiecnes working for people who were equally as greedy, nothing really suprises me these days from theroies (and realities) of failing banks to the propping up of a fake boom as real and good for everyone.
April 29th, 2009 at 12:24 PM
Crikey and George:
Some good points. I definitely shouldn’t have made the statement without further investigation, as i already said. The study, as i recall it, showed that while housing had increased xxx% over multiple decades in the U.S., the increase above the inflation rate was entirely accounted for by larger, nicer houses (i.e. the average size of a house was substantially more in 2000 than in 1950).
The study was American, as mentioned, but if I recall correctly it was broad in scope- both time- and location- wise.
Crikey:
“Did you just buy an overpriced house, per chance?”
Nope. Sorry to disappoint.
April 29th, 2009 at 12:25 PM
lawtalkingguy,
if the study was done in 2000, It would be in the ball park. But any time after that, house prices have been out of whack with inflation.
I have posted this about Calgary, it is 2 years old. Adjusted for inflation. If you were a speculator and bought in 81, ouch. You never want to buy at the peak. Yes, I know NEP, but there are challenges out there this time around as well.
http://photos1.blogger.com/blogger/4027/164/1600/History%20of%20Calgary%20RE%20prices%20-%201973%20to%20today.jpg
April 29th, 2009 at 12:25 PM
lawtalkingguy,
“Did you just buy an overpriced house, per chance?”
Nope. Sorry to disappoint.
Why would I be disappointed? Good for you.
George,
Fantastic graph. Sums it all up nicely. I’d like to see an updated one, however.
April 29th, 2009 at 12:26 PM
Reading a statement from Jim Flaherty that all is A-OK should be the equivalent of assigning the national economy a CCC rating. The man is a dribbling idiot whose motus operandi is to blame Ontario for all the ills of the country.
“In addition, our financial institutions, particularly our banks, are well capitalized and strong, and our household balance sheets are strong as well”
Pass the bong my good man!
Read a broad spectrum of information from national and international sources and form your own opinion.
April 29th, 2009 at 12:26 PM
Yeah everything is SUPER PEACHY…and if u disagree YOU HATE WHERE YOU LIVE!!!!
I love when Armoth insults everyone with student loans. That’s pure class. Everyone should just spoon off thier parents for thier schooling I suppose. Parents that can pay for thier kids, are a blessing…but if one doesn’t have that luxury it’s very LOW class to start firing out pissy comments like that.
I enjoy this blog and site but when stuff like this gets dredged out of the swamp I want to leave and not return. Fortuneately for me, there are many others here with valid points that present them without alienating half the people. That and Norms patience with everyone’s comments.
*goes to get water*
April 29th, 2009 at 12:27 PM
Armoth,
These links I post, are sad yes, but you know what, it is something called reality. Some of these sad things are coming into Canada like it or not.
I have said it before, there are over 35 countries in the developed world experiencing a downturn in housing this year. We are not different. You can talk you want about resources but they will not save us. A local economy is only one factor in determining a local RE market.
I think you are in for one big surprise.
April 29th, 2009 at 12:28 PM
For investors like me =o)
April 29th, 2009 at 12:28 PM
The Sask economy numbers from June. K Im done now when you feel sad look at my links except for that wrong 1.
April 29th, 2009 at 12:28 PM
I’d also like to give some perspective that Bob Truman seemed to leave out of his posting.
Yes, it is correct that Calgary’s inventory is down from its peak earlier this year. SFH inventory has come down about 15%, and Condo inventory has fallen about 13%.
However…
1. While inventory is important, it can’t be looked at in a vacuum. An inventory of 30,000 homes for sale would be very healthy if you were selling 10,000 homes a month. Calgary is not.
While inventory has decreased from the peak, the absorption rate is still RIDICULOUSLY high. Condo absorption rate has increased to an all time high (5.7 months worth of inventory), and SFH are sitting at 4.6 months worth. The CREB’s own definition of a “balanced market” (where prices would neither rise nor fall) is between 2 and 3.5 months. In the spring of 2006, the rate was as low as 0.5.
2. Calgary’s inventory did the exact same thing last year, albeit not peaking until October. It then came down until the spring when inventory skyrocketed and hit all time record highs. Many speculators pulled their listings last fall to wait for the “spring rush”, re-listing them in the new year. That “spring rush” never materialized in Calgary.
Now the rental listings are being flooded (I would know, I was shopping around last month before I decided to stay put where I am) with unintended landlords looking to rent out their “investment” until prices recover. Typically at a negative cash flow. Is inventory really going down, or just hiding for the time being? I don’t know the answer, but I think that it’s a damn good question.
So they ARE coming down, but ARE still at “nosebleed levels” (as it was described). One fact that Mr. Truman can verify is that prices are firmly trending down here in the “hottest economy” in Canada. Condo prices are basically where they were two years ago and SFH have given up all their 2008 gains and 11 months of their 2007 gains. A lot of my co-workers are now $50,000 or more upside down on their mortgage. And most of them bought condos, which I’m WAY more bearish on than SFH.
April 29th, 2009 at 12:29 PM
Warren,
Seeking a bit of financial advice if you would be so kind.
Let’s say that you knew a guy who has a fair bit of his savings invested in aggressive equity funds with reputable companies like AGF, Aim/Trimark, Fidelity, etc. About 80% of it is there and 20% in secure guaranteed investments. He has about 20 years before he needs to rely on those investments for income. What should he do right now? I know this is sketchy and there’s a lot of detail missing. I guess I’m more curious about your thoughts on the stock market in general and specifically “mutual funds.”
April 29th, 2009 at 12:31 PM
Norm:
I’m flattered, but honestly not the most knowledgable person you should be asking. But here’s my thoughts…
First off, I would congratulate this person. Most people have little or nothing set aside (not to pick on the housing bulls again), thinking that their home is going to be worth xxxx million by the time they retire and they can live off that. Highly unlikely. So good for them for planning for the future.
I can’t say enough about the stock market in general. I’ve been over it a thousand times, but I’ll review once more. Real estate (residential kind), can only increase by the amount that incomes increase – which is usually fairly close to inflation. Period. There can be short term aberrations, but I’m talking about the long run here. Someone has to pay for it, they need money to pay for it, and they will usually get that money from their job.
Equities, on the other hand, can increase infinitely (in theory). They have the unique intangible of increasing productivity. I own a piece of a company that makes widgets. It makes xx dollars a year by producing these widgets. It invests in a new technology that allows it to double its widget production and suddenly the company is twice as profitable (now making 2xx dollars a year with its widgets). A house cannot become more efficient – a house cannot get a competitive advantage on it’s neighboring houses.
I am also a big student, and believer, of history. And history tells me that equities have outperformed every other asset class out there (widely available asset class – I’m sure something like 17th century French art has generated higher returns, but it’s not quite as easy of a market to get into). They’ve outperformed real estate by around 7 to 2 since World War II.
So, as for the specific situation – the companies you list are all reputable (Aim/Trimark, Fidelity, etc), and I myself have some money in them from my work’s pension. But overall, my experience with companies such as these are that their fees are way, way too high. What’s the benefit of a 8% return, when the company is lopping 2% off the top? Here’s an interesting article on this:
http://www.fool.com/school/mutualfunds/costs/ratios.htm
So I recommend index funds to people. They’re extrememly simple mini-versions of many markets around the world. You can still enter into many of the same risk/reward situations – ie. you want an aggresive index fund – pick an emerging market. It gets into a bit of financial theory (the Efficient Market Hypothesis), but here’s a great excerpt from Wikipedia about what makes index funds superior:
“In particular the EMH says that economic profits cannot be wrung from stock picking. This is not to say that a stock picker cannot achieve a superior return, just that the excess return will not exceed the costs of winning it (including salaries, information costs, and trading costs). The conclusion is that most investors would be better off buying a cheap index fund.”
Of course, the problem with the Efficient Market Hypothesis is that it falls apart if everyone believes in the Efficient Market Hypothesis, since then nobody searches for stocks that will outperform, and that information doesn’t get built into the stock prices, and then opportunities begin to exist…blah, blah, blah. If I went back in time to shoot my grandfather before he gave met my grandmother, would they have my father to have me to go back in time…urghh.
Yes, Warren Buffett, John Templeton, George Soros, and many others prove the market is not efficient. But, as smart of people as we may all be – we are no Warren Buffetts, John Templetons, or George Soros.
I enjoy Jim Cramer on CNBC. I don’t enjoy him because I think he’s right, I enjoy him because he now tells his viewers that they can beat the street. That they, working a few minutes a day, and taking his advice, can achieve better results than a couple dozen of the smartest graduates on the continent working for Goldman Sachs in New York. What makes it so enjoyable for me is that Jim Cramer wrote in 1999 that :
“After a lifetime of picking stocks, I have to admit that Bogle’s arguments in favor of the index fund have me thinking of joining him rather than trying to beat him.”
see this article:
http://www.slate.com/id/2158497/
The point that I’m trying to get at (in a very long, drawn out way) is that I would recommend for this person to pull some of their money out of these funds and buy some simple index funds (as, in the long run, it’s very close to impossible to beat the market – and it is the long run that this person is interested). I would have advised them to liquidate last fall (when I did) with all the clouds on the horizon, but it’s almost too late now. You’re knee deep in it, you may as well stick around.
If this person did want to try some individual investing, take a small amount (10 or 15%) and just play around with it. Take Warren Buffett’s advice – buy what you know. Do you like Cherry Coke? Warren Buffett does and so he bought Coke stock. Do you drive a Toyota? Do you like it better than other car companies? Do you own Sony products? Do you like Sony better than other companies? Etc, etc, etc.
20 years is still lots of time to play around with, to have some successes, and to have some failures. I think most people’s biggest faults with their personal finances are:
1. They don’t trust themselves.
2. They’re lazy about their investments.
So many people I know are unhappy with the returns that they’re getting from their investments, but don’t change it. They never phone up the company and say “screw you guys, I’m taking my money elsewhere”. Don’t be complacent, you’ll just get run over. Similarly, so many people don’t trust their instincts and don’t take a small risk now and again (in life as well as personal finance). I’m no better. I like to gamble. I like Las Vegas (a lot – I mean a lot!). I watched MGM/Mirage go down from $100.50 to $21.65 and thought that it made no sense. The breakup value of the compnay was multiples of what it was being valued at. I could go on for pages, but the long and the short is that I didn’t pull the trigger (and buy what I know – not even a couple hundred dollars worth), and now the stock has nearly doubled off its lows and is at $35.85. Trust yourself (but only with as much as you can afford to lose, lol).
Oh, and (very small thing, but it affects you every day). Ditch the brick and mortar banks. Seriously, they’re like travel agents and door to door vacuum cleaner salesmen – they’re a dying breed. Check out citizensbank.ca – they’re fully linked with all the credit unions in Saskatchewan as well (which are fairly ubiquitous). Best choice you’ll ever make.
April 29th, 2009 at 12:31 PM
Armoth,
remember the facts you have yet to post, well, I found some facts. Our resource boom is made up of a lot of speculation.
“Potash Corp. of Saskatchewan (TSX:POT), the world’s biggest producer of crop nutrients, was also off around 11 per cent amid a mass commodities selloff. Its stock lost 12.8 per cent, or $26.49, to $180.50.”
Stock loses 12.8% in one day. Are they done eating in China? They don’t need fertilizer anymore to grow food?
There is tonnes of speculation in the commodities markets. The only question is it long or short term.
April 29th, 2009 at 12:32 PM
Jrochest
Your exact words were “Also, inventory isn’t going down in Calgary”
Now that you have switched your preferred source to CREB, using the Total MLS, inventory is down 9%.
I fail to understand why someone buying a house in Calgary would want to compare the city data with farms, acreages, or homes selling in Banff, and that’s why I post numbers for the city only.
For anyone interested, I posted a blog topic that shows what homes that sold in 2005, 2006, and 2007 are selling for today(The Truman Index). Warren endorses it!
Norm, thanks for indulging me.
April 29th, 2009 at 12:32 PM
George, I don’t know that “are they done eating in China” is a good argument for why Potash Corp should have long term success.
Kind of over simplifies the whole stockpile, competition, alternatives etc issue.
Kind of like how people in Africa are hungry, yet wheat in Saskatchewan didn’t do so hot the last few DECADES
Arizona has a lot of coal, and a couple big hydro damns, and people need power, and a lot of IT/computer industry, and computer use is going up, but yet their real estate industry is crashing …
April 29th, 2009 at 12:33 PM
Warren, that was one long post!
Here’s what I took home:
“Real estate (residential kind), can only increase by the amount that incomes increase – which is usually fairly close to inflation. Period. There can be short term aberrations, but I’m talking about the long run here. Someone has to pay for it, they need money to pay for it, and they will usually get that money from their job.”
Makes sense. In other words, if real estate doubles in 2 years (Saskatoon) prices are going to take a LONG time before wages catch up and prices can go up further – or prices can just drop substantially to match the whopping 10% wages went up over 2 years (v. 80? 90?% increase in housing)
April 29th, 2009 at 12:34 PM
Norm one final comment and done for the day, that 184,000 condo in forest grove is in either same (or identical) building, same basic unit, to the one a buddy sold his for 245,000 earlier this year.
Emailing him the link, he’ll enjoy it in his place in Alberta.
April 29th, 2009 at 12:35 PM
Doug:
That would be the gist of it, yes.
Armoth:
No, that’s not what I’m trying to say. I still think what you did was pretty stupid. Good choice of investment vehicle, very bad way to fund it. I mentioned more than once about the “long term”. “Long term” means that you can get killed in the next 1,2,5 years – but 20 years from now you’ll be better off. As I previously explained, I don’t see you being able to financially withstand a downturn. You’ve posted your income, you’ve posted your mortage – the numbers just don’t add up.
“I like your thinking your a genius like me my friend and did anybody see the news about the new tax free savings account it should be pretty awesome we will be the next switzerland.”
Okay, first of all – it’s “you’re”, not “your” – I hate bad spelling. Secondly, I don’t think I’m a genius. I just think that I pay attention, something a lot of people don’t seem to do.
Have you started calculating your home’s P/E ratio yet? Please let me know when you have it. And have you found a job for me yet in Saskatoon? Or are you just really good at doing nothing but questioning other people?
April 29th, 2009 at 12:35 PM
Warren,
“I’m flattered, but honestly not the most knowledgable person you should be asking.”
You’ve been in and out of here many times over the last couple of years and always impressed me as a pretty sharp guy when it comes to money. Thanks so much for the detailed reply. I appreciate hearing your thoughts on this.
I guess I worry a bit that there’s a massive collapse coming but I suppose if that happens we’ll all be starting over.
Bob,
I caught your index earlier when I dropped by your blog. It’s interesting that some of them have re-sold a fair bit higher even in a short period of time. Thank you for sharing your thoughts on the Calgary market. I appreciate it.
Doug,
Wow! $245K? Must have been a private deal. The previous high on MLS for that “identical unit” is $225K and that one stands out like a sore thumb compared to the rest. There were two others that topped $200K, but just barely. There are a wide variety of floor plans in that complex, some as large as 1,300 square feet. You sure it wasn’t one of the bigger ones?
April 29th, 2009 at 12:36 PM
Warren,
Real estate may only increase on average at the rate of inflation over the years, compared with better returns in the stock market, but doesn’t that simplify some of the great advantages of investing in real estate. I, for example, recently bought a revenue property in Regina for 100,000 dollars. I paid 20,000 dollars down, 20,000 I could have invested in an index fund. For that 20,000, the bank then essentially handed me another 80,000 to invest. The place rents for 800 a month, twice what my mortgage is right now. Let’s assume my 20,000 had been invested in the index fund and doubled every 7-9 years. In 15 to 18 years, I’d have 80,000 dollars. In the same amount of time, the house I bought, indexed to 2.5 percent inflation, would be worth something like 150,000, and I would likely own it outright by then. Rent would also be increasing at 2.5 percent a year, meaning my rent would be far exceed my mortgage costs, especially in later years. Even if I didn’t own it outright by then, I would be close, still putting me well ahead of my hypothetical index fund investment. I think the advantage of the right kind of real estate investment is that it allows you to essentially borrow a lot more money to invest (against the property you’ll one day own) and allows you to finance it with money you or someone else would spend anyway (rent). I personally think if you can find cash flowing real estate investments, it’s hands down the best investment out there. Now that all said, this doesn’t work so well when you buy at the height of a bubble, but thought I’d get your comment since you seem to eschew real estate investment in general.
April 29th, 2009 at 12:36 PM
Armoth, I believe you just proved Warren’s point again. He was asking what type of good job you could get with a degree there. It doesn’t sound like you agree there is much in terms of a business degree either but that the money is in the trades.
Warren’s point is really comes down to income vs housing. The majority of the people there do not make great incomes unless you own your own business. What Warren is trying to say is that a six figure income in Alberta is really easy to achieve and often people in the offices make more than the tradesmen …which is already really good. That is what somewhat justifies the high priced housing in Alberta.
Mark,
Sounds like you did really good on your investment. I’m sure there are many people out there like you. However it is definitely harder for people to get in now. Probably much harder to buy at today’s prices and rent cash flow positive. I’m sure you have, but most people don’t factor in that if you go one or two months without a tenant or have something happen, it can easily wipe out your entire year’s profit. But at the same time I think the goal with rentals is to make money on the cap ap rather than the rental income.
I have had the luxury of living in Regina, Van and Calgary. I used to think Regina was the best place to live for quality of life AND financial standpoint. I moved to Vancouver and that reinforced the financial standpoint. Quality of life got even better in Regina as you had low commuting time. Vancouver’s advantage is that you experienced several things, food, events that you would NEVER see in Regina. You also get very mild weather all year round (mind you lots of that is constant light rain)
Then we moved to Calgary and my views changed. I now conclude that from a financial point ONLY that calgary is the best place to be. The money is huge here. Sure not everyone can work in Oil and Gas but when you have hundreds of oil and gas companies that offer office jobs it sure helps. I still wanted to go back to Regina and take the lower pay to get the better lifestyle but then the boom hit Sask and now that may never happen. If I have to pay similiar money and cut my paycheck in half, it really doesn’t make much sense. What would make me leave is the violent crimes. we had 4 shootings in the last two weekends (week before). We are already on the 20th homocide this year. When i lived in Regina we’d average 12/year. Now I will try to say this in the most politically correct way. 11 of those 12 were usually house parties that got out of hand at an aboriginally party.
My conclusion, if I had tons more money I’d move to Vancouver, but chances are if i’m retiring I’d move back to Regina but unfortunately I’m in the same boat as several others. Financially, living in Calgary makes the most sense.
April 29th, 2009 at 12:36 PM
anyways i have a question for the people following the Saskatoon market as I am curious to know how it compares to Calgary and Regina. Are the newly built houses away from downtown costing more than the older core homes? What kind of premium do you pay for being close to the university? Is there an old run down area in Saskatoon similar to Washington Park in Regina where several of your houses are worth well below 50k?
April 29th, 2009 at 12:37 PM
Personally my views are this on the areas.
The newly built houses are fetching or attempting to fetch top dollar, the older homes in regular areas, say south nutana, are trying to sell for 300-400k sometimes with little upgrades since the houses were built in the 60′s (i think). I think proximity to the University fetches a bit but I think there is a balance with the ages of the homes being quite a bit older yet seem to sell for a good price too.
I mean in Saskatoon you’re pretty close to the uni anyways but walking distance I’d imagine there is a little bit of a cost hike to buy there. Washington park? Basically in my opinion Avenue A – Avenue Z..most areas north of 11th st west and south of say….22nd street are worst, north of 22nd it starts picking up with sporatic bad houses and good houses throughout. Those areas houses WERE worth 50k or lower until the increases. Now you’d be hardpressed to find ANY for under $185k
my 2 cents. wait for the others to flow in on this. i may be off my rocker.
April 29th, 2009 at 12:38 PM
Vinny,
okay i’m off my rocker for price where i stated ‘hardpressed to find ANY for under $185k.”
search MLS and Area 4. Area 4 is pretty bad if u ask me. it’s the areas of the city where people like to say its cleaning up pretty good with lots of young families moving in and such. i still don’t wanna see hookers, or have my stuff broken into or stolen. i’d say comparable to washington park.
April 29th, 2009 at 12:38 PM
hehe, thanks jesse.
I remember when i left Regina you could literally find 100+ homes under 50k. Mind you those are 450ft bungalows that were tilting but that’s besides the point. I had a friend in that neighborhood and his neighbors always threatened to beat him up to.
Sounds like Saskatoon IS very simliar to Regina’s market then. People are definitely paying a premium for newer housing in Regina. In Calgary you pay a very obvious premium for being close to the university and can actually buy newer houses in the burbs cheaper than you can buy them in Regina (and most likely Saskatoon). However downtown is very different. You can buy a fairly old tiny (750-800ft) bungalow close to the Stampede grounds and pay 600k.
April 29th, 2009 at 12:40 PM
for sure. yeah i know i remember those times up here too and i’m only 30 years old. I would personally live anywhere else in the city than that area. I would rent a trailer in a trailer park before I would live in the “alphabet soup”.
I was in calgary lately (in McKenzie town) and saw that some houses were for sale, some less than 4 years old, similiar cost to bungalow’s for sale in the city here that were built in the 60′s with no upgrades. out there with my girlfriend if it was a choice to pay the 380 k to live here or to live there, we saw it as no question as to where made more sense. (to us)
April 29th, 2009 at 12:40 PM
Jesse G. said:
“I would personally live anywhere else in the city than that area. I would rent a trailer in a trailer park before I would live in the “alphabet soup”.”
Sigh.
I used to get mad about this particular type of ignorance, but I suppose I should just be happy that because of people like you I can afford a sweet house in the “alphabet soup” that costs the same as a P.O.S. bungalow in any number of East side neighbourhoods.
For the record, I have lived in the alphabet soup for almost 25 years. I have never been stabbed, robbed, assaulted, immolated or murdered.
I of course live in constant fear of my n’er do well neighbours; on one side we have a young family of four, on the other we have a U of S prof.
So I, with 25+ years of experience living in alphabet soup, have a little bit of trouble figuring out what exactly irks you so much about my home, my neighbourhood, and my neighbours.
If it’s not the architecture, the neighbours, or the quality of life that draws your ire, what is it? Is it the brown people, as one of the other posters oh-so-subtley alluded to above?
April 29th, 2009 at 12:41 PM
lawtalkignguy,
i didn’t mean to be ignorant and i applogize if i’ve hit a nerve. I did grow up on the east side, but you are right there are a lot of crappy bungalow’s around the city too not just out there. For the record to it’s not the good people like you that I’d be concerned about, it’s the others. I went looking at a condo on Avenue X, and saw 4 cop cars at 4 separate places with lights a blaring on my way.
It’s not that it irks me by any means, it’s more a fear of what I’ve seen around in my short time. Maybe I’ve just seen things thru the wrong glasses, that’s entirely possible as well.
What I don’t want in any neibourhood is beer bottles being thrown at my house, vehicles being keyed, hookers strolling around, not being able to walk around the neibourhood at 10pm and feel comfortable etc. I’m not saying that’s your nieghbourhood but it’s just an area I wouldnt’ feel comfortable in personally. I’ve seen areas like these in Edmonton and calgary as well as regina and saskatoon. I guess it’s on perspective too, where one grew up and so on too. Maybe i grew up with too rosy colored glasses. I’m just not certain. The gut feeling for me though is I wouldn’t want to be in the alphabet soup area. Another area which kind of scares me is exhibition area by the sound walls.
April 29th, 2009 at 12:42 PM
Vinny,
The one difference, however, between Regina and Saskatoon markets is the price. The average house in Regina is still 50,000 less. With no more bidding wars, great bungalows in established neighbourhoods like Albert Park and Whitmore Park can be scooped up now for 250 – 275. The same houses, 1200 square feet, built in fifties, great shape, in the best old neighbourhoods, are quite a bit more in Saskatoon I think.
Regarding the ‘worst neighourhood in Canada’, the west half of Washington Park – west of Elphinstone – is definetely improving. Around the Pasqua Hospital in particular, there is more home ownership and families do seem to be moving in weekly. Solid deals to be had in there in the 100 – 130 range I think, for home buyers and investors. Even if Regina’s average drops, those improving streets could still go up in value. Five blocks over the same houses are worth 180+. Inventory is high in Regina – though not as high as Saskatoon – but doesn’t seem to be growing anymore. And sales are still decent.
April 29th, 2009 at 12:42 PM
lawtalkingguy,
1/3 of the city crime is between 15th and 25th street and from Idylwyld to Avenue W. This was printed in the Star Phoenix a couple of years ago.
the area does get a bad rap, whether it deserves it or not. The drug houses and unkept properties do stand out. This is an area of town I wouldn’t walk at night, but is not the only area of town a person could get mugged.
I do believe with the right people and with investment this area can and will be revitilized. The Farmer’s market, affordable housing projects among other investments will help this area. It is close to the river and there are some streets that are beautiful. But this change will not happen overnight, it will take years.
April 29th, 2009 at 12:43 PM
Good info Mark. You sound like you used to live in Regina. You know seem to know the streets quite well.
Sounds so ironic hearing 100-130 being solid deals but i guess times have changed. About 5 years ago I guy I played football with bought Two houses for 5k/piece. He knocked those two down and built a really nice house on it. He did some of the work himself and total cost came out to 75kish. On top of that the city was offering a 5 year tax free break for anyone who did this. We didn’t all agree it was a smart move back then but if he owned it up until this year he’s laughing now.
April 29th, 2009 at 12:43 PM
Still there Vinny, still there. We don’t have a decent real estate blog down here, so I have to read vicariously.
April 29th, 2009 at 12:43 PM
Mark,
I do not know much about Regina’s housing. It is one market I have not looked at. I am guessing the Alberta speculators did not prey on Regina like they did on Saskatoon. That would maybe explain the price difference. Because for fundamentals:
Everything is the basically same from taxes, regulations, even the wages are the same. The costs to build a home are about the same. But house prices are quite far apart. I could be wrong here, so anybody step in.
I see Regina’s average at 247k, last year at this time they were at 176k.
Saskatoon’s average is at 292k, last year at this time we were at 245k.
April 29th, 2009 at 12:45 PM
George said:
“1/3 of the city crime is between 15th and 25th street and from Idylwyld to Avenue W. This was printed in the Star Phoenix a couple of years ago”
Fine. But check out on a map how much of “alphabet soup” doesn’t fall within those areas. The whole area gets labelled, since it’s easier than finding out the facts.
George S. said:
“What I don’t want in any neibourhood is beer bottles being thrown at my house, vehicles being keyed, hookers strolling around, not being able to walk around the neibourhood at 10pm and feel comfortable etc.”
Nobody wants that. The problem becomes when people oversimplify and overgeneralize, as you did, by connecting those things to “the alphabets”. I live in the lettered avenues, and have never had a car keyed, and never seen a hooker within a mile of my house. My girlfriend walks our dog in our neighbourhood at night all the time, and neither of us gives it a second thought.
April 29th, 2009 at 12:49 PM
Can someone confirm that the taxes are the roughly the same in Regina and Saskatoon? I can tell you one thing for sure, Regina’s property taxes are ridiculously high compared to almost any other larger city in Canada (at least Western Canada). I wasn’t sure if Saskatoon was the same or not.
As for speculators, i have several friend’s friends how went into Regina buying entire condo complexes or at least several units. There intent was to not rent but to flat out flip. Haven’t heard any updates so I’m not sure how they are doing on those right now.
Are there lots of people in Regina getting stuck between houses? I have quite a few friends who are in the early stages of building so they haven’t tried to sell yet but I could see it being an issue if everyone is doing it.
April 29th, 2009 at 12:50 PM
law,
I guess I did oversimplify it… I was sure I typed in what Streets too.. what i mean and what i think of by alphabet soup is north of 11th st west and south of say….22nd street. (or 25th). I know people in the niebourhood of where Mount Royal is and they say it’s fine up there.
April 29th, 2009 at 12:52 PM
Vinny,
We definetely had some out of province investors driving around town last summer. Not sure how much of our inventory they bought. And building continues with a big new subdivision to the South West just getting started. Could be an issue if in-migration doesn’t pick up the slack. Jobs seem to be popping up all over the place here though so we’ll see.
April 29th, 2009 at 12:53 PM
Law guy, the west end is sketchy. Pure and simple. Sure, a block may be a bit removed from the rectangle of crime George mentioned, but Saskatoon’s crime is like double the rest of the country’s crime, so the remaining 2/3′s for the remainder of the population of it’s crime still puts it well above average for Canada.
April 29th, 2009 at 12:53 PM
George “Everything is the basically same from taxes, regulations, even the wages are the same”
Actually, wages are typically a couple thousand a year higher in Regina than Saskatoon.
April 29th, 2009 at 12:54 PM
Vinny “My conclusion, if I had tons more money I’d move to Vancouver, but chances are if i’m retiring I’d move back to Regina but unfortunately I’m in the same boat as several others. Financially, living in Calgary makes the most sense.”
Lots of nice parts of BC, Alberta for cheaper than Saskatoon. Quaint areas of PEI, Nova Scotia, New Brunswick are far cheaper than Saskatoon, or Regina or even Prince Albert.
April 29th, 2009 at 12:54 PM
Wow, a lot of posting today – some good opinions.
Mark:
Absolutely great post on the benefits of real estate investing. I do think that you gloss over some issues though.
1. Although you are renting it out for double the mortgage, there are many other costs that are your responsibility. Ridiculously high Saskatchewen property taxes, home insurance, and maintenance/upkeep come to mind first. I’m not saying that it isn’t positive cash flow, but RE isn’t as easy as it seems.
2. Leverage can be just as easily used for stocks as for real estate. Real estate has historically been a lower risk investment, so leveraging was unlikely to go as horribly wrong as it could with the stock market. However, we are not living in regular times, and I think many of my co-workers here in Calgary can tell you that leveraging for real estate investment can also go very, very bad.
But this is just nit-picking, you do make some very good points. The real benefits of investment properties are that they are a hedge against inflation(so while you keep increasing the rents, your mortgage payments stay the same), and they typically appreciate in value. The problem is that I think you would be very, very hard pressed to find a positive cash flow property these days (my house, for example, is renting for half of what the mortgage costs would be), or one that will continue to appreciate in value.
“Now that all said, this doesn’t work so well when you buy at the height of a bubble”
Well put.
April 29th, 2009 at 12:55 PM
Reason, not sure where you meant, but nice detached condos with views in Vernon BC (North Okanagan) for low $300,000′s, cheaper than similar in Saskatoon. A mini Kelowna, but bigger/more services (and lower crime) than PA or Moose Jaw. Minutes from the lake. And warm enough you can actually enjoy winter. If you’re young (more of a retirement paradise) is only about 15 minutes from Silver Star which is awesome skiing. Shorter, but maybe even better powder than Lake Louise or Sunshine.
April 29th, 2009 at 12:56 PM
Warren,
You’re right, I did gloss over those monthly costs, and real estate investment in this manner is best handled with the help of a property manager (another 60 a month), but that said, for the brave, there are still plenty of cash-flowing investment properties to be bought out there. Regina has plenty of three bedroom houses under 150,000, some on improving and possibly soon to be decent streets, and rents are similar to Saskatoon. If I wanted to invest in real estate in Saskatoon, I might consider looking at the edges of your rougher areas. First time home buyers may have no choice but to move into some of the better streets, meaning what to start is simply a cash flowing investment (or close to it) could suddenly outperform other areas, appreciation wise. Saskatoon and Regina house prices could drop overall on average, but our core areas might actually go up at the same time. This may be more likely in Regina though, as the last time I looked at MLS listings for Saskatoon, I think much of your revenue property was through the roof too.
Also, by leverage I meant the initial downpayment of 20,000 allows you to borrow 80,000. Essentially you have 100,000 to invest, while only risking 20,000. In a worst case scenario, the bank can only take the house back (your 20,000 lost) and your credit. But it’s pretty hard to borrow 80,000 otherwise, to invest in stocks say, without putting up some kind of collateral. Like your own house, or car. In which case, you’re on the hook for the whole 80,000. Maybe I’m confused about what you mean by leverage, but it just seems that real estate is unique in a way in that it allows you to borrow against collateral that isn’t really yours.
April 29th, 2009 at 12:56 PM
Granted not directly related to real estate, but indirectly so, in terms of the whole artificial boom concept…
What’s with all the media outlets making the Conference Board of Canada predictions to lead GDP growth for 2008 top stories again? After all but ignoring the year end 2007 data just a few months ago that actually had Saskatchewan trail all of western Canada in GDP growth for the second straight year?
Apparently we’re back to publishing hype predictions, but ignoring actual numbers.
http://www.canada.com/saskatoonstarphoenix/news/business/story.html
http://www.statcan.ca/Daily/English/080428/d080428a.htm
—
“Doug Elliott of SaskTrends Monitor, a monthly statistical newsletter, said the Statistics Canada numbers more accurately reflect the actual state of the provincial economy over some private-sector forecasts.
“I think the Conference Board (of Canada) and all the bank (economists) have been overstating the strength of Saskatchewan’s economy.
“We’re doing fairly well, but we’re not this powerhouse that everybody seems to think we are.”"
I’m sure sooner or later some one would have referenced this new PREDICTION anyway. Key is, last years was way over what actual results were. And here’s a prominent Saskatchewan Statistician and what he thinks of Conference Board predictions!
April 29th, 2009 at 12:58 PM
“reason” talking guy said:
“Law guy, the west end is sketchy. Pure and simple. Sure, a block may be a bit removed from the rectangle of crime George mentioned, but Saskatoon’s crime is like double the rest of the country’s crime, so the remaining 2/3′s for the remainder of the population of it’s crime still puts it well above average for Canada.”
You realize that your evidence doesn’t support your statement at all, right?
According to your argument, crime is well above average in ALL parts of saskatoon- “west end” and east side alike.
Do you have anything that would actually support your argument that the “west end” (I’m not even sure what that refers to, by the way) is “sketchy”? Or is it just more uninformed opinion, “pure and simple”?
April 29th, 2009 at 12:58 PM
Here is the perfect website to show where the crime is in Saskatoon. Breaks it down quite nice. If you search on website you will find other cities.
http://www.statcan.ca/english/research/85-561-MIE/2008012/maps/map12-en.htm
April 29th, 2009 at 12:59 PM
George:
Thanks for the link. Your posts on this topic have been well-supported and even-handed, in my opinion.
April 29th, 2009 at 12:59 PM
lawtalkingguy
thanks. Even though I don’t leave on the west side, I care for this part of the city very much. This city is very beautiful, has great people, when something happens, volunteers break down the doors to help. Revitalization is happening in places that surely need it.
I think the province is doing a great thing with this excess money by paying down debt. I would love to see some of excess money being pumped into programs that help people to kick habits like drugs and gangs. But money is not the only thing. These kids that destroy property should learn the responsibility and the appreciation of hard work. But sadly this where our justice system fails. Give these people who have no hope, something to live for other than destruction. In good economic times nobody should be left behind. This would be the proper revitalization we need, instead of pushing these people aside.
April 29th, 2009 at 1:00 PM
According to stats can, it looks like Greystone Heights and College Park have the worst crime % wise in residential East side. Surprising, I thought it would be Exhibition or Nutana
April 29th, 2009 at 1:01 PM
I am not conversant with the local vernacular, so if offend it is unintentional. I am unclear if discussion of any link between aboriginals and the crime rate is openly discussed in Saskatoon?
Are high crime rates located in neighborhoods that are “urban reserves”? I am curious as to whether real estate agents inform potential buyers they are purchasing a house on Native Indian land
April 29th, 2009 at 1:03 PM
Sam,
There is no doubt that the IP are a troublesome group, and the neighbourhoods that have a higher crime rate also have a higher native population. Other than that I do not know much about the crime stats.
April 29th, 2009 at 1:03 PM
“There is no doubt that the IP are a troublesome group, and the neighbourhoods that have a higher crime rate also have a higher native population”
This seems to be rather racially insensitive, George. I’m not sure how it was intended, but it sure seems that way….
April 29th, 2009 at 1:05 PM
Yikes, that came wrong, I’m sorry. The last thing I want to do is to be racially insensitive to any group. I did not mean to say because it has more natives that is why there is a higher crime rate. But it did come out that way. I’m sorry. Sometimes I should proofread my stuff.
I was trying to answer Sam’s question and then I had to run out and so again, I’m sorry.
April 29th, 2009 at 1:05 PM
2 viewpoints from same economist at Merrill on Canada house prices
http://www.reportonbusiness.com/servlet/story/RTGAM.20080807.wmerrill0807/BNStory/Business/home
http://www.financialpost.com/story.html?id=707590
April 29th, 2009 at 1:05 PM
the comment is not racially insensitive. it’s just the truth. everyone from saskatoon knows the worst area of the city and what its all about. drive down 20th and surrounding area.
as for the east side i was thinking sutherland. seems to be getting worse. i lived in exhibition and i found it to be a pretty quiet neighborhood.
April 29th, 2009 at 1:06 PM
sometimes facts are racially insensitive, but it doesnt make it less true. not every native is in a gang or working the street, but a disproportionate number are compared to other races. their leaders are trying to solve a lot of social ills that have been going on for generations. poverty and hopelessness is an underlying cause and no one wants to live like that. the problems in certain west end neighborhoods are not going to go away just because someone thinks they can price everyone out who doesnt have money. I also live in the alphabet soup as you call it and I like the area. wouldnt walk around at night though. I am not that stupid.
April 29th, 2009 at 1:06 PM
Good articles today on the Financial Post
http://www.financialpost.com/reports/property/story.html?id=707590
http://www.financialpost.com/story.html?id=707150
http://www.financialpost.com/story.html?id=693396
Highlights: construction permits down in June (SK, QC exceptions); all indications are the Canadian housing market is in a sustained downturn, and markets in Regina, Saskatoon, Vancouver, Victoria, Calgary, Edmonton, Sudbury and Montreal are all more than 10% overvalued; calls for 0% price growth in the next year.
April 29th, 2009 at 1:07 PM
Booming Economy in Sask?
http://cnews.canoe.ca/CNEWS/Canada/2008/08/08/6385201-cp.html
“Quebec, Ontario, Saskatchewan and Prince Edward Island all saw job losses.”
April 29th, 2009 at 1:09 PM
Thanks George,
I understand the issues, but I find generalizing to or from a group is always dicy, paticularly on a public RE blog. People might construe it in a way it wasn’t intended, but it obviously wasn’t intended.
captcha= morality 11
lol
April 29th, 2009 at 1:09 PM
Wow, 50% overvalued.
50% of the current prices?
Is that what it means?
Like, A $500,000 house should be $250,000?
I know its all averages and only one economist or whatever.
But his last name is Wolf. That’s pretty cool. Gotta count for something.
April 29th, 2009 at 1:10 PM
Sheep’s Clothing
“Mr. Wolf calculates fair value using variables such as current prices, affordability and long-term average valuations”
It is easy to see how he came up with a 50% overvalue of Saskatoon real estate if you look at historic trends and affordability.
If one where to look at RBC chart of affordability and if we had the same affordability % this year as in 05, yes we are 50% overvalued according to Mr. Wolfs calculation.
Even though I see a major correction coming here, there are more variables to look at other than the few they used.
April 29th, 2009 at 1:10 PM
http://www.greaterfool.ca/
“As Merrill Lynch Canada economist David Wolf correctly points out, the average house here is now equal to four times the average household income. During the last boom market (1989) which ended in bust, that ratio topped out at just over three times income. In the United States, where there is a real estate depression, the ratio at the peak was less than it is here right now.”
History shows were are set for a fall and the sad thing is that our affordability is worse now than the States had at their peak.
April 29th, 2009 at 1:10 PM
Jesse exhibition area is a beautiful area to live in and all the areas around it too. There have been lots of places bought here for over 200,000 just for the lots then smashed down to build new houses come check it out for yourself drive around you will see.
There is no crime here at all never had my house or car broken into, neighbors are either elderly or young single profesionals in the condos. Most of the seedy area were the apartments in the exhibition area have been converted to condos lots of them with river view. And for the crime its the industrial area next to the old casino that gets hit lots for breakins not the residential houses. And one more thing if they ever moved the exhibition grounds somewhere else and put up new houses there the whole place would be prime realstate with the willows to the south saskatchewan cres to the north and queen elizebeth to th east and 2 min to drive to get downtown.
April 29th, 2009 at 1:11 PM
50% overvalued would be $500,000/1.5 = $333,333.
$333,333 + 50% = $500,000
I assume this would be how it is calculated
April 29th, 2009 at 1:12 PM
Nooo…
I’m not an accountant, but I know that 50% of 500,000 anything (even dollars), is 250,000.
500,000 x .50 = 250,000
I know percentages work differently on the way up than on the way down, but c’mon.
Btw, this was in the “comments” section for the article that George posted from the G&M:
“Panty in a knot from vancouver, Canada writes: HELP ME. HELP ME.
Last fall the bank loaned me $850,000 for my $900,000 1200 sq.ft. condo even though I work as a bartender. Another bank even gave me a home equity line thinking that the price of my condo would go up and then I went out and bought a BMW X5.
Now tips are starting to dry up at the bar and I can’t pay my mortgage payment. The bank promised I could always refinance but neighbour just sold the same size condo for $800,000 and the bank won’t give me any more money.
Sound Absurd? Think Again. Its everywhere here.
Posted 08/08/08 at 9:40 AM EDT | Alert an Editor | Link to Comment”
You just can’t make this stuff up…
April 29th, 2009 at 1:12 PM
Actually Crikey the wording would suggest that Accounting guys calculation is correct. 50% overvalued is $333,333 x 1.5 = $500,000
April 29th, 2009 at 1:13 PM
Wesco,
I read the article and see we are in the top 4 for lowest unemployment rates. I just cant wrap my head around it but how is that bad?
April 29th, 2009 at 1:13 PM
The emphasis should be on “up to 50%”, meaning it’s going to range and vary considerably. For example, a lot of these cheaper condo “conversions” that were valued at between $60k-$75k (prior to the boom in 2006) and were selling for upwards of $150k-$175k (after renovations) probably saw an increase of between 150-250%. So those would have the potential to drop the most, and I would estimate 25%, 33% or even 50% (how much is anyone’s guess as at some point replacement cost is going to factor into the equation).
On the other hand, some of the more expensive properties (prior to the boom) that probably only saw a more conservative increase of between 33-50% will probably only see a 10-15% drop in prices.
Garth Turner recently posted a new article to his website, and this particular portion is potentially very, very scary…
http://www.greaterfool.ca/
“Those who bought within the last two years will certainly soon realize they paid too much. Those young buyers who got into homes with nothing down will owe more than they own. The hardest hit will be those who must sell, and find that it takes months – perhaps years – to find a buyer, with constant price reductions necessary to do so. People who decide to give up and walk away will find Canada is not America. We not have ‘short selling’ or ‘jingle mail’ here. You’re liable for every dollar of your mortgage, plus costs, even if the debt far exceeds the value of the house you are surrendering.”
April 29th, 2009 at 1:14 PM
Armoth,
I’m trying to point out that our economy is not “Booming” and actually month over month data shows that like P.E.I, Quebec and Ontario we had an increase in the unemployment rate. It may be ticky tacky, however if our economy is “booming” so much why would we have an increase in the unemployment rate? (and a 10% increase is not insignificant)
April 29th, 2009 at 1:15 PM
Wesco and accounting guy,
Yep, the wording does make a difference, you’re right. “overvalued by 50%” and “going to fall 50%” are not the same thing, as far as my caffeine-deprived brain can muster. Whichever way one slices it, if it pans out, is not good for the average Joe.
April 29th, 2009 at 1:15 PM
Crikey,
The number is closer to 333,333 than 250,000 for a 500,000 house if overvalued by 50%
The houses in Stonebridge going for 500,000 right now, if builders sold for 250,000 they would lose money, at 333,333 they wouldn’t as much if the land was priced correctly.
Prices have gotten outta hand. Materials for a 1200 bungalow, no labor, no basement, no land, will run you 60k. Factor in it takes about 8000 man hours to build one house. Lots, the big pie ones should be at most 70k. These houses shouldn’t cost anymore than 375k, but they are listed for 525 upto 600k. A few are making tonnes of money, the buyers are getting hosed.
A buddy who is in the business of building homes told me it is not getting cheaper to build homes. I pointed out the fact that there are many homes in the states selling for less than the cost to build them and builders are now going under. I pointed out that fact of growing inventories and price drops in Alberta, it will come here. His reply was that they have made enough money the last few years to sustain a big correction here. and they don’t build on spec. And if it lasted too long, he would just pull the plug, but he does not see a big correction here. I have told him to post here, but he is too busy pounding nails.
April 29th, 2009 at 1:16 PM
Better strap in. We are not different
http://video.google.com/videoplay?docid=-2757699799528285056
April 29th, 2009 at 1:17 PM
“People who decide to give up and walk away will find Canada is not America. We not have ‘short selling’ or ‘jingle mail’ here. You’re liable for every dollar of your mortgage, plus costs, even if the debt far exceeds the value of the house you are surrendering.”
For what it’s worth, Turner is wr-wr-wrong on this point (as it applies to Saskatchewan).
The Saskatchewan Limitation of Civil Rights Act (who names these things?) means that you are NOT liable for every dollar of your mortgage beyond the actual security of your house, so long as it’s a primary residence and the owner is a natural person, not a corporation.
Small consolation perhaps, but something to keep in mind when evaluating Garth Turner’s credibility.
April 29th, 2009 at 1:18 PM
lawtalkingguy
It’s been a long time since I took contract law classes.
You are correct as long as the money was used to purchase the property.
“The Limitation of Civil Rights Act limits a creditor’s right to enforce an agreement for the sale of land or a mortgage.
If a court has ordered cancellation of an agreement for sale or sale of the land, or foreclosure of the mortgage, the creditor is entitled only to the amount received from the sale or foreclosure but not to any money in addition if those funds are insufficient. The court order operates as full satisfaction of the debt.”
But if I remember correctly, if you use your property as collateral for a new loan, the money is not used to purchase the property, therefore this protection ceases.
That is what I earlier mentioned to Armoth. Garth Turner has always recommend borrowing against your property to invest in mutual funds or stocks.
I couldn’t find anything on the internet to back this up. I could be wrong.
April 29th, 2009 at 1:18 PM
lawtalkingguy/accounting guy,
So it sounds like obtaining a mortgage for a covered = good but obtaining a home equity line of credit for something else = possibly not covered. In any event, that makes the prospect of a 50% drop in pricing even more realistic — since people can just default on their mortgages if they feel they’ve lost too much value. Jingle all the way, indeed…
After all, for $0 down what risk is there? Bank forecloses and dumps it back on the market; whatever it gets it gets and writes off the rest. This does not sound all that different from the current situation in the US (banks cannot pursue people to recovery the loss on any mortgages). Sure, credit might take a hit, but for a lot of people that has to look a lot better than the prospect of *losing* $100k+…
April 29th, 2009 at 1:20 PM
George,
Where does this $500,000-$600,000 1,200 square foot bungalow come from? There is no such thing in Stonebridge. Those are available from $380-$420 and some of those would probably gladly sell at $20K off of list.
By the way, I love how “economists” have no cred whatsoever until one of them says something like this guy said.
What amazes me is how incredibly all over the map these people are. Some economist from the Conference Board was just on the radio yesterday Talking about our province. He says, “house prices are rapidly rising in your area.”
April 29th, 2009 at 1:20 PM
Accounting guy:
Good point.
The relevant statute:
Mortgages and Agreements for Sale and Leases of Land
s 2. Action on personal covenant prohibited in certain cases
2(1)
Where land is hereafter sold under an agreement for sale in writing, or mortgaged whether by legal or equitable mortgage for the purpose of securing the purchase price or part of the purchase price of the land affected, or where a mortgage is hereafter given as collateral security for the purchase price or part of the purchase price of land, the vendor’s or mortgagee’s right to recover the unpaid balance due shall be restricted to the land sold or mortgaged and to cancellation of the agreement for sale or foreclosure of the mortgage or sale of the property, and no action shall lie on the covenant for payment contained in the agreement for sale or mortgage.
2(1.1)
The benefit of subsection (1) extends to and includes a mortgage that secures, or is given as collateral security for, the purchase price or part of the purchase price of the land, whether or not the mortgagee was the vendor of that land.
2(2)
The benefit of subsections (1) and (1.1) extends to and includes:
(a) the personal covenant of the purchaser contained in any assignment by the vendor of such an agreement for sale;
(b) the personal covenant of the assignee contained in any assignment by the purchaser of such an agreement for sale;
(c) the personal covenant of the mortgagor contained in an agreement extending any such mortgage;
(d) the personal covenant of a purchaser of lands subject to any such mortgage, to assume and pay the mortgage;
and no action lies on any such personal covenant.
1983-84, c. 44, s. 2
April 29th, 2009 at 1:21 PM
lawtalkingguy and accounting guy,
Correct me if im wrong but if the equity i used when I refinanced my house was put into an RRSP the money in my RRSP would be protected from bankruptcy. Regarding also the new tax free savings account coming out soon do you know if the same rules apply to it as well if im correct? Thank you ahead of time for your answer.
April 29th, 2009 at 1:21 PM
Armoth:
All I know is what google tells me, but I’d say they won’t be protected, no:
“TFSAs will not be protected from creditors in the event of bankruptcy and TFSA assets can be pledged as security for loans;”
http://www.hrreporter.com/loginarea/members/viewing.asp?ArticleNo=5930
April 29th, 2009 at 1:21 PM
This is an old article:
“Consumers still like to buy bigger and bigger space,” says Gopal Ahluwahlia, research director of the NAHB, “even though families are smaller.” Ahluwahlia says family size shrunk 20 percent but new houses have expanded in size by more than 50 percent since 1970. [1660sqft in 1973 and 2434sqft in 2005]
http://money.cnn.com/2006/07/24/real_estate/home_stretching/index.htm
Does anyone have these type of stats for Saskatchewan or Canada? I feel that our average home size would be much smaller.
April 29th, 2009 at 1:22 PM
Dumb Conference Board, completely wrong about 2007 when the GDP grew less than Manitoba/BC/Alberta and Stats Can called them on it and now getting press again with overly optimistic forecasts.
Posted again, because Norm brought up Conference Board
http://www.canada.com/saskatoonstarphoenix/news/business/story.html
http://www.statcan.ca/Daily/English/080428/d080428a.htm
***************************************************
“Doug Elliott of SaskTrends Monitor, a monthly statistical newsletter, said the Statistics Canada numbers more accurately reflect the actual state of the provincial economy over some private-sector forecasts.
“I think the Conference Board (of Canada) and all the bank (economists) have been overstating the strength of Saskatchewan’s economy.
“We’re doing fairly well, but we’re not this powerhouse that everybody seems to think we are.”"
*****************************************************
Anyone see this before?
http://www.canada.com/saskatoonstarphoenix/story.html?id=66c61861-d1ad-4abb-9fda-0ac8238f4107&k=19194
Median family incomes in 2005
$65,839 Saskatoon metro area
$82,590 RM of Corman Park
$58,563 Saskatchewan
$71,174 Regina metro area
$51,613 North Battleford
$53,083 Prince Albert
Burn to Saskatoon
*************************************************
Law the West end of Saskatoon is “sketchy” even if you can’t understand that even the remaining 2/3′rds of our crime from elsewhere is still more per capita than other cities, or that 1/3 of crime from a small area is bad. That other poster could have put some stats there, but we all know Saskatoon has a super high crime rate, and Norm gets grumpy when people just keep re-posting crime data.
April 29th, 2009 at 1:22 PM
Doug,
“but we all know Saskatoon has a super high crime rate”
Exactly!!
Lol. It’s not that I don’t want anyone to know. It’s that I think that anyone with a half ounce of brain matter understands this and has heard it a billion times. In a nutshell, it’s not very interesting anymore. It’s been talked to death.
April 29th, 2009 at 1:23 PM
Here’s something fun.
My wife just sent me this. It’s from June 19, so a little bit dated but according to MoneySense Magazine, They rate Regina and Saskatoon as one of the seven best places to buy investment real estate in Canada based on their rating criteria which measures “value, momentum and economy.”
http://tinyurl.com/moneysense
Chew that one up kids!
April 29th, 2009 at 1:23 PM
Yes, but what is their definition of “investment real estate”?
Do you think this being the best place to be a real estate investor will help the average person buy the average house?
April 29th, 2009 at 1:23 PM
Agreed Norm, but law guy apparently needs numbers repeatedly on how high crime is in Saskatoon.
Law, you should rent/buy in the alphabet “good” areas if you think they’re so safe, you’ll save a lot.
April 29th, 2009 at 1:24 PM
To anyone who cares,
This is the new law i was referring too and why I dont really care what my house is worth. If somehow I did screw myself over doing 230k as a refinance to put money into the stock market and I lost everything my monies would be protected as long as they were registered and it was past 12 months. Tell me if im wrong cause if i am my genius plan if Canada goes to heck will not work and I’ll be penniless =D. I notice there is less for sale signs in my neighbourhood now I wonder if sales are up =p
April 29th, 2009 at 1:24 PM
1. Story on Global TV now that Saskatoon housing is over priced (well in a couple minutes, watch it if you can)
2. Norm! Your study is based on 2+ year old data. Like anything that says Saskatoon is a good buy. And a prediction. Remember how over rated those were for 2007?
“We looked at how fast each community grew between 2001 and 2006 (the most recent year for which figures are available). We also factored in unemployment rates (based on 2007 data) and discretionary income levels, as well as a forecast from Canada Mortgage and Housing for unemployment in each city in 2008.”
April 29th, 2009 at 1:24 PM
Ouch! CTV says Merryl Lynch says Saskatoon is over priced by 50% !!
Burn, the rest of western Canada is only 10% over valued
April 29th, 2009 at 1:25 PM
http://www.canada.com/reginaleaderpost/news/story.html?id=beebc27c-6604-49a2-90a9-be4d04f6553d
“Published: Friday, August 08, 2008
Saskatoon’s houses are the most overvalued in the country, as much as 50 per cent more expensive than they should be, says a report by Merrill Lynch.
Regina is the second-most overvalued, at about 48 per cent, says the firm’s economic commentary. It evaluated 21 cities from Halifax to Victoria.
The economic analysis, entitled, Peaked: Canada’s housing market in depth, says Canada’s housing market is heading for a sustained downturn.”
Norm, you know this warrants a new “Recent Post” controversial or not!
April 29th, 2009 at 1:25 PM
“”We’re most concerned about Saskatchewan, where the doubling of house prices in both Regina and Saskatoon over the past two years has led us to estimate that these markets are now close to 50 per cent overvalued – a level that our research denotes as the beginning of the ‘extreme’ zone where bust risks rise materially,” said the report.”
Kind of happy I didn’t buy an investment condo in the last few months!
April 29th, 2009 at 1:25 PM
Hi guys, its me again.
Who knows where this ends.
I borrowed $225k on a $266k home. I work for a government company and make about $70k a year and it isn’t like the $1200 a month will “kill me” or anything but the thought of losing value sure drives me crazy, even though plenty of people I know continue to say “who cares provided you can pay for it”.
I guess one thing to do is rent it out for a year or two and stay at home, saving money to toss onto the Principle so I can get it down as fast as possible.
Or rent out my basement for $500-800 and use that to help myself. If things get “bad”, Rental Demand will be strong for a few years before things settle down and people start buying homes again.
If I live frugally for a couple years, I could probably save up an additional $25-35k to toss down onto the principle. In 5 years I could get the mortgage down to $150k.
It may mean I am upside down for a bit and did “lose” a lot of money, but as long as I have my job and health for the long run, does it really matter?
Hell, I know tonnes of people at work who divorced in their 30′s and 40′s and lost literally hundreds of thousands and they recovered.
Any comments?
April 29th, 2009 at 1:26 PM
I think it will be really interesting to see what happens to sales over the next few weeks? You’d think everyone who can would hold off buying and re-evaluate their decision for at least a few weeks.
The one ray of sunshine in a 50% over-valued market is that it should help out renters. A lot of incentive to rent out the basement, or even an extra room, to help off set lost value.
This will help drive rental costs down, and ease the rental crunch, as all these over valued houses are either turned to rental, instead of taking a loss on sales, or owners rent out rooms/basements to try to pay down the mortgage a bit faster – in case they ever have to move, and try to get some value back. Really, renting out a room is probably a good idea any way, as rents continue to climb, despite falling house prices.
And
Oil is down to $115 a barrel.
April 29th, 2009 at 1:27 PM
Mithan, I know you’ve discussed your situation here before, but refresh my memory – do you think you overpaid? I know several people who paid more than that and make less than you and they seem to be fine with it. And I don’t say that to demean your perspective on this. But it’s a roof over their heads and their rent won’t be going up. Why would you want to move home and live off your parent(s)when you make 70 grand a year? Maybe you’re anxious about it because (as it’s been said before) you’re paying too much attention to the naysayers on here?
April 29th, 2009 at 1:28 PM
Crikey,
“Yes, but what is their definition of “investment real estate”?”
Well, they’re definitely talking about residential real estate, but that’s not the point. The point is that none of these eastern based reporters really know what they’re talking about when it comes to our area. We’re either a resource to be exploited or a dust bowl in the prairies that couldn’t possibly being doing better than they are.
Doug,
“Norm, you know this warrants a new “Recent Post” controversial or not!”
I’ve published all kinds of “controversial stuff. ” FYI, the Royal Bank and Scotiabank both pegged this market as overvalued a year ago and had you been here, you’d have known that. Any case, you’re right but I’m afraid it won’t come this evening.
Mithan,
Sucker for punishment, hey?
Julie’s right and you’re right to. It just doesn’t matter that much. It comes, and it goes, and then it comes back again. Relax man. Life is too damned short as it is. You’re in good shape and nobody really knows the future including Merrill Lynch.
April 29th, 2009 at 1:28 PM
Post by a realtor on “Greater Fool” website:
“But after a while I start sounding like a broken record pointing out the knob&tube wiring, the cast iron pipes, the moldy drywall, the rotting framing, etc. When people have the fever, they will buy anything. Sellers quickly figure out that they don’t have to renovate or even maintain their homes to get top dollar in a boom. Some houses I’ve been in I’d be embarrassed to list.
In addition to lower prices, perhaps the upside of a bursting bubble will be homeowners compelled to put some effort into their homes. And I don’t mean granite countertops, heated-tile floors or stainless steel appliances. I mean basic stuff, like insulation (you’d be surprised how many older houses here have little or none), upgraded wiring and panels, modern plumbing, moisture abatement, and (dare I say it in a place that bills itself as the City of Gardens) some decent landscaping.
I give my sellers a laundry list of things to do before I’ll list their house. No effort on their part = go list with some other shmoe. I challenge all realtors to take the same approach with their vendors. Sellers, buyers and realtors would all be better off for it.”
April 29th, 2009 at 1:28 PM
I know I’m on my self imposed break, but when I saw this on the news I wanted to make sure it made the website. Let the bulls explain it away!
I guess I’ve missed:
a 10% increase in Saskatchewan unemployment
house prices down, if only weekly
an overvalued housing story actually making the news!
Saskatoon being #1 in violent crime, again, for 2007
another Conference Board prediction making the news,
while ignoring the less than forecast 2007…
Anyway, it appears that it’s been posted, back to my exile.
And Mithan, rent out some space, will make you feel better to pay off the mortgage a bit quicker and helps out some one who can’t find affordable rental.
April 29th, 2009 at 1:29 PM
Zippy,
Thanks, and amen.
I read something out of the states yesterday that said, (paraphrase) “the market will start to improve when agents stop listing homes at prices which they know have no chance of attracting a buyer.”
Many of us have been caught in the change over from “anything will sell at darned near any price” to “everything matters.” I’m going this guy’s way as the future unfolds. I will give my sellers the straight goods and if they insist on living in la la land I will find something else to do. I can sell an ugly house but it must be priced appropriately.
Thanks for sharing this.
April 29th, 2009 at 1:30 PM
Julie:
This is my situation:
I am a single guy who payed $260k for a home in Regina. I put 18% down and ended up borrowing about $220k. I make about $65k a year.
Basically, I average $1500 take home every 2 weeks and my mortgage is $600 every two weeks, and $200 a month for property taxes. So when all is said and done, I pay $1400 a month for the home. Expenses are extra. I have zero credit card debt, car debt, or other loans. I get an additional $300 a month for some Internet Sites I manage, and that could potentially go up to $1000-$1500 here if I get a job on a popular Blog Portal but I didn’t put that money into my “$1500 average” take home pay. I do this in my spare time so its basically extra cash.
The home is located in the South West part of Regina and all the homes around it were selling for about $30-50k more than I payed, so yes, I did get a bit of a “deal”. In 2007, homes in that area were selling for roughly the same price. In fact, my cousin sold a smaller home a block away for the exact same price in June 2007. So I guess you could say I payed 2007 prices for this home.
Did I need the home? Not really. I was content at home, though lets face it, being 32 I need to move out sometime. Yes, I am one of those people who felt that if I didn’t get in now, I never would.
In retrospect, it is easy for us to look back and say “we should have known better” but 4 and 5 months ago, EVERYTHING in the news from people who are supposed to know, was so damn bullish.. what were you supposed to think?
Now we have everybody telling us things are going down the crapper.
History serves as a guide, but history never repeates itself exactly each time. So I made a calculated risk. The only bad thing is that I originally wanted to not pay anymore than $1200 a month in total with property tax and I ended up at $1400. Is $200 a huge amount? No, but still. Next year our property tax re-assesment could push me up an extra $500 or so though… but who knows, Fiaco would be stupid if he reassed things higher and everything corrects.
When I am finsihed, I will have invested about $17k into renovating the home, doing all the work myself. While I am not quite done (will be soon), what is done looks fantastic and with the exception of cabinets and windows (Which I refinished anyways), everything is basically brand new, inside and outside. Of course, my savings account will be down to about $4k in the bank.
My basement is not finished and I had originally considered spending $6k or so to finish it and then rent the thing out. I figure that best case, I should easily get $800 a month for the 1100sq ft 2 bedroom basement suit. Worst case, I could probably still easily get $600 a month (utilities included).
My goal was to live frugally for 5 years and take all the rental money and dump it on the Principle, with the idea being that my mortgage would be down around the $160k range in 5 years, thus if interest rates were around 8%, it wouldn’t be an issue for me at all. Of course, if I was to find a nice girl and get married, she would help pay some of the expenses as well.
Basically at the end of the day, I can afford the home and for me (and a possible family some day) the house can easily accomodate everybody. I am happy with the house, just not happy that people are telling me I am going to owe tonnes more than its worth.
However, I am so anxious about everything now that I can not think straight anymore and it has severely impacted me. I am on anti-anxiety drugs for it too now. Yay.
Of course, I have always been a very anxious person who jumps to worst case scenarios (they never happen) as well.
Looking at things rationally, at the end of the day does it really matter if I am upside down in the mortgage provided I can pay for the damn house?
I know nobody wants to be a slave to their home, but the fact is, we are all slaves to something. Most people who are not “slaves” to their home instead are slaves to an expensive car payment or expensive apartment or whatever. Very few people in our society do NOT push the boundaries of what they can afford. Thats how things have been done for almost ever.
I visited a Counceler for help a couple weeks ago. She told me that in the 80′s she was working 3 jobs to make ends meet and she was still happy and that a large part of the problem with Generation X and Y is that we are so used to working regular 35-40 hour weeks, eating out, living on credit, etc, etc, that we wouldn’t know the word “frugal” if it kicked us in the ass.
She probably has a point.
So as for Merril Lynch and stuff… I agree, nobody knows the future and he sounds illogical when he says 50% over valuation. I always thought things were worth what people were willing to pay for them.
Lets face it, 3 or 4 months ago, everybody was saying “prices are going to go up more!”, were they right? No. Now we got the Merril guy saying things are over valued by 50%. Of course in Toronto where average price is about $150k more than Regina, things are “ok”.
huh? Does he own a few buildings in Toronto?
Honestly, it doesn’t make any sense to me anymore.
I was thinking the last week or two to rent the entire house out for about $1200 and do that for about 2 years and stay at home. The idea being that I could save up as much as I can over the next 2 years ($25k-40k) and then move in in two years from, fix the basement and then dump that money on the principle. Then rent the basement for 3 more years and put even more money on the principle.
Of course now I am worried that Regina will collapse, nobody will rent, everybody will move out, etc, etc, etc. Sigh. It never ends with my brain.
I even worry we will all be going to soup kitches in 2 years or plain starving to death and how rational is that happening, in Canada?
Sigh
April 29th, 2009 at 1:30 PM
Guys, how do you calculate over valuation of 50%?
Do you divide by “1.5″ or multiply by “.5″?
I am a bit confused…
Average home prices in Regina are about $240k right now. If you divide by 1.5, it becomes $160k. If you multiply by .5, you get $120k obviously. Thats a pretty big difference…
I really cant see prices returning to $120k “average”, but I could certainly see a average of $160k to $180k. Still big difference.
Can anybody explain?
Thanks.
April 29th, 2009 at 1:31 PM
Norm,
You have nailed a very important point.
A house (particularly in a deflating type of market) that prices itself below the competition in an area is going to sell. Why? Because there are a select number of buyers on the sidelines – buyers with significant down payments and verifiable income who really want to get into a house or a particular area. This is why some listings get multiple bids while some get none at all. Although there may be significantly fewer buyers, they’re going to buy the best-priced, best maintained houses.
And that brings us back to fundamentals. There will be much more competition to sell now, and likely fewer buyers, however. All this fancy financing stuff is going to go they way of the do-do, as it should. IMO (barring some depression-type crash that we’re helpless to control anyway), prices will fall until they are in-line with fundamentals (price/income and price/rent). At that point there will hopefully be enough buyers that can (and are willing to) secure a reasonable loan from the bank, and this will likely stabilize prices.
April 29th, 2009 at 1:31 PM
Mithan,
If you really want to calculate 50% overvalued, listen to accounting guy, and divide by 1.5. I mistook the wording. It’s NOT the same as dropping by 50%.
I guess the main point is, right now might be the time to focus on this. You seem to be financially sound, and you say you can afford the monthly payment regardless of what happens. Try to focus on that.
April 29th, 2009 at 1:32 PM
Doug,
“Norm! Your study is based on 2+ year old data. Like anything that says Saskatoon is a good buy.”
Doug, it’s not my study and I was intending to point at something that I saw as ridiculous. Only a complete moron would point to Saskatoon as one of the best places to invest in real estate. Maybe the “buy low, sell high” principle no longer applies? My point really is that non of the supposedly well-informed really know what they’re talking about and I’ll include Merrill Lynch, “Investment-banker” in that crowd.
Mithan,
Yes, divide by 1.5 to assess the damage. Hey, only 48 points in Regina, so don’t get carried away.
Crikey,
“And that brings us back to fundamentals.”
Yay!
April 29th, 2009 at 1:32 PM
Mithan, if you want to gripe to some one, complain to CTV/Global. Seriously. They published all those headlines that said “buy”.
Norm, I have heard of the RBC and Scotia Bank studies that said Saskatoon housing was over valued. Both made thebench.ca (how I found your sight). Mithan, these studies were glossed over by the media, as they sought more hype and boom headlines. Kind of like how hardly any one heard the GDP in 2007 grew barely half of expected, and “worst west of Ontario”, after shrinking in 2006 – actually making Saskatchewan’s economy Canada’s worst, from 2006 to 2007. Yet that doesn’t make half the news networks (did make Star Phoenix) even though the repeat Conference Board 2008 predictions are top stories, even when CTV probably won’t cover the actual data in 9 or 10 months that it’s trying to predict.
Point is, well balanced information was out there. Norm’s blog does show up pretty quick in a search of Saskatchewan Real Estate, or Saskatoon (maybe not Regina) on Google. But the main stream media ignored everything negative, or even realistic. Gripe to them. There was never any good reason for houses in Regina or Saskatoon to double. It’s just common sense.
Did YOU know that Regina lost 1,000 people between 1996 and 2006? Confirmed by Statistics Canada/Census data?
The fundamentals were never there. We’re still at potential. Your situation sucks if it goes down, other than getting a good deal, but consider it a lesson learned and make money off renting. A silver lining, and helps some one else out.
And gripe to CTV/Global news for biased coverage. And stop relying on them or local boosters or your sleezy little mayor for information, Stats Can population data would have instantly contradicted all of these sources. Remember, back when I lived in Regina, Fiacco promised 50,000 new residents. He’s at -1,000 now.
Maybe write one of thoese viewer emails that some times makes the news to let others know about stuff you find out wherever and isn’t covered on TV.
April 29th, 2009 at 1:33 PM
Doug,
With due respect, how can you really chastise the media for being “unbalanced” if you’re not willing to show any balance yourself. You are 100% negative, 100% of the time and you don’t seem to see anything good in this province. I don’t see a single “good news” story on your site. There’s a lot going on here that we can be thankful for. I can agree that housing has some real issues but we should all take greater care to separate housing news from other economic news.
April 29th, 2009 at 1:33 PM
Doug said:
“Agreed Norm, but law guy apparently needs numbers repeatedly on how high crime is in Saskatoon.
Law, you should rent/buy in the alphabet “good” areas if you think they’re so safe, you’ll save a lot.”
Doug, I’m not sure what to say about your reading comprehension, but I did buy in the “good” alphabet areas. My money is squarely where my mouth is.
April 29th, 2009 at 1:34 PM
Norm:
You have a point there.
A lot of good things are happening and will continue to happen. Home prices are only one facet of an economy. Actually, lower prices will probably HELP Saskatchewan by bringing new people into the province, which were driven away by insane prices the last 18 months.
I know the Loblaws thing in Regina is huge for us. The warehouse jobs wont all be $30 an hour jobs of course, but that doesn’t matter. Good solid $15-20 an hour jobs are just as important as higher end jobs as well.
I know Merril Lynch didn’t take that into account and they certainly have no idea about the Class A tower that will be announced in September for Regina, and the “major tennant” relocating hundreds of jobs to Regina.
Thats just a few things going on.
April 29th, 2009 at 1:34 PM
Mithan
Not trying to down play your concerns but you need to get your head out of this “problem” for a while. Go to a homeless shelter and get some perspective.
From the information you have provided here you look to be ok, but you spend a lot of time working, upgrading your house and worrying about the deal you made on it. A lot of us could say the same; but it sounds like you are getting wound tighter and tighter over it. Sometimes there is no clear “best solution”, we make a decision on how to deal with a problem or mitigate a loss so we can get on with life.
April 29th, 2009 at 1:35 PM
Joe, “I know Merril Lynch didn’t take that into account”
Maybe they did, Saskatoon was 2% more over valued…
after losing their big warehouse
Just remember Regina lost 1,000 people by Stat Can/Census data from 1996 to 2006. It looks like a lot of stuff is going up, but you forget about losing Crown Life as a separate company, or Ipsco moving more corporate to the States etc. Just because your slime ball mayor says Regina is booming, and it’s getting one more big tower, doesn’t mean your over priced home in the burbs is more valuable.
April 29th, 2009 at 1:36 PM
Norm, I don’t see a need to cover boosterish predictions, they’re given so much coverage by the media anyway, and as nice a city as Saskatoon is, which I’ll admit, it has a crap load of crime and really over priced housing. We keep hearing boom on the media, so why do we need one more lemming saying, gosh I think my $900,000 home in Briarwood will keep going up in value, even though the rest of the country is going down, even though I live down the street from a town house (duplex if $900,000 on Lakeshore)
To me, Mithan having no idea house prices wouldn’t keep going up justifies being a bit of a devil’s advocate. All the positive stuff out there is covered ad nauseum. Some one needs to remind us that people in Toronto don’t want to move here/think our crime is high. Especially because we can fix some of this stuff, but it pisses me off to no end to here “I feel so safe here, at least I don’t live in Toronto”. They feel the same about us. Seriously. And they have the lower crime rate to back up their concerns. Ditto for our perception of more expensive housing everywhere but here, or how our jobs must pay the most … just blatantly ignoring actual reality. Not you Norm. Not most of the posters on this blog, but a substantial portion of Saskatoon’s population more than anywhere else I have lived, have no friggin clue about anything outside of the city other than: a – they hate Regina and b – everywhere else has higher crime, lower wages, more expensive housing etc. (all the stuff we lead in)
April 29th, 2009 at 1:36 PM
Doug,
There you go Doug I linked something that Regina beats us in. And last time I checked the maritime provinces are still having price increases but you never know I could be wrong =op
April 29th, 2009 at 1:37 PM
holey moley! go away for a weekend and blammo a zillion posts.
so perusing thru the postings, a question came into my mind. i may be totally off my rocker, but just to entertain us, what if our increasingly lower employment rate is due to ‘new career-ers’ leaving the province. just entertain this for a minute. i’m not saying people are but if we pretended that this was happening, wouldn’t that make our unemployment rate decrease?
i got too much sun this weekend.
April 29th, 2009 at 1:38 PM
Jesse,
Hard to say. I think these numbers are difficult to judge from one month to the next. My understanding is that year over year employment is up.