Saskatoon real estate: Week in review (June 30–July 4 2008)
New Saskatoon real estate listings dropped again for the second week in row, by just enough to prevent inventories from climbing for the 20th consecutive week. There are currently 1,433 residential listings showing an active status, down just slightly from 1,440 last week. This is the first week during which inventory has declined since the week of February 11-15 when total active listings sat at just 361 units. A total of 171 new residential listings entered the system this week including 163 single-family homes and condos (127 & 36 respectively).
Total sales came in at 70 units, just below last week’s number of 72. Of those reported sales, 68 were houses or condos, an increase of just three units compared to last week.
The average selling price of a Saskatoon home came in below the $300,000 mark for the first time since the week of May 19-23. Condo sales accounted for a higher percentage of total sales this week when compared to previous weeks, driving average sale prices down.
Overbids were nearly non-existent with just three homes reporting sales above the asking price, but the average overbid spiked to its highest level this year, skewed by one massive $66,000 over list offer. Underbidding occurred in 53 of 68 house and condo transactions, with the average underbid falling below $10K once again.
I was really struck by the low numbers of transactions coming out of areas 4 and 5 over the past few weeks. Since around the middle of May, these two large geographic areas have been hard pressed to crack the 20-unit mark collectively. Together, the two area have just 323 house and condo listings, which is also a relatively small percentage of total listings, but hey, 8 sales on the entire west side? Ouch!
See a Google map displaying the boundaries of Saskatoon real estate “areas” here
Data collection and calculation for our statistical reports
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
Follow our daily updates on Twitter @SaskatoonHomes.
Norm Fisher
Royal LePage Saskatoon Real Estate
112 comments so far. We'd love to hear your thoughts.
May 2nd, 2009 at 9:41 AM
8 sales on the west side. Wow. The west side is not just all rift raft. There are some very nice established areas there. Dundonald, Hampton Village, Fairhaven, Parkridge, and my favorite area, Montgomery with the huge lots and lake like atmosphere. The city projects growth to 80% east side 20% west side, so 8 sales out of 60 is not that far off.
May 2nd, 2009 at 9:42 AM
George,
“The city projects growth to 80% east side 20% west side”
I think that’s probably an entirely different story. Areas 4 and 5 have posted some of the strongest activity and price gains in the past year. I just find it curious that sales are down so much.
May 2nd, 2009 at 9:42 AM
Hey Norm where did the extra hundred listings go? Is it because over a hundred sellers took their property off the market? Renting maybe?
May 2nd, 2009 at 9:43 AM
Norm, thanks for the latest update. Definitely some interesting numbers.
According to SRAR, listings peaked in May at 1,482 and ended in June down to 1,353. Is the discrepancy between 1,353 and 1,433 for listings other than houses or condos?
So contrary to popular belief total listings are not in fact skyrocketing but now *decreasing*, which is actually in-line with previous historical trends (over the past 5 years we’ve seen an average 10.7% decrease in the last 2 months of the summer selling season and this continues into the Fall/Winter).
The average sale price seems to have also stabilized around the $300k mark although this will probably drop by $10k-$15k starting in the Fall.
May 2nd, 2009 at 9:43 AM
Wesco,
I see 7 withdrawals, 1 expired and about 45 cancellations, most of which would have come back as new listings. Balance of units in conditional sales category.
Drake,
You’re looking at “Total MLS Listings Taken” for each month. Includes all rural areas and all categories of real estate including commercial, residential, farm, etc.
May 2nd, 2009 at 9:43 AM
Okay, seriously who was the monkey who over bid 66 thousand dollars! I bet that seller has been laughing since that deal closed, considering there are now people who are having difficulty selling their place.
May 2nd, 2009 at 9:44 AM
Norm,
it is not entirely a different story. It does show where the majority of people want to move to in the city. I think there will always be more demand for houses on the east side for a variety of reasons. I don’t think the west side is all that bad. East side has some troubling areas as well.
May 2nd, 2009 at 9:44 AM
Brian,
Lol. In fairness to that “monkey,” the property was an estate sale and the contract was written in February. It was probably “subject to letters probate” which caused a lengthy delay in firming up the sale. It was a 1200 square foot bungalow in a very nice area 2 location with some good upgrades including kitchen, flooring, windows, furnace, etc. Probably not a bad buy at $390,000.
George,
I think it would be fair to conclude that 80% of the people who can afford to build a new home would prefer to do it on the east side. Many that buy resale can’t afford to build, or buy resale on the east side for that matter.
May 2nd, 2009 at 9:44 AM
Hey guys, its been a long long time since I posted – probably three months now – so I figured I’d say hi and drop some comments.
Not much to say though – it looks like Saskatoon is doing the same thing as Phoenix. Identical really – inventory is balooning with high priced real estate. Prices still haven’t changed much in Phoenix and I don’t expect them to change much here. Probably sit at around the $300K mark for a while.
If there’s a great deal to be had it will likely be in the fall. Still, there could be a lot of buyers waiting for the fall so an August / early September purchase may be the way to go. I bought during the first week of September last year and it turned out to be perfect timing in hindsight.
It’ll be interesting to see what happens to pricing during July and August. I’m guessing not much – in fact I’d speculate on pricing remaining stable from now through to next spring.
Thats it for my crystal ball gazing – good luck to anyone buying or selling a home!
May 2nd, 2009 at 9:45 AM
Hey Doug,
Nice to see you. It has been too long.
Prices haven’t changed much in Phoenix?
The “Standard and Poor’s – Case Schiller House Price Indices shows Phoenix being down 25% for the year ending April 30, 2008. It’s the third largest decline in the American markets that they measure.
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_062418.pdf
May 2nd, 2009 at 9:45 AM
Hey Norm, good to hear from you and thanks for the update – I haven’t looked closely at whats been happening there – my comment is based on a blog posted by one of their real estate agents a while back who said prices were remaining stable.
Assuming what he said was correct at the time (and I think inventory levels had been high for a while prior to his comments), its going to take time for higher inventory levels to effect price. Its not going to happen in two months in my opinion but time will tell.
May 2nd, 2009 at 9:45 AM
Doug,
Oh, okay. If a real estate agent said so, it must be true.
May 2nd, 2009 at 9:46 AM
Regarding comments above about inventory…
I’ve been thinking for awhile that “months if inventory” might be an interesting measure to track in terms of showing trends. Please keep in mind that this was done quickly with a pocket calculator! If you notice any glaring errors or you think the data is misleading, please say so.
From what I’ve been able to glean, months of inventory is computed by dividing the number of total listings by the number of total sales, which results in the number of months of inventory remaining. One can also compute seasonal or yearly stats by dividing number of total listings by number of sold listings for any given time period.
Months of Inventory for Saskatoon (MLS only, residential listings only), as given by Saskatoon Real Estate Resource Centre data:
Months of Inventory for January 2008: 1.08
Months of Inventory for February 2008: 1.01
Months of Inventory for March 2008: 1.20
Months of Inventory for April 2008: 1.84
Months of Inventory for May 2008: 2.51
Months of Inventory for June 2008: 4.37
As Norm pointed out, number of active listings decreased ever so slightly last week… it’ll be interesting to see what happens from here!
May 2nd, 2009 at 9:46 AM
Sorry, my last post didn’t really define “months of inventory”- assuming new listings were to stop completely, it would take “X” number of months to sell all the inventory, assuming sales were to stay constant.
What really surprised me, actually, was that the inventory was as low as it was for so long. Part of the reason I didn’t include 2007 monthly data is that February through June 2007 would have been negative (more sales than active listings)!! Crazy. This would have averaged out with YOY data, though.
May 2nd, 2009 at 9:47 AM
Crikey, keep in mind industry averages. I was looking at New York a while back and I believe the average length of time it took to sell an appartment ranged from 3 to 9 months depending on the year.
What may seem like a long carrying period for Saskatoon, is relative to crisis level inventory we had in the winter/spring. When you compare us to the Canadian and US average I’d expect us to now be on par for carrying time.
Norm – true – you never know when one is telling the truth. I like to err on the side of trust and be proven wrong – and maybe I was!
May 2nd, 2009 at 9:47 AM
“It could be 1982 all over again”
http://www.edmontonsun.com/News/Alberta/2008/07/06/6078936-sun.html
“the froth of the speculative condo market hasn’t been blown off yet”
This is being talked about right next door. This was the same kind of talk in the US in 2006.
May 2nd, 2009 at 9:47 AM
George,
It’s interesting (not in a good way for homeowners) that the new property assessments will result in such increased taxes. Our new property assessment for a home in Holliston was $40,000 more than the last assessment. Yet according to our city hall letter, our taxes won’t be going up much if at all. That I don’t understand. In any event, I feel badly for those who NEED to sell in order to move (new job, etc) who paid more for their home last year than they can now sell it for (whether it be in Stoon or elsewhere). I’m looking at a house across the street that the owners’ have already reduced 30,000 after a few months on the market, after buying it last fall. I don’t think they’ll make much of a profit, if any at all after realtor fees (no offence to any realtors out there). Another house on the next block up also just reduced, and I expect another one block behind us won’t be far behind. What a difference from last year at this time.
May 2nd, 2009 at 9:47 AM
Yes, Julie,
Those that bought at or near the peak may be in trouble. In saying this, of course, I’m assuming we’ve reached “the peak” for the foreseeable future, which you may or may not agree with. I think there was a certain amount of mania and/or panic (not only here, but in most markets I can think of), in that many people thought that prices were going to continue increasing, and they were afraid they were going to get “priced out of the market”.
Owning a house can be such an emotionally and psychologically-laden issue. It is truly sad when it leads to loss. One doesn’t have to look farther than the US or the UK to see really nasty examples of this. Actually, the UK market appears to be collapsing even faster than the US. An interesting site outlining “credit contraction” issues worldwide (although it tends to fairly extreme pessimism at times, IMO): http://theautomaticearth.blogspot.com
May 2nd, 2009 at 9:48 AM
Hi Julie,
Reassessment is revenue neutral and the objective is to collect the same amount of tax from the same number of properties when all is said and done. Your home’s value went up, but so did everyone else’s. The tax burden will shift around marginally but nobody should expect a huge increase or decrease.
May 2nd, 2009 at 9:48 AM
Did someone say “Phoenix”?
After a *huge* run-up in appreciation (on the order of 50 – 60% over a one year period) prices have clearly declined in the Phoenix market.
Phoenix is a very large city, both in population (5th or 6th largest city in the US depending on who you listen to) and in physical area (our MLS covers about 10K square miles).
Given that size, we have quite the variety of homes, prices, and activity.
There are parts of Phoenix where the average home price is down about 10- 15% from the highs, and other areas (particularly outlying areas) where prices are off closer to 50%.
There are 44,000 single family homes listed for sale in the Phoenix MLS. This is compared to about 3,200 in Jan 2006. Inventory seems to be leveling out, maybe even declining, and price declines seem to be slowing.
There is a ton of short sale and REO properties on the market, which are dragging down prices, but the banks seem to be moving quickly (for the most part) on the REO properties. They continue to drag out short sales.
I think once we can churn through the bank owned properties, things will start to return to a more balanced market. Right now though, it is a difficult market for sellers (which means of course, there are some buying opportunities).
May 2nd, 2009 at 9:49 AM
What happened in 1982?
http://photos1.blogger.com/blogger/4027/164/1600/History%20of%20Calgary%20RE%20prices%20-%201973%20to%20today.jpg
Sorry that’s Calgary, in Saskatoon its different here.
May 2nd, 2009 at 9:49 AM
Julie,
If your neighbours bought their house last fall and are trying to sell it now, breaking even is to be expected. In a “realistic” real estate market one wouldn’t have equity in that short a time frame anyway. In the past, a person would need to sit on their property for at least a couple years to see modest gains. Of course all that went out the window in 2007, now people think they should be making instant equity overnight! Things are beginning to normalize now.
May 2nd, 2009 at 9:50 AM
Jay,
Thanks for the update on the Phoenix market.
May 2nd, 2009 at 9:50 AM
Jay, thanks for the comments – it might have even been your posts I was refering to. Saskatoon doesn’t have the bank owned properties dragging down our market like Phoenix does and it would be nice to know how much of an impact this has had in your market.
My own hypothesis is that price increases in light of a scarcity of supply is more understandable than price decreases in light of an abundance of supply. People need to buy houses to live – people don’t need to sell houses unless its in their economic best interests.
May 2nd, 2009 at 9:50 AM
This is a very interesting blog. Norm I have a question for you. My mother in law is moving and will be putting her house up for sale. It is in the Caswell Hill area. She’s not sure if she should wait until the fall to list or if she should list it now. Any comments/suggestions? Thanks.
May 2nd, 2009 at 9:51 AM
Well Doug,
People need a place to live, they don’t need to BUY a place to live. In certain economic conditions, renting is WAY cheaper than buying. But since this is a real estate blog, I’ll leave that one alone for now! LOL
May 2nd, 2009 at 9:51 AM
Al,
This is a tough call. I think if I were looking at selling in the next year, I would be thinking sooner, rather than later. You hear a lot of talk about longer market times right now. For the most part, it’s because seller’s are “testing the market.” Good homes are marketable at a decent price in a reasonable period of time. Seems to me that the popular opinion here is that we’re moving into a correction period. If that’s true, the home may be worth less in the fall.
Grrr,
I appreciate your sensitivity, but you are always welcome to express your opinion.
May 2nd, 2009 at 9:51 AM
I had a ball tournament this weekend and needed to kill a couple of hours between games. So I thought I’d drive around and check out some places on the east side. I have never seen so many open house signs. I went down Taylor and seriously, almost every cross street had at least one open house sign posted. Of course, most homes in that area are out of my budget, but it was very interesting to see how many are on the market right now. The numbers on here are great to go by, but seeing that many open houses on one day, really put the market situation into perspective for me, so I thought I’d share.
Grrrr
I’m currently renting and if rent keeps going up the way it is, I think I may NEED to buy in order to afford living here. lol
May 2nd, 2009 at 9:52 AM
Sean — that’s interesting.
I’m wondering how long it’ll be before people who don’t hang out here (ie, aren’t RE geeks — grin grin) start to realize that the market has shifted.
I think the ‘Geeze, look at all the For Sale signs!” moment is one of those triggers.
Doug:
About ‘must buy, needn’t sell’ — I think it’s the other way around. If you leave town or get a new job or get married or have a baby, not selling means you pay two mortgages. Renting is difficult if you don’t know how to be a landlord, and not moving is often not an option.
And rents often don’t cover the cost to maintain the property.
On the flip side: you can always rent for a while. Rent’s cheap, even when it’s expensive — you’re not
I think the only people who think they MUST buy to live are those who’ve already been on the property ladder. But renting makes so much sense, and buying is so dangerous
As for the lack of foreclosures: two years ago, Phoenix didn’t have many foreclosures either! Although we don’t have as many ARMS or teaser rate mortgages, we have people who are overextending themselves to buy a house, and they’ve got a tiny margin for error. Anyone who buys at 0 down is upside down before they move in, thanks to CMHC insurance. This feels okay in an appreciating market but not in a falling one.
Foreclosures rise as markets fall: when interest rates rise and people have to refinance; when speculators are left with properties on their hands; when people lose their jobs; when people realize that they owe more than the property is worth. That’s when they turn in the keys. It happened in Calgary in the 80s, and mortage terms were far stricter then than now.
I think we’ll see a few forclosures before this is over.
May 2nd, 2009 at 9:52 AM
*sigh* — I meant “Rent’s cheap, even when it’s expensive, because the rent is usually less than a mortgage payment on a comparable property, and you’re not paying taxes, water, heat, condo fees, property insurance and other costs on top of it. Every time my rent seems INSANE I just need to add up the cost of a comparable condo and it puts it in perspective. “
May 2nd, 2009 at 9:52 AM
jrochest,
“Anyone who buys at 0 down is upside down before they move in, thanks to CMHC insurance. This feels okay in an appreciating market but not in a falling one.”
That’s something that hadn’t yet occurred to me- thanks for pointing that out! Even if you put 5-10% down in a declining market, on top of CMHC insurance, you still might owe more on the property than it’s worth. Let’s not forget that the CMHC insurance is there to protect the banks, as well, not the person with the mortgage.
Wow, you really do see something new every day, even if it’s right in front of you.
May 2nd, 2009 at 9:53 AM
I’m just waiting to see how much rent will be by next summer for my 1 bedroom 1960′s apartment. Oct 1 goes up to $850. I’m guessing $1100?
*buys a van and lives DOWN BY THE RIVER…
May 2nd, 2009 at 9:53 AM
Sean said, “I went down Taylor and seriously, almost every cross street had at least one open house sign posted”.
Sounds like the east end to me for a while now. Every time one crummy east end town house finally sells, another pops up in its place. Some small complexes have 5 places for sale (of 20 ish?) and every cross street has a few places for sale. If these town house owners are new grads or transfers, they’re going to have to reduce their sale prices to competed with the 20+ neighbours for sale.
1,433 residential MLS listings
+ 381 on Saskhouses (up more than MLS drop this week)
Still a lot of places for sale, sales also “down” from last week. So still a buyers’ market.
And I’m not surprised that areas 4 and 5 are having trouble selling. IN a post “boom” era, they are now just overpriced less desirable areas. Easy to buy in Riversdale out of fear of not being able to afford a house … tougher to sell to people when there are over 1,000 places for sale East of the ghetto. West End Saskatoon minimal sales may be an indicator of further drops in sales in the rest of town … until prices fall their predicted (by me) 10 percent from May 2008 to average $270,000 or less by January 2009.
May 2nd, 2009 at 9:53 AM
Doug “The only thing I see that can push down prices is higher inventories with owners competing on price to sell homes ”
We already have a big bloated inventory, the first week in July was the first time since February that inventory decreased at all (a whole 7 places city wide). Inventory is way up year to date. Reductions in prices are common. And saskhouses.com, at 381 listings, has gained 17 listings over this same period (I think it was 364 last week).
Saskatoon already has high inventories, causing places to sell under list, and in June prices came down per sq ft. There is a lot of new supply on the market. Consumer confidence will likely be hurt by sky rocketing gas prices, which help Saskatchewan tax wise, but not so much Saskatoon.
Kenton, if you still read this, how did the move to Weyburn work out? Still lots of oil and gas jobs down there paying more than here? Houses still way cheaper than Saskatoon for houses, with no crime?
May 2nd, 2009 at 9:54 AM
You doom and gloomers are something i can’t wait to here you wine in three or four months if this turns out to be another turning point in the market.
May 2nd, 2009 at 9:54 AM
Hey- if I’m “wining” instead of “whining” in three or four months, I’ll be one happy camper.
No one has a crystal ball here, “Realistic”, all we can see are trends.
May 2nd, 2009 at 9:54 AM
Hi All,
If you would like to find out how many people are potentially upside down. Count the sales for the last 6 months cause im sure it actually wont amount to much. Then calculate the amount of people like me who dont really care to sell their house for at least the next 5 years. To be honest if my house shed 100k of its value ide still be over what I owe and to be honest there isnt much speculation anymore except for the houses in the newer areas. There is only 1 house in my 10 block radius that is owned by a speculator and the rest are owned by similiar people like me. The only speculator that was in my close neighbourhood was a gentleman who flipped a house right beside mine. He flipped it in less than 6 months and made it close to the nicest on the block so I dont mind flippers they did alot of work on the west side and did help to beautify the city even tho people wish ill will on them.
May 2nd, 2009 at 9:55 AM
Well talking about trends, maybe we should take look at an updated version of that active listing graph we saw a couple weeks ago. Maybe we can see some new trends :
May 2nd, 2009 at 9:55 AM
Armoth – I also live in confed, and I assure you, there’s enormous speculation up here. Past AND present (the ones stuck trying to get out). There’s been 3 spec houses up on Douglas alone in the last 3 months, as well as 2 on fisher, and 2 more on smallwood that I’m aware of. That doesn’t count the other side of the park either, where I’m less familiar with my ‘neighbors’. I do however agree with you – some speculators can be good news, upgrading properties nicely, and increasing property values for the whole area. I just worry how it will affect us if all of these guys who are now sort of ‘stuck’ with their houses now have to rent them to cover their butts. My husband and I are in that boat right now – couldn’t sell up here, so now we’re landlords. Ask our neighbors how they feel about that. I personally feel bad for them. The only thing that makes me feel less bad is that I truly believe that we’ve found good people as tennants, and we have no intention of allowing our property to become run down in any way. We are not intentional multiple property holders, but circumstances turned differently than we’d hoped, and we had to take action. Just giving you another point of view from your ‘home’ turf.
May 2nd, 2009 at 9:56 AM
Ringo,
Most of the people selling in my area ive known since ive moved in my house. They are not speculators and only house I know of that is owned by a speculator now is at the end of 33rd by the new houses. Im sorry tho that you got stuck with a house but on the bright side Confed area is cleaned up I lived there when i was 7 years old on St Laurent and now I live there when im older. I believe this is the tip of the iceberg and I think there will be increased demand even tho there is higher inventory. Not that I really care im moving when my kids grow up and thats at least 9 years away.
May 2nd, 2009 at 9:56 AM
Armoth –
Given that there were three properties sold in all of Area 5 this week, I don’t think the market in Confederation is all that hot.
The iceberg in question is the mounting inventory.
May 2nd, 2009 at 9:56 AM
Jesse – I feel for you, bud. We just got another notice in our building that rent will be going up by about another $125 for us younger folks in the building. The rent increases seem totally random; some people on the same floor with the same units only recieved $25 increases, but us younger working folks received a huge increase. In a lot of cases, us younger individuals are now paying more for a one bedroom unit than an older person in a two bedroom unit. The rental company says that when setting the amount of the rent increases for this quarter they are going off the financial information provided by us tenants when we first moved in. It really bites, especially when our building has fallen into its worst state of repair since I moved in about four years ago. Our elevators are broken and frequently leave you stuck between floors, our security doors have been broken for over a month, and our parkade has become a free for all for car thieves as now anybody off the street can enter our building and vandalize / break into the vehicles. Top top things off, the outer walls and windows of the building leak causing a huge mold problem with the carpets in our suites. The sad thing is, if someone off the street walked in and wanted to rent a unit they would now be paying over $1200 for the privilege of putting up with these problems. I guess this is all part of the new realty of post boom Saskatoon.
May 2nd, 2009 at 9:57 AM
“Well talking about trends, maybe we should take look at an updated version of that active listing graph we saw a couple weeks ago. Maybe we can see some new trends”
Funny you should say that! I have a nice graph of active listings vs. sales, up to date to the end of June, and Norms’s got a copy. Perhaps he’ll post it?
May 2nd, 2009 at 9:57 AM
Crikey,
I will get that graph posted, either today, or tomorrow at the latest. I have not been able to find anyone who is willing to dual with you so I’ll have to come up with a post myself.
Thank you again for your work on it.
May 2nd, 2009 at 9:58 AM
Oh, let’s not call it duelling. Intelligent debate sounds far less messy.
May 2nd, 2009 at 9:58 AM
Jason,
have you called an inspector for those problems in those buildings? There must be something that can be done. I read in the paper about how the city has gone after Jack Grover and his crappy properties. I suspect there are more of these guys, just maybe not as bad. During this time they are making money they should be fixing the place up.
May 2nd, 2009 at 9:58 AM
George – I have told our building manager if our parkade doors and elevators aren’t fixed by this week I will be placing a call to the fire marshal. I am also going to circulate a petition amongst the tenants addressing us tenants concerns about the dwindling conditions of our building and the continously rising rents. I’m not too sure if this will do any good, but it won’t hurt to try.
May 2nd, 2009 at 9:58 AM
Good for you, Jason. Writing a letter to the editor of the Star-Phoenix, or contacting a reporter directly, is usually very effective as well.
May 2nd, 2009 at 9:59 AM
Jason,
I am with ya on that. I didn’t know they’d be so crooked as to do the whole mob thing of How much will it cost me? and they go How much you got?!….That’s like our place somewhat. Fire doors are never closed, Washer and dryers SUCK and cost way more than just going to a laundromat. Just super annoying. If it was true that most landlords tend to charge more to make ‘upgrades’ or fixes, that’d be one thing, but so far i haven’t heard of many landlords that have actually had ANYthing fixed or upgraded….Us renters are basically paying more so that the company that owns the building, can pay for thier paint, laminate and 8 feet of cupboards so they can sell them as condo’s without actually costing them a dime.
May 2nd, 2009 at 9:59 AM
Jason — That’s INSANE. If you’ve not talked to the Office of the Rentalsman, I think you should.
The poor maintenance is a problem, of course, but the differential rents should be illegal. It’s one thing if tenants who’ve been there longer are paying less — that’s common — but to raise the rent on one group and not on another is problematic.
Imagine if a grocery store did this: “For you, this liter of milk is 1.50, but for you, it’s 5.99″
Definitely, talk to the press.
May 2nd, 2009 at 9:59 AM
Mind you, there is a solution: move out.
Unfortunately, most of the apartments in town are being converted to condos no-one wants to buy, meaning that there are no rentals to move to. And the landlords are explicitly gouging those who make decent salaries.
Therefore, it makes sense for those who are earning decent salaries move to Alberta, or BC, or Ontario.
May 2nd, 2009 at 10:00 AM
Sask Houses just hit 387 listings. That’s the most I’ve seen on there. That’s all…back to work for good Ol Sean.
May 2nd, 2009 at 10:00 AM
The listings on MLS are back up by about 70 properties today, too: I count 1503 properties using my patented “do four searches and add up the totals” method.
Yes, I know this is less accurate than Norm’s figures, but I only got 1460 last weeks, so…up is up, and pigs is pigs.
Alas, back to moving sentences around…
May 2nd, 2009 at 10:00 AM
Yes, I noticed that there was a big spike in MLS listings today… did a condo development come on line, or were they a spike in SFH listings?
May 2nd, 2009 at 10:00 AM
Maybe: I didn’t go through all 1500 listings. The first and last pages of all the searches had a couple of unfamiliar things: lots in the West End, for example.
Yes, I know Norm doesn’t count lots. But I thought it was interesting that the Total of Totals added up to more than 1500, finally.
OOh…captcha is trippy-looking. (I’m easily amused)
May 2nd, 2009 at 10:01 AM
jrochest,
To be clear, when I talk “total active listings in the residential category,” that includes anything listed in that category including lots. That said, mls.ca does not operate in real time like the agent mls does. On any given day there are a number of units appearing there which are actually firmly sold and others which are conditionally sold.
Total actives in the residential category sit at exactly 1,450 at the close of business today. Getting very close but not quite there yet.
May 2nd, 2009 at 10:01 AM
Norm, Questions and a comment,
1 A lot of big condo conversions. Often see a few on MLS, but not the full 20 or 30 units in the building, are most listed in MLS? Does this come up as 20, 30 or more listing or just one? Do some developers just list a few, but have more available? A lot of big developments in the east end/conversions in inner city, if I would think hundreds and hundreds of units just in these under construction/renovation units alone, maybe just not listed yet, or part of the reason for the jump in listings?
2 – Using that realtor.ca, 1641 places are available just for “Saskatoon” with surrounding farms/lots. 1794 if zoomed out to Warman/Martensville level. Just thought this was interesting.
May 2nd, 2009 at 10:02 AM
That 1,700 + listings for around Saskatoon is after clicking “residential”.
Saskhouses is up 6 listings from just yesterday, now 387, so everyone is apparently gaining listings, still.
May 2nd, 2009 at 10:02 AM
Yep, Norm — I remember the explanation, and I believe you. I just keep doing my own count, even though I know it’s over the official tally, usually by about 50 properties.
But this is the first time it’s been over 1500, so I’m pleased.
Small minds are pleased by small things
May 2nd, 2009 at 10:02 AM
And I’ve wondered about Doug’s question, too: some of the multi-family units seem to list many properties, while others will have one general ad that covers all of them. Odd.
May 2nd, 2009 at 10:02 AM
Jrochest and Doug,
They all operate a little differently but there are a few projects that have several (like a dozen) units listed. I know that there a few that have almost nothing left.
It’s difficult to have a good handle on this end of the market. We know that around 2000 units have been approved for conversion since the beginning of 2007, but there have also been a whack of sales (1755 since that time including resales of properties which were already condo).
To be even clearer on the numbers, whether I’m talking SF and condo, or total residential, I am only talking areas 1 through 5 unless otherwise noted.
May 2nd, 2009 at 10:03 AM
I do notice that a lot of brand new condos in my area, when announced, have only a couple units listed, while the sign will say “24″ or something. So actual inventory likely much higher.
May 2nd, 2009 at 10:03 AM
I’ve been playing with the new “Realtor.ca” site. I like the map feature: it gives a good idea of the asking prices for particular areas.
Scooting back and forth between cities and neighborhoods is pretty surreal. Varsity View, and Nutana are stupidly, stupidly overpriced — prices for SFH that are, no joke, directly comparable to SFH prices in several good neighborhoods in downtown Toronto.
It’s amusing. I recommend it, if you really want to bend your brain a little.
May 2nd, 2009 at 10:03 AM
Jroch, I think we had agreed “overvalued” was a better, less mean way of pointing out that Saskatoon’s houses are “overpriced”
Unfortunately, with less than half the crime of Saskatoon, Toronto is just too dangerous to lure many Saskatoonians east, in search of better wages (TO still high) and similar priced housing.
Unless of course they live in Forest Grove/Sutherland, and are trying to escape the home invasions and B and E’s of Saskatoon.
I can’t believe, even after hearing about the random home invasion today, the first comment I hear is “At least we don’t live in Toronto”
I think the half of Saskatoon that has never been east of Yorkton keeps property values elevated, as they’re too scared to move anywhere else.
May 2nd, 2009 at 10:04 AM
Well, the *rest* of Saskatoon may be overvalued, but Varsity View and Nutuana are just plain overpriced.
Sorry. There’s no polite way to say it.
As to the other point — *Sigh*.
Toronto is not just less dangerous than Saskatoon: it’s MUCH less dangerous, both statistically and personally.
In the three years I’ve lived in Saskatoon, I’ve experienced two break-ins, one bike theft, witnessed one group of guys beating up a single guy, groups of drunks smashing car windows for fun, and had beer bottles thrown at me from passing cars. All in lovely little safe Nutana.
In thirteen years in comparable neighborhoods in Toronto I experienced exactly one (1) bike theft, and a certain amount of drunken noise outside of bars.
The downtown TO neighborhoods I’m talking about are so gentrified as to be packed with yuppie mommies with $500 strollers. “Downtown”, in any major center, is much safer than the suburbs: this is why Saskatonians who move to, oh, Vancouver, and settle in Surrey or New West rather than the West End or Kits because they think that further from the centre is safer are always so shocked. The pattern holds true for most big cities; the central core is the most desirable place.
Scarborough, a suburb, is the site of most of the violence; there’s little pockets of really horrific poverty in the older ‘inner’ burbs.
May 2nd, 2009 at 10:04 AM
Here it comes, inflation predicted to be up, bring on the housing market crippling mortgage rate hikes … banks already hiked a bit, when Bank of Canada announced no more drops a while ago
http://finance.sympatico.msn.ca/investing/insight/article.aspx?cp-documentid=8494628
Will be a nice time for those who held off buying 2nd or 3 rd or n th properties, and have saved up cash and securities to buy up some cheap housing from bankrupt borrowers when they can’t sell their house in a year. Yeah, it sounds mean spirited, but this is what people get when they buy stuff they can’t afford.
Some of the stuff your grandparents teach you is right, borrowing money is risky, saving to actually buy stuff yourself is a better idea.
May 2nd, 2009 at 10:05 AM
Homebuyers are very lucky to have such an avid watchdog like you on their side Jim. Curious, by chance are you interested in buying a house? Why are you on this blog? Is there a reason for your repeated “sky is falling” posts? Maybe looking to scare buyers out of the market until you get your cheap house? Good strategy, but as you can see, certainly not a new strategy to this blog!
. There will be no housing crash in Canada, especially not in Saskatchewan. The market is slowing down and pulling back but it is a minor correction. Banks in Canada have not been lending to people who can’t afford the loan like we’ve seen down south, we have much more strict borrowing parameters. Have you ever been through the process?
May 2nd, 2009 at 10:05 AM
Jen,
I’ve never met Jim, so I don’t know, but I don’t get the impression that he’s trying to “scare” poetential homebuyers. Buying a house is not without financial risk, and unless you have a significant downpayment, a short amortization period, and you plan to stay in your house for a good long time, in a falling/depreciating market there is a SIGNIFICANT amount of risk. No one is telling you not to buy, just to buy wisely.
How are you backing up your assertion that there will be no housing “crash” or even “correction” in Canada? What is going to protect us from what the rest of the world is experiencing? The economy in the US is going to pot, and 75-80% of our exports go there. Who’s going to buy our stuff? If our dollar is overvalued, why would they? Where are you getting your information from? The Star-Phoenix?
You may assert that real estate is local, but it is initmately tied to the economy, and the Canadian economy is intimately tied to the global economy.
In Candada, household debt is at a record. The national savings rate is zero (in the US and UK, it’s WAY below zero). Over 80% of family net worth is in real estate. Houses are coming down in value. Gasoline and energy costs are at a record high. Family income has stagnated.
In Toronto and Vancouver, sales are falling off a cliff, which likely means prices will deteriorate by the end of the year. Home sales in the GTA are down 18% over this time last year, and crashed 9% last month alone. In Vancouver, sales have dropped by 43% in a year, and the number of people trying to bail has grown steadily, with listings up 18%. Prices have already started to deline in Calgary and Edmonton. What makes you think we’re immune?
Canada is following a year or so behind the problems in the US and several European countries (notably the UK, Ireland and Spain), but we are inexorably moving in the same direction. Our real estate excesses have been less extreme, the property market will still likey decline sufficiently far to put many mortgage holders in negative equity. In addition, our banking system is accutely vulnerable to disruptions in the derivatives market. For instance, CIBC is on the hook for huge reinsurance losses ($6.7 BILLION, possibly more). If you don’t think that credit is going to be harder to come by globally due to this, I’m afraid you’re sadly mistaken.
May 2nd, 2009 at 10:05 AM
Crikey.
You sure seem to know your stuff! How much of a correction do you see in Saskatoon over the next year? And what do you see happening here long term…say 5 years from now. I’m so confused on what to do. The market is going down and my rent is going up. So do I endure rental increases while I wait for the market to go down further or buy now? It’s very frustrating for me as a new Saskatoonian. I moved here to save on rent, or housing if I decided to buy. But rent here is no less than in Kelowna where I moved from.
I simply can’t comprehend why rent is so high here. Yes, currently there is close to zero vacancy, but that won’t last at these prices. I mean if it costs the same to live here as in Major cities, people will move to them. They simply have more to offer. I’m new to Saskatoon and I like it, don’t get me wrong. But places like Vancouver don’t have an 8 month deep freeze each year. What they do have is more restaurants, more entertainment, more jobs…the ocean…a few things I faintly remember called MOUNTAINS…major sports teams…I think I’ll stop now, I’m getting depressed ahahah.
May 2nd, 2009 at 10:06 AM
Sean,
I’d like to know the same thing…I’m renting too…I wouldn’t mind roommates if it was like the whole ‘friends show’ thing where the places were nice and large (yes i realize it’s a tv show) and plenty of room, but here? Any rental property is a crowded little apartment with new paint and laminate…i’d say get the heck out if u can. Me? i’m waiting for my girl to finish school in 2010…though i could be paying $1400 a month rent by that point….SCARY…esp when i talked to a woman from Vernon BC who told me she thought prices are expensive out there…to rent a small house for 1200 a month…doesn’t sound like much compared to here now..
May 2nd, 2009 at 10:06 AM
Sean,
First of all, hello from a former B.C.’er!! I moved here from Vancouver 13 months ago. I have to say I’m very loathe to give financial advice, and I can’t tell you what to to about the “buying vs. renting” thing. I’m also renting, but I’m currently renting a 2,000 sf 3-bedroom house in a fantastic neighborhood for LESS than I was paying for a 700 sf basement suite in Kitsilano. So comparitively, I’m happy.
I’m not sure what your rental situation is, but there are several great “rent vs. buy” calculators out there than can help you make a decision about whether or not this is a good time. I’ll link a good one here, but you can google one almost anywhere and check it out:
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html#
Just beware, many of them have a place to run the numbers “Home value will increase annually by___%”. If the value of the home is actually decreasing, this information is less than useless, but you’ll be able to plug in “0%” to see what happens if home prices stay flat. Just run some scenarios through more than one of them, and have some fun (without risk).
Just remember, rent and interest are the same kind of thing. They are what you pay to use something — either to use a house, or to use money. Interest is the rent paid on borrowed money. To know whether to buy, you just have to compare one rental option to the other.
Let’s face it, most people have to borrow money to pay for a house. Let’s start with the “scariest” (to me, anyway) case: a no down, 40 year mortgage. This entails extreme use of leverage. Leverage means using debt to amplify gain. Most people forget that losses get amplified as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or an interest rate hike, he’s bankrupt in the real world. Most people also don’t seem to realize that by using an extended amortization, they are paying a HUGE premium.
Let’s assume (for simplicity’s sake) for the following scenarios that interest rates are going to remain constant for the next 40 years. They won’t, of course, they’ll very likey rise, but you can run that through your calculator too.
A 300K house (assuming no down) at 6% interest, paid off over 40 years will cost you $484,917.83 in interest (yes, INTEREST) over the term of the loan, for grand total of $785K paid to the bank over the 40 years. The monthly payment will be about 1,635/month.
Same house, same interest rate, still no down, paid off over 25 years: will cost you $275,825.91 in interest over the term of the loan, for grand total of $576K paid to the bank over the 25 years. The monthly payment will be about 1,919.42/month.
Yes, the 40 year amortization will save you $284/month, but you’ll end up paying $209K MORE to the bank over the term of the loan. Your call.
May 2nd, 2009 at 10:07 AM
Jesse G.
Maybe I should buy a place here with a legal suite. Charge 1400 a month for rent and fly to vegas every month. Hmmm I wonder if that’s what my land lord is doing grrrrrrrrr.
May 2nd, 2009 at 10:07 AM
Sean,
Yeah no doubt. What i love is the place i’m in, is upgrading what they can with the funds from the increased rent they are charging, so they can convert them for free and sell and rap….reap the profit.
I love the whole ‘we won’t charge more than market rent’…which is basically everyone going ‘so what can u get for your place? OH!? YOU GET 1200 A MONTH!? Sheesh i’m only charging $700 for mine! Since there is no law, hey I will just put a letter together and raise mine to 1200. I could use the new hot tub in my house. I’m sure the tennants will stay since there aren’t many vacant places.
May 2nd, 2009 at 10:07 AM
Crikey.
Ya Kits is VERY expensive. Nice area though!
No I would never never get a 40 year ammortization. That’s nuts. I’m 33. That’s mean’s if I didn’t sell it, I’d have 8 years of mortgage payments after retiring. How’s that even possible? Why anyone would ever sign into that is beyond me. I say, stick with what you can afford over 25 years and suck it up. No, your house probably won’t have sparkling hardwood floors and gleaming stainless steel appliances…but maybe you can retire on time. Ha!
I’m looking along the lines of hopefully getting something in a decent area on the westside for around 200k with about 30 K down. Or maybe 210 with 40 k down. And with the way things are starting to drop I may actually be able to do that and get something decent. Payments would be about a grand which is less than my rent. And I think I’m expecting a rent hike soon (after 3 months of living at this place, ya nice) which would probably equal the property taxes. This way I could actually put some money away each month for retirement instead of going with something for 300k and being mortgage poor.
I’m just trying to figure out if I wait a year…will I get a lot more house for my money. If rent was reasonable I think I’d wait for sure , but when it’s this high it certainly factors in.
May 2nd, 2009 at 10:07 AM
So, what percentage of rental suites out there do y’all think are non-conforming?
Would it be possible to go through all the old mls listings, get the addresses of houses with self described non-conforming suites, and find out if they are being rented now?
For those that are currently rented, notify the city in order to make the owners update the suites to conform. If the owner can’t or won’t, the suites should not be rented. And then the owners won’t have that cash flow to help with their mortgage, so they’ll have to sell, accelerating the crash-correction-downturn-hardsoft-landing-whatever-you-wanna-call-it.
Yeah, that’s a good idea.
May 2nd, 2009 at 10:08 AM
If i were a betting man…I’d say at least 80% of the suites are non conforming. Codes are updated every 5 or so years, local ones may even be updated more often. I’d do it but don’t have time working 60ish hours a week already. But good idea!
May 2nd, 2009 at 10:08 AM
Mach too,
I don’t recall anyone saying that was a good idea, but you bring up an interesting point. Are you saying “owners” have more of a right to stable and afforable housing than “renters”? Or are you saying something else?
May 2nd, 2009 at 10:08 AM
How much of the announced or projected capital investment has even started in this province? I still think we are in the pre-boom stage as far as population and GDP growth are concerned.
It is too bad that the housing prices had to climb so high off of speculation before the real growth. This will make it more difficult to attract people here.
May 2nd, 2009 at 10:08 AM
I’m the one who said it’s a good idea.
I don’t really think anyone has a ‘right’ to anything. We’re all random biological entities who justify our actions with intangible ‘beliefs’ about the way things should be. Ah yeah, droppin mad philosophy on Norm’s blog!
You could say that I’m just looking out for the renters, they should not have to put up with living in a illegal suite while paying the price of a legal one.
But really, I just wanna burn the speculators, and drive the housing prices into the ground for decades to come!!!! I’m totally evil like that.
May 2nd, 2009 at 10:09 AM
Crikey,
Perhaps I’m wrong but I hear Mach Too saying, “I will resort to almost any level to bring myself benefit from someone else’s misery.” Naturally, he or she assumes that anyone who owns a property with a suite is either evil, or rich, and in either case, deserving of punishment for their blatant lawlessness.
If every “non-conforming” suite was closed tomorrow it wouldn’t cause a real estate crash, it would cause a great deal of additional pain for renters.
May 2nd, 2009 at 10:09 AM
Okay — this is funny. Sean’s from elsewhere, Crikey’s from elsewhere, Jesse’s from elsewhere — Hey! we have a poker hand! I’m a recent transplant too; I moved here 4 years ago to take a job at U of S.
I’m originally from Vancouver, spent years in TO and several US cities. Never lived anywhere with fewer than a million people before this.
I find it amusing that so many of the sceptics on this blog are from somewhere else! I think Sean nailed it when he pointed out that Saskatoon isn’t itself enough of a draw to keep people here in the teeth of ‘big city’ rents and prices. The only people who know what places like Vancouver, Toronto, Montreal and Calgary have going for them are people who’ve lived in them. It’s also much easier for us to look at the prices in Saskatoon and say “this is insane…”.
I think that the housing costs will kill the goose that lays the golden eggs.
Sean, Crikey’s post is spot-on about everything: rents vz interest, and 40 year mortgages. Also, don’t forget that, of ownership costs, only the mortgage payment is stable (until you refinance in 5 or 10 years) but taxes, insurance, condo fees or maintenance costs, heating & electrical and repairs and renovations all go up. Those are typically 30-40% of the total cost of ownership. Even if your rent goes up 200 a year, you’ll still be ahead if you live on half your salary and bank the rest for a down payment.
Advice is worth what any of us will pay for it, but I can honestly say that I’m not buying because I’m convinced that the market has nowhere to go but down.
I have a feeling that rents will correct, too: the units that were pulled from the market will return to it. And rents are MUCH more volatile than house prices; they are currently skyrocketing, but I doubt that they’ll
keep going up. People panic when they have no place to live, and sign up for more than they can pay, but ultimately salaries are ceilings for rents, and salaries aren’t very high in Saskatoon. If the rents continue to rocket, people who have the option will leave.
I’m also noticing that many of the laughable rents on Craigslist have been replaced by more reasonable ones: the guy who wanted 950 for the crappy 400sf bachelor at 4th and 25th is now asking 650. I’m sure he just intends to crank it up by 300 bucks as soon as the person moves in, but I’m also pretty sure that the person will move out as soon as he does so.
May 2nd, 2009 at 10:10 AM
Oh, and I’m a Vancouverite, and lived in ‘illegal’ basement suites for years and years when a student at UBC. Most suites are illegal, but unless they’re actively unsafe (rare) or cause real hardship for the neighbors (parking) I’d think they’re a good thing, not a bad.
What makes them ‘illegal’ is stuff like low ceilings, small windows, non-separate entrances. None of this makes them unsafe, as such.
May 2nd, 2009 at 10:10 AM
No no no… It doesn’t have to be misery, but misery loves company, so at least they won’t be alone.
Why is it not okay to benefit from Saskatoon renter’s and owner’s misery, but it is okay to benefit from (for example) the third world’s misery? Where’s the cut off?
If I can get ahead by showing the boss that someone else is breaking the rules, why am I the bad guy or gal? Those rules are in place for a reason, aren’t they? Don’t tell me this is really a case of “nobody likes a tattletale”.
May 2nd, 2009 at 10:10 AM
Mach Too,
I see… I mistakenly thought you were being sarcastic.
You may be too young to remember Alberta in the late 1980′s during the oil shocks. The housing market crashed and burned, some condos in Calgary lost 90% of their value, Alberta’s financial sector was in total ruins, the 1987 stock market meltdown resulted in some quite substantial losses. For everyone. People with cash on hand profited from “fire sales”, but that’s about it. Anyone old enough to have experienced what was going on at the time (I was in my teens) does not derive any joy from what happened. As much as I think real estate is overvalued at the current time, real estate collapses are not fun and games.
Norm,
Good call.
May 2nd, 2009 at 10:11 AM
Mach Too,
I didn’t suggest that you shouldn’t do it, or that it would be wrong to do it. I just think it’s, well, not a very smart plan to crash the market.
Good luck crushing your fellow “biological entities!”
May 2nd, 2009 at 10:11 AM
“real estate collapses are not fun and games”
Nope, nor do I think anyone here thinks they are. But I would like to see a quick correction, before there’s too much damage to the city and the province. If people come to count on the value of their house for their retirement, or draw on their equity to make repairs or to give their kids a down payment or to pay credit card bills, or, worse yet, if they lumber themselves with mortgage payments so high that they have no chance to invest or save in any other vehicles — leaving them with their life savings in, as Garth Turner says, “one house, on one street, in one town.”
If prices correct quickly, then those who bought last year will suffer. If they don’t, then many people will suffer, and the economy as a whole will as well.
May 2nd, 2009 at 10:12 AM
jrochest,
Totally off topic, but I’m a UBC grad too. Medicine. Small world!
May 2nd, 2009 at 10:12 AM
Sometimes I just don’t understand you humans.
On another note…
Does anyone know if that sewage lift station to go under Idylwyld bridge is a done deal?
I thought I saw 2 or 3 nice places go up for sale right around there in the last couple of days. Probably just coincidence, but maybe they’re selling before the s**t hits the fan, so to speak. They can apparently be quite stinky.
May 2nd, 2009 at 10:12 AM
Hah! I did my undergrad there, so it’s been quite a while since I lived there, back when Kits was cheap enough for students and dinosaurs roamed the earth.
Graduate work, MA & PhD (which took far longer) was at U of T.
And now I HAVE to get back to work…
May 2nd, 2009 at 10:13 AM
Oh, but one more thing, from the Globe & Mail:
Ottawa has overturned 40 year mortgages, and zero down mortgages, and ‘declared income loans’. And there’s a maximum cap of 45% debt service-to-income, which will be a further dose of cold water on the debt-o-rama party.
All in all, nice. Would have been better earlier, but still, nice.
Oh, and the deadline for the new rules is October 15, which should goose the market a bit before it hoses it down.
People will RUSH to get their 40 year, zero downpayment declared income loans that they can’t really afford before they’re all gone.
May 2nd, 2009 at 10:13 AM
And once again the question comes down to “how much of a correction will we see”.
Personally, I think that unless something drastic happens, things will stay much flatter than people are predicting things will change, at least in the next 6 months.
The economy is still hot in Saskatchewan and we are predicted to lead the nation in 2009.
Maybe the most important aspect is that people are very bullish for the most part, which means they are “feeling good” about the near future in Saskatchewan.
I am not concerned about the next 6 months for real estate though because I think you guys are wrong in that things are going to correct significantly enough in the short term to make much of a meaningful difference.
What concerns me is the long term real estate picture and personally, I think that by the end of 2009, we will start seeing “Canadas real estate market down 10-15% from 2008.
May 2nd, 2009 at 10:13 AM
jrochest,
You’re right, by Jove!! Thanks goodness, this should dampen things right down (by the fall, anyway). Or “hose it down”, if you like.
Here’s the link:
http://www.reportonbusiness.com/servlet/story/RTGAM.20080709.wmortgagestaff0709/BNStory/Business/home
Ottawa revamps mortgage rules
KEVIN CARMICHAEL
Globe and Mail Update, Reuters
July 9, 2008 at 4:36 PM EDT
OTTAWA — The federal government says it will no longer guarantee 40-year mortgages, one of a handful of measures aimed at guarding against a U.S.-style housing bubble.
The Finance Department said Wednesday in a news release that the government will guarantee no mortgages with durations longer than 35 years. The government also will demand a minimum down payment equal to 5 per cent of the value of the home.
“Today’s announcement marks a responsible and measured approach by the government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Finance Department said.
May 2nd, 2009 at 10:13 AM
Phds and economic experts can preach all day long about the drawbacks of longer amortization mortgages. But this I know – if I hadn’t bought my house last spring when prices were climbing, I would have paid an extra 150k for my home at today’s prices. Even if I’m paying an extra 200+k over the life of the mortgage, believe it or not I’m fine with that. Because that option was on the table, and I couldn’t afford a 220K 25yr mortgage at the time. Some others in the same boat as me see it the same way. It’s not stupidity or naivete pushing us into these mortgages. It’s wanting a family home for the next decade or two, in a good location, without worry of increasing rents and shady landlords. And it’s somewhat about respect, because tenants don’t get much of that (unless maybe they’re profs
. So I guess I bought my family’s happiness for a pretty steep price, but it’s cheaper than the alternative in the long run.
May 2nd, 2009 at 10:14 AM
Julie,
“if I’m paying an extra 200+k over the life of the mortgage, believe it or not I’m fine with that”.
If you’re okay with that, why would it bother me?
What does bother me is the fact that people buying houses they can’t afford using traditional mortgages is driving up the prices of housing for everyone else. Looser credit = more “buyers” (you’re really just renting from the bank, btw) = decreased supply = higher real estate costs.
Too bad you feel like you have to “buy your family’s happiness”, though.
May 2nd, 2009 at 10:14 AM
I wonder how this will affect listings.
May 2nd, 2009 at 10:14 AM
Julie:
If you are smart and toss a few thousand extra on that over time, it will come down a lot faster than 40 years anyways.
May 2nd, 2009 at 10:15 AM
Sorry but i just laughed out loud at that link to the article….I want to see how long places stay up on the market after October. It’ll be an interesting thing.
May 2nd, 2009 at 10:15 AM
Well, I suspect this is going to help prevent Canadians overextending themselves credit-wise, while removing a lot of inflationary pressure on the RE market. I’m inclined to think removing a bunch of buyers from a market in the early stages of a correction is going to accelerate price declines, but as jrochest says, there may be a bit of a “RUSH for people to get their 40 year, zero downpayment declared income loans that they can’t really afford before they’re all gone” LOL.
In the long term, this is a great move towards a more stable RE market, I think.
May 2nd, 2009 at 10:15 AM
Mach Too,
Now that’s a smart question.
It’s definitely going to impact affordability.
Crikey,
I notice that the “maximum term” is now 35 years under the revised regulations. I wonder how much of a difference that really makes as far as overextension is concerned. Nice to see a return to a minimum down payment though.
May 2nd, 2009 at 10:16 AM
i wonder how many will realize the magnitude of the changes that will result from the tightening lending standards reported in the article crikey just posted.
real estate may be local, but the money that finances it, is not. right now people with assets all over the world are reexamining risk. i’m not talking about the folks with a few thousand bucks in CDs and hundreds of dollars in the bank. these people generally have auto, student loan and credit card debt, and believe their greatest asset is the soon-to-be-rapidly-depreciating, highly levered box at which they receive their mail. i mean people with money. people who know that the CDIC only insures up to 100K in a particular account, because they have several times 100K sitting in cash. people on whom it is now dawning, that sometimes, return of capital is more important than return on capital. when these people pucker, credit tightens for borrowers. if credit becomes hard to obtain, sales will slow and prices will decline, regardless of whether or not there are still willing buyers. if you doubt this, read about what has happened with banks and borrowers in england in the last year.
for those thinking of buying now, patience may be a very rewarding strategy.
for those worried about rent increases, that also can change quite quickly. the exact same phenomenon occurred in the bubble markets in the states. as house prices jumped in their last parabolic phase, landlords smelled the renters’ panic and desperation, and jacked rents. fast forward a few years, and rents are falling hardest in the recently frothy areas because many flippers are now facing a new steep curve. the learning curve of becoming a landlord. the first concept that new members of the rentier class learn is that being highly cash flow negative on a depreciating asset while credit tightens requires a great deal of intestinal fortitude, and more importantly, deep pockets. sadly, for many of these people, it will also be their last lesson as a landlord.
there are those who are watching this unfold south of the border with a great deal of glee.
before giving ourselves a congratulatory round of smug hugs, notice the first line of crikey’s article. “Canada tightened the rules on government-backed mortgages Wednesday to TRY to avoid the sort of housing meltdown that has damaged the U.S. economy.” While no one knows if we will experience similar declines here, it is far from certain that we will avoid severe hardship.
shcadenfreude is a natural human response, but so is empathy. these are not happy times.
May 2nd, 2009 at 10:16 AM
sorry, that came off as more than a little pedantic.
May 2nd, 2009 at 10:16 AM
haha,
and my fancy german wurd is speld rong.
May 2nd, 2009 at 10:17 AM
s,
Lol. Don’t worry. It’s pretty obvious that you’re brilliant.
May 2nd, 2009 at 10:17 AM
Trust me, being “more than a little pedantic” isn’t a bad thing.
And Julie: trust me, the only difference being a prof made to my last two landlords was the assumption that I would pay bribes to get repairs done and wouldn’t take them to court over the deposit. They were wrong on both counts, of course.
But really, nobody is suggesting that you’re naive or greedy for taking the 40 year amortization. Your motivation is perfectly understandable — you can’t afford the house without the 40 year mortgage.
The problem is that 40 year mortgages made it possible for people to buy more house than they could afford, and helped fuel the bubble. You bought before the nutso price runup, so you’re probably fine, but the people who used 40 year ams to buy at the height of the market will not be.
I don’t think it is cheaper in the long run, though. Far from it. Mithan is right when he tells you to make HUGE payments on it and turn it into a defacto 20 year mortgage.
May 2nd, 2009 at 10:17 AM
Julie,
I understand where you are coming from me and my wife were in the same boat. It was either buy a house or rent a townhouse for $1200 with our 3 kids. Now I would like to see the rent vs buy arguement against my 230k mortgage for 40 years vs renting a townhouse for $1200 with some rent hikes.
p.s.
the sky is falling omg the sky is falling
May 2nd, 2009 at 10:18 AM
Armoth, your crummy town house’s neighbours are likely all on sale for about $300,000 now … so you have a good deal, NOW it is just plain crazy to buy a town house. So many available. I rent a 3 bedroom Lakewood unit for $1000 a month (other friends as low as 800), I think you’re over-estimating at 1200.
You would be better off to invest the difference.
Then again, town houses will get real cheap, real quick, with the huge number available for sale …
May 2nd, 2009 at 10:18 AM
Armoth — you’ve already seen the argument against, shown to you by several of the posters here. If the value of the house drops below what you owe, you’re in deep trouble. That doesn’t happen with a rental.
And I think that this rule change means that you’ll need to make an extra payment and re-qualify when you refinance.
The sky’s not falling, but prices are sure going to.
May 2nd, 2009 at 10:18 AM
jrochest said;
‘But I would like to see a quick correction, before there’s too much damage to the city and the province. If people come to count on the value of their house for their retirement, or draw on their equity to make repairs or to give their kids a down payment or to pay credit card bills, or, worse yet, if they lumber themselves with mortgage payments so high that they have no chance to invest or save in any other vehicles — leaving them with their life savings in, as Garth Turner says, “one house, on one street, in one town.” ‘
Pfft quoting Garth Turner are we? Good luck with that.
Yes, your home WILL help in your retirement. Yes, you can use home equity to make repairs/renovate. Or to help your kids with a down payment. There is nothing wrong with this as long as you know what you are doing. I’m afraid jrochest that you have just passed into the ‘anti-real estate for the sake of being anti-real estate’ phase.
May 2nd, 2009 at 10:19 AM
Yes because being FOR real estate helps sooo many people…that already have it…
May 2nd, 2009 at 10:19 AM
Callum,
“Yes, your home WILL help in your retirement. Yes, you can use home equity to make repairs/renovate. Or to help your kids with a down payment. There is nothing wrong with this as long as you know what you are doing.”
Not if it’s worth less than you paid for it. Or if you can’t make your payments and have to foreclose.
If you bought during the last year, I guess you didn’t know what you were doing.
May 2nd, 2009 at 10:19 AM
With the new changes to mortgages there will be a price decrease but some of the people on here asking for a crash will not be able to get a house. Having an average credit rating wont get you a house having no downpayment wont get you a house. Whats gonna happen when u doom and gloomers finally buy a house if you can it will slowly depreciate from the true lack of demand that will come from these new changes to mortgages. In closing the next 3 – 4 months we will see a definite increase in activity for sales due to the deadline for 40 year mortgages.
May 2nd, 2009 at 10:20 AM
Grrr,
Anyone who bought a house last year with the intention of using equity to finance their imminent retirement is a little short on foresight.
I suspect Callum meant “over the long term.”