Saskatoon real estate: Week in review (March 2-6 2009)
Unit sales of Saskatoon houses and condos fell just short of the fifty mark for the third week in a row, finishing at forty-nine properties. That activity represents a gain of just two units compared to the previous week, and a drop from seventy-eight units when compared to the same week last year. An additional five semi-detached homes brought total residential sales reported to the local MLS to fifty-four.
New listings grew to their second highest weekly level this year as Saskatoon real estate agents brought 135 condominiums and houses to the market, down twenty units from 155 for the same week last year. This was just the second week this year that new listing activity was down on a year-over-year basis. Total active residential listings were up marginally over last week but managed to break the thirteen hundred mark for the first time this year finishing at 1,313 by the close of business Friday. There are 808 single-family homes and 419 condominiums currently offered for sale within the city of Saskatoon.
Click the image for a larger version of the graph.
A lower ratio of sales in higher-priced area 1, combined with an unusually high number of smaller house sales pushed prices down sharply for the week. The average sale price slid from $269,628 last week to just $232,035. The six-week average lost a little over $5,000 compared to the previous week and finished at $276,503, up just under $14,000 from the same week last year, while the four-week median increased to $268,037 from $263,750 last week, remaining up $27,000 from the same week last year when it reached $241,000.
Saskatoon homes sellers submitted sixty-four prices changes over the course of the week. An additional twenty-four listings were cancelled and re-listed, most at a new price.
Click the image for a larger version of the graph.
The average underbid for the week crept back up above the ten thousand dollar mark again to finish at $10,577. Of course the lower average sale prices meant that buyers did manage a larger discount as a percentage of the asking price. On average, Saskatoon home buyers negotiated an offer at 4.1% off of the list price, up from 3.4% last week.
The percentage of sales completed within $5,000 of the asking price dipped sharply from 40% last week to 18%, while the $5,001-$10,000 category gained ground from 34% last week to finish at 45%. The $10,001-$15,000 category grew from 11% to 21%, and the $15,001-$20,000 range doubled from 6% last week to 12%. The larger discounts did weaken some as the $20,001-$25,000 range dropped by more than half from 9% to just 4% of sales. For the second week in a row, no Saskatoon home sellers gave up more than $25,000 as a discount.
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.
Norm Fisher
Royal LePage Saskatoon Real Estate
72 comments so far. We'd love to hear your thoughts.
April 14th, 2009 at 3:57 PM
Norm, do you have any graphs or data showing the total number of MLS listings year-over-year, not just the monthly gains and sales? How many condo sales were reported this week? Just wondering if there was an increase in condo activity that attributed for the lower average sale price or if homebuyers are starting to shop more for what they can afford than what they want.
April 14th, 2009 at 3:57 PM
Jason,
“do you have any graphs or data showing the total number of MLS listings year-over-year”
I have this graph that a friend made that shows total active listings, year-over-year.
http://www.normfisher.ca/images/teamblog/troysgraph.jpg
“How many condo sales were reported this week?”
15 of 49. Same number as last week.
“Just wondering if there was an increase in condo activity that attributed for the lower average sale price or if homebuyers are starting to shop more for what they can afford than what they want.”
I’m not sure that you can make any of these kinds of conclusions based on a week or two of sales. All I can say for sure is there was “a lower ratio of sales in higher-priced area 1, combined with an unusually high number of smaller house sales.” The average house size sold this week was 1,060. The week before it was 1,180. I don’t think that’s indicative of a change in trends, just what happened to happen with these 34 house sales.
Judging by past occurrences, whether up or down on the graph, these spikes tend to bounce back fairly quickly.
April 14th, 2009 at 3:58 PM
That yoy total active listings chart is great, could you post that every week going forward? Thanks!
April 14th, 2009 at 3:58 PM
It’ll be interesting to see what kind of a dance those 6-week average and 4-week median sale prices from this year and last are going to do.
Tango? Swing? Hmm.
Thanks again for all your work, Norm!
April 14th, 2009 at 3:58 PM
Just thought I would say thanks for everyone’s advice. As my renewal date was may 1st I was not able to take advantate or merix’s deal before it expired..without paying penalties to td. Anyway, I had a convertible mortgage and I called TD yesterday and they said they could give me 1 year at 3%, so I took it. Not sure how much lower banks will really be able to go even if rates are cut again at the end of april.
As for housing the Saskatoon market does appear, at least thus far, to be fairly resilient. It will be interesting to see how everything plays out. However, sask is still suppose to lead all provinces in economic growth 1.6 %. So you never know, that combined with low interest rates may keep the market fairly steady.
April 14th, 2009 at 4:05 PM
Lou,
Thanks I would definitely look at including it with my monthly review.
Crikey,
“It’ll be interesting to see what kind of a dance those 6-week average and 4-week median sale prices from this year and last are going to do.”
Tango? Swing? Hmm.
Not sure, but it looks nearly certain that they’ll be getting together sometime in the next couple of weeks.
April 14th, 2009 at 4:06 PM
PS: Your Stats are awesome, everyone appreciates it. I just wish I knew about this blog and you before I bought and sold my last properties in saskatoon.
April 14th, 2009 at 4:06 PM
Bales,
Thanks very much.
Wow! 3%!. You gotta be happy with that if you’re okay with the one-year term.
I see that Scotiabank is offering a promotional rate of 5.25% on a ten-year closed. Bizarre.
http://www.scotiabank.com/rates/mort_rates.html#nha_conv
April 14th, 2009 at 4:07 PM
Rates are bizarre right now.
BOC lowers rate by 0.5% and banks raise their fixed mortgage rates…
Old variable rates are prime minus 1% and new rates are supporting those poor decisions by banks to offer those low rates.
Anyway, as a 1st time home buyer we are perplexed with what to do. Variable??? Fixed??? Bank or Broker???
Norm, would you lock into a 10 year 5.25% rate? 5 year 4.24%? Those seem to be the best rates we can find right now.
April 14th, 2009 at 4:08 PM
I know you asked norm, but locking in is a good idea right now. fixed rates are exceptionally low. if you think you’re buying long term, take the 5.25 for 10 years. If you’re not sure, the five year fixed at least. One thing for sure, rates in five years when you renew, though, will be higher. IMHO.
April 14th, 2009 at 4:08 PM
Kevin,
I agree with Mark that we are headed towards higher rates in a couple/few years time. 10 years is an awful long time though. Remember, regardless of the “fixed term” you choose, if you want to get out of it before the end of the term there will be some penalties so make sure you’re clear on those.
I recently renewed for three years. Starting to wonder if I should have gone longer. I had originally intended to do a five.
RBC was advertising a fixed five-year mortgage at 4% and I know there are others in the same ballpark.
Bank or broker? Personally, I don’t think there’s anything to lose by going with a broker and lots of potential gain. That’s the direction that I go.
April 14th, 2009 at 4:08 PM
Norm, thanks for the active listings chart. I’d also enjoy seeing that on a weekly basis! Question for you: what are the some of the penalties like in attempting to get out of any really short-term mortgages (1-3 years) with low interest rates?
Kevin, anytime you see banks raising interest rates on fixed term mortgages while lowering rates on short-term mortgages it’s a good indicator of where interest rates are headed (low in the near future, much higher in the not too distant future). A 5-year fixed rate at 4% is fairly decent – I agree with Mark that a 10-year at 5.25% is even better, though. I think we’re going to see interest rates spike up fairly high in the next few years and then gradually settle back so as he pointed out, if you’re in this for the long term you need to be thinking along the lines of where interest rates are going to be 5, 10 and even 15 years out vs. what they are currently.
April 14th, 2009 at 4:09 PM
Good TVO interview by Allan Greeg with Garth Turner (www.greaterfool.ca).
http://www.greaterfool.ca/2009/03/07/gregg-does-garth/
While one won’t necessarily agree with everything from Garth’s viewpoint, he does touch on a few key points, one being that we’re on the verge of another change in society (not unlike the Great Depression) where an ‘age of excess’ will cease to exist and frugality and self-sufficiency become the new normal.
April 14th, 2009 at 4:10 PM
Kevin and Jason,
Are banks raising rates on fixed term mortgages? I’ve been following them fairly closely as my renewal was coming down. They seem to be getting lower to me.
Jason,
A penalty equal to three months of mortgage interest is what’s most typical for early pay outs. Some mortgages might have an “interest differential” clause which would essentially make you responsible for the difference between what you agreed to pay and what the lender can get for the money in the current market.
April 14th, 2009 at 4:14 PM
Norm, not that I’m aware of – I was merely pointing out that if (when) you see short-term rates going down (or stabilize) and long-term rates going up, that’s usually a good time to start looking at a longer, fixed-term mortgage. With the “interest differential”, does that work in reverse too?
The most interesting mortgage I’ve seen originated in the UK (HBOS). The interest rate consisted of the base rate -0.76 points. The article dates to Dec/2008, but the Bank of England rate is now 0.5%, so not only do they have an interest-free mortgage (for the time being), but the bank is paying them 0.26% per month!
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/3567585/Tens-of-thousands-of-home-owners-could-have-their-mortgage-paid-by-banks.htm
April 14th, 2009 at 4:14 PM
Jason,
“Good TVO interview by Allan Greeg with Garth Turner”
His views come off as far more reasonable on television. No “squirrel” talk probably helps.
“I was merely pointing out that if…”
Gotcha
“With the “interest differential”, does that work in reverse too?
”
Good one. I would say though that lenders have been far more flexible and accommodating in recent years. It’s often easy to avoid a payout penalty if you find yourself in a position where you have to move. The ability to “port” mortgages is a huge plus and “pre-payment” options have really improved a lot. They get a bit of a bad wrap sometimes for not wanting to change the terms of agreements.
April 14th, 2009 at 4:15 PM
Thanks for the feedback Norm. We are torn between a 5 year fixed and a 10 year fixed given that rates may rise. Leaning toward locking into 10 years just for the security of a fixed payment.
In response to your question, yes, some banks are raising their 5 year fixed rates in response to the BOC cuts.
Some of the major banks 5 year fixed was 4.49 or so and now is 4.72 – 4.79 after the rate cut of .5%. None of them LOWERED their rates from what I have seen. Somebody correct me if I am wrong there.
I understand interest rates long term are a complex issue but it just seems so wrong for the banks to not make a cut in the fixed rates!
April 14th, 2009 at 4:15 PM
http://www.normfisher.ca/images/teamblog/troysgraph.jpg
Very interesting graph.
Puts in perspective just how much listings are up year over year.
2009 see way more inventory for sale than any of the last several year for this time. with the trend suggesting inventory wise inventory will eclipse last year – while sales remain down.
Looks like the 6 week average will be down year over year in a couple weeks. Wonder how long before news agencies report with straight forward head lines like “Prices Down Year Over Year” “Saskatoon real estates inventory climbs, while sales fall” “Saskatoon prices are expected to slide further on volume of listings” etc.
April 15th, 2009 at 9:08 AM
Kevin, all I know for sure is I watched TD fairly closely and they dropped their 4 year posted by .25 (to 5.44) and kept their 5 year the same. That being said those are there posted rates and I don’t know what their actual margins are doing behind the scene.
I should also say norm that I too think interest rates will go up, (there is really no where else to go) but how fast will depend on how this all plays out.
I myself am military, and I expect to be moving again in the next year or two, that is the only reason I went so short a term. I am hoping if I am posted next summer rates are still relatively low and I can lock in at a decent price.
Kevin my advice to you would be to look at the interest you would be paying each month on the 10 year and the 5 year and then consider if that extra over the first 5 years is worth the insurance of the 10 year fixed rate. Keeping in mind the money you save in the first 5 years you may need to pay in the next 5 years at your most likely higher interest rate. But you never know what options will be available at that time. It of course also depends if you plan on making any lump some payments as well. Anyways, thats my advice, for what it is worth.
April 15th, 2009 at 9:08 AM
Norm, yes, I think Garth tends to moderate his views a bit more on radio and television. It’s refreshing to see that lending standards have eased a bit. I remember a time not so long ago when it was next to impossible to obtain a mortgage – let alone have any flexibility with the terms.
Nick, it certainly is (thanks again for posting that Norm, I hope it becomes a regular weekly addition!) I give it 3 months before we’re seeing negative headlines in the news media.
April 15th, 2009 at 9:09 AM
Kevin,
Their posted rates might be the same or higher but I think most of them are running “promotions” like the Royal’s 3.99% five-year and Scotia’s 5.25% ten-year. These are definitely drops from what’s been available recently.
On January 14, I received the following renewal options from MCAP.
1 year closed – 5.6%
2 year closed – 6.25%
3 year closed – 6.25%
4 year closed – 6.45%
5 year closed – 6.75%
10 year closed – 7.35%
These rates seem laughable just two months later. Don’t worry about what the “posted rate” sign says. Get a broker to look around for you and you’ll find that there are plenty of rate offerings that will meet your needs. Figuring out what the needs are might be tougher though (5 year vs. 10 year)
Nick,
You are a busy spinmeister today. You’ll have to submit those headlines as suggestions.
Jason,
I like the graph too but because it’s “month-over-month” I think I’ll include it with the monthly stats. Seems silly to post a graph that only changes once a month, four to five times a month.
April 15th, 2009 at 9:10 AM
Funny thing is if I was a baseless booster, New Talk or Global would probably give me a job yelling loudly at any one who pointed out kinks in Saskatoon’s armour or using random immigrants to Saskatoon as a representative sample of booming inflation – who needs Stats Canada’s numbers when we can find a new resident on the street?
Maybe I should get a job recruiting for the Alberta Advantage! Is cheaper (given better average wage) to buy in Edmonton – and cheaper significantly to rent in Edmonton (most Canadian cities) than Saskatoon!
April 15th, 2009 at 9:10 AM
Norm, I’m once again reading, hearing and seeing a lot of real estate propaganda. The latest batch is aimed at the segment of the market who has become more “conservative” and how they should essentially open up their wallets to buy a new home, refinance or complete a renovation. What’s next? It’s our patriotic duty to enter the housing market?!
This is fast becoming (if not borderline) absurd. No disrespect intended, but your industry (realtors, bankers and developers) would be well-served by maintaining a lower profile, eliminating the advertising and propaganda and quietly downsizing and scaling back to 2006-era levels. The number of tradespeople, realtors and developers is not sustainable with current market conditions, anyway.
Speculating on houses as an investment (rather than the more important aspect as a place to live) is what got us into this mess in the first place, and we’re not going to be able to buy our way out if it, either. It’s time to let the market correct naturally, and if need be, crash back to 2006-era levels. The sooner this happens the sooner things will start to improve, and all these efforts to artificially inflate the market in the interim are simply prolonging the inevitable.
April 15th, 2009 at 9:10 AM
Norm, “Seems silly to post a graph that only changes once a month” – famous last words! We’ll see how much inventory moves this summer! (monthly is fine although I’d suggest perhaps reformatting it to the same format of your other graphs to make it more consistent and easier to read).
Nick, if you were big into “boosting”, I think a change of locale would be in your cards for the future… (I wouldn’t want my name/reputation associated with “there has never been a better time to buy!” for all the tea in China…)
April 15th, 2009 at 9:12 AM
Nick,
“Funny thing is if I was a baseless booster, New Talk or Global would probably give me a job yelling loudly at any one who pointed out kinks in Saskatoon’s armour or using random immigrants to Saskatoon as a representative sample of booming inflation”
Yes, you’re probably right. I’m only laughing because my Blackberry was going crazy there for awhile. Turns out it was just you writing the same thing over and over on three different posts.
Jason,
“Norm, I’m once again reading, hearing and seeing a lot of real estate propaganda.”
You certainly have that correct. I can only imagine that they must actually believe it. Surely they’re aware that their words will outlast them. Real estate people were almost wetting their pants with excitement because CNN wrote a story about our fine province. Check this out.
http://tinyurl.com/bdg99o
“all these efforts to artificially inflate the market in the interim are simply prolonging the inevitable.”
Don’t worry. It won’t work. There has never been a time, at least that I’m aware of when the fundamentals were more likely to drive the market. This correction will be over when it makes as much sense to buy as it does to rent and we have been moving in that direction rather rapidly for months. Recent interest rate cuts are also helping. Some of the most bearish here having been talking summer/fall as a potential time to purchase. I expect it won’t be long before one could make a reasonable argument that a buy isn’t such a bad idea. I expect that it will still be met as “spin and self-serving propaganda. ” Mean time, sales seem to be willing to continue at a reasonable “pre-boom” rate, and you’re right, we should thank our lucky stars.
Struck me as interesting that Garth Turner recently purchased a property. Seems even the most skeptical could make a buy at a time that is “a bad time to buy” under the right circumstances.
“Norm, “Seems silly to post a graph that only changes once a month” – famous last words! We’ll see how much inventory moves this summer!”
Don’t get me wrong. I’ve said I think “inventory will explode” this spring and everything seems to be leaning in that direction. I was not thinking that there wouldn’t be enough growth to justify posting a graph, but rather, there is no historical record for active listings on a weekly basis. I’ve been keeping track of those in the weekly review for about a year but there is no other recorded history going back any further. It’s only available as month end numbers.
April 15th, 2009 at 9:16 AM
I don’t think I’ll ever be a “there has never been a better time to buy” (especially not now!).
I like to think of my self as a realist.
Hence the move to Regina,
gotta live some where,
might as well live in the closest, most similar and most affordable alternative available at the time. That said, even though Regina is more affordable than Saskatoon, doesn’t mean it makes any sense to buy in either market right now!
April 15th, 2009 at 9:16 AM
Norm, that’s hilarious (and yet scary) on so many levels… I don’t know where the “1000′s of jobs” were to begin with, nor do I see how 5 million unemployed Americans desperately clicking on any link that says “jobs” translates into a mass influx of people. Harry is clearly operating on an alternate plane of reality…
This is only the first cycle of housing price declines… when interest rates spike affordability will go out the window and within a year of that we’ll see a second wave of foreclosed and unaffordable homes hit the market. I think the Fall/Winter of 2010-2011 is going to be close to the bottom. We’ll see, though…
I suspect Garth got that property for an outright theft, but it sounds like fairly extensive renovations are going be required. Maybe it’s next to a wildlife preserve…
We seem to be averaging a net of about 100 new listings per month, so it will be interesting to see how the cycle of fear plays out with inventory for the remainder of the year…
April 15th, 2009 at 9:17 AM
“nor do I see how 5 million unemployed Americans desperately clicking on any link that says “jobs” translates into a mass influx of people.”
Oh, it’s going to be huge.
I could actually see us getting some action from illegals. They will actually move to find a job.
In any case, it seems to me that it would be far more productive to tell people, uuuum, the facts. It would be easier to convince sellers that they need to step up and put some effort into bagging a buyer, since there is endless amounts of strong and nearly irrefutable evidence to support the position. Instead, we want to convince buyers who can’t afford a home, and can’t get a loan for one, to get out there and buy one while they still can’t afford it because it will only get worse if they wait. Hang in there sellers!
Still, I trust that the market will eventually find it’s footing. As Crikey would say, “you just can’t fool Mr. Market.” Not for long anyway.
April 15th, 2009 at 9:18 AM
The price to buy a house in Saskatoon does not make sense. For a city that advertises affordability, it is really quite expensive. The big supply of available housing growing is proof enough that Saskatoon is just too expensive to move to. Or stay in. Young people should seriously look at other Canadian cities. Despite home grown fear mongering, most places in Canada are cheaper and safer to live in. If you don’t like Caledon Ontario you can always move back. Not like prices in Saskatoon are going back up anytime soon.
April 15th, 2009 at 9:20 AM
Nick, the graph is good, but do we have to cook the books to prove a point. According to Norm’s week in review numbers, for end of each month.
December 2008 ended with 1121 listings not 1127
January 2009 ended with 1124 listings not 1156
February 2009 ended with 1298 listings not 1313
It’s in print just review Norm’s posted numbers form last “week in review” for each month.
April 15th, 2009 at 9:20 AM
I think there’s more entry level buyers coming onto the market as interest rates are low. The more high end expensive properties will now be the ones the suffer and sit on the market. This will intern bring down the average sale price of a single family home in Saskatoon. I think there could be slight increase in 1 & 2 bed condo sales in the coming months.
April 15th, 2009 at 9:58 AM
from an unspecified other real estate blog
“Another bonus is that, should you wish to make changes to your revenue property, tradesmen who do renovations aren’t as busy as they used to be. As a result, these tradesmen are now answering their phones on the first ring, showing up when they say they will and offering much more competitive pricing.”
I guess it’s a good time to buy, because since the market is weak, you can get all the reno’s you want, on your depreciating asset…
I’d have thought that all these extra tradespeople should mean some one could build an affordable condo on schedule?
April 15th, 2009 at 9:58 AM
Tim, without looking at the numbers, Norm has pointed out in the past how he himself has different numbers, one total, one only condos and houses (excludes duplexes and trailers) … the graph is good for showing a general trend of a substantially higher than normal supply of residential listings for sale. Not exactly a precise science.
Stoon, hopefully those entry level buyers weren’t scared in by “buy now” tactics and have enough money and planning long enough term that they can afford a Potential drop in prices (I personally think very likely drop).
April 15th, 2009 at 9:59 AM
Tim you know it’s not my graph right? Just posted the link from above to show what I was commenting on.
April 15th, 2009 at 9:59 AM
The much talked about graph:
http://www.normfisher.ca/images/teamblog/troysgraph.jpg
April 15th, 2009 at 10:00 AM
Nick I actually think prices will go up next year, people tend to get tunnel vision when looking at all these weekly stats. This spring will be an “ok” spring in regards to sales. Of course nothing like 07′ and 08′, but all things considered things could be much worse with happening throughout the rest of Canada and the States. I do however think 2010 will be a better year then 2009 for sales. Saskatchewan is an un tapped goldmine especially when it comes to oil. And oil is King even if the price per barrel is down now, it will go back up once the economy goes back. And everyone will be running to Sask with their shovels ready to dig out that precious “black gold”. So the way I look at it. Investing in Saskatchewan real estate is a good thing especially if you can hold your revenue property for 3-5 years.
April 15th, 2009 at 10:00 AM
Tim,
The graph shows month end numbers for “total active residential listings” as reported by SRAR. While my weekly posts typically cover just condos and single-family homes, you’re correct in pointing out that I also usually include an update on total active residential listings, though it’s seldom precisely at that ‘month end’ point. For instance, my last post in February was 2/27. I suspect a few listings may have gone from conditional status back to active, and perhaps a few were added on the following Saturday moving them from 1,298 to 1,313. These numbers can change a fair bit from one day to the next. By Sunday I think we were back to about 1,255.
April 15th, 2009 at 10:00 AM
I agree Stoon. Tunnel vision is what got us into the economic mess, and tunnel vision will eventually lead us out. People will eventually realize the sky is not falling and will resume normal spending habits. Just takes time.
There were ‘realists’ on here talking about deflation a few weeks back. Here is what Buffet had to say, as you can see he is not worried about deflation but rather inflation (from bnn.ca):
——–
Warren Buffett said Monday that the U.S. economy had “fallen off a cliff” and eventually would recover, although a rebound could rekindle inflation worse than experienced in the late 1970s.
——–
My advice is buy or refinance now and lock in those low interest rates! They soon will be gone!
April 15th, 2009 at 10:01 AM
“People will eventually realize the sky is not falling and will resume normal spending habits.”
Define ‘normal’.
If you consider the consumption-driven spending of the last decade, and people spending more than they make (or can hope to pay off) to be ‘normal’ then I guess we have different definitions of the term.
What was it that was so awful about the North American standard of living in 1995, 1985, or 1975 that people are so terrified of ‘regressing’ to those levels?
April 15th, 2009 at 10:02 AM
Stoon, except the weekly sales are flat. While there may be an increased demand at certain price points, this will most likely occur in the range of the lowest-priced single family homes. Condominiums risk the same accelerated devaluation as more expensive properties, but for a different reason: oversupply.
John/Stoon, cheap, widely-available credit and reduced lending requirements are what got us into this mess. The only “tunnel vision” was the thinking that housing prices would continue to climb indefinitely. We will never return to “normal” spending habits; those days are over. And until housing prices return to around 3x income things aren’t going to stabilize.
I’d be more worried about deflation: your money may be worth more, but everything is going down in value (prices, wages)… except debt, which then becomes more expensive to pay off. And then imagine if we suddenly have high interest and rapid inflation; wages and salaries are not going to be able to keep up.
April 15th, 2009 at 10:02 AM
Bookrat, “What was it that was so awful about the North American standard of living in 1995, 1985, or 1975 that people are so terrified of ‘regressing’ to those levels?”
Exactly! What’s wrong about ‘living within your means’ or ‘saving for a rainy day’? This “age of excess” is fast drawing to a close! Being frugal, grinding on deals and penny-pinching are going to once again be in vogue. I think this twist on an old expression sums it up best:
“He who dies with the most toys… still dies.”
April 15th, 2009 at 10:02 AM
Nick, “Wonder how long before news agencies report with straight forward head lines like…” – apparently you didn’t have to wait very long…
Housing starts see huge year-over-year drop
http://www.thestarphoenix.com/Business/Housing+starts+huge+year+over+year+drop/1370178/story.html
Housing starts down 86.3% year-over-year with 57 vs. 376 housing starts. I’m feeling a bit “bearish”.
April 15th, 2009 at 10:03 AM
Wow!
April 15th, 2009 at 10:03 AM
I’ve heard comments about Saskatchewan’s oil similar to what Stoon/John are talking about.
My friend is convinced that when the gold/oil/whatever is tapped into that housing prices are going to skyrocket again.
Have any of you heard similar arguments? Is there a possibility of that happening?
April 15th, 2009 at 10:03 AM
cyn_d,
I don’t beleive that Saskatoon will be very impacted from oil in the province. Other parts of the province forsure, but highly unlikely in Saskatoon. You have to be close to oil for real estate to go up, or at least be in economy/commodity trading driven city. Oil business headquaters are not going to move from Calgary to Saskatoon, so people with this inclination that oil will drive Saskatchewan, I hope your right, but I’m guessing your wrong.
April 15th, 2009 at 10:04 AM
cyn_d, regarding oil, the US has almost filled their strategic reserve to capacity. Land-based oil storage facilities are at capacity and oil producers have started storing oil offshore on floating supertankers. Even with demand for oil from China (etc.) increasing, we still have to resolve the issue of quite a bit of supply before we see oil prices increase, ie: we’ll have to literally burn through the excess inventory, reduce production in existing wells (either artificially or through natural declines over time) and increase demand.
As for gold, there are two popular scenarios. The first is that we’re going to see a massive move to gold as a safe haven (this requires deteriorating economic conditions), in which case the price could skyrocket upwards of $2,000/ounce; that would push stocks in gold companies up as well. The second is that gold has peaked, and that we might see a drop back down to the $500/ounce range; this would probably depress the commodities market further.
With respect to housing prices, readily-available credit in the form of “creative” mortgages combined with lots of speculation caused the current housing “bubble”. I use the term bubble because we have far exceeded the level of affordability in the current housing market and are due for a potentially massive correction, ie: a return to 2006-era levels. Add-in the possibility of deflation and then hyperinflation and you could see high interest rates, increased unemployment, lower wages and a higher cost of living lead to further affordability issues and decreases in housing prices.
April 15th, 2009 at 10:07 AM
John,
You may be right eventually, but I seriously doubt that inflation is going to be a worry any time in the near future. Yes, money supply is indeed soaring, but destruction of bank, business and consumer balance sheets is happening faster. Governments may be able to print, but they cannot spend- only consumers can do that. Earnings are sinking, unemployment is rising, and we are unwinding the biggest debt bubble in history. Can you tell us why central banks around the world would be slashing interest rates if they were worried about inflation in the near term? I just can’t see how the current consumer and employment environment can support an increase in home prices, but if you do, please do tell us what it is. Is this global economic environment creating jobs, or are they being lost in numbers we haven’t seen in decades? Wage price spirals happen when corporations get into bidding wars over employees, not when they are shoving them out the door by the hundreds of thousands. What are the chances of the average consumer seeing an increase in wages to support a rise in home prices (or anything else) anytime soon? This bears repeating: even in a historically low interest rate environment, prices can not rise above wage growth over the long haul. The answer to an excess of debt is not more debt. The answer to a debt bubble is not another debt bubble. Show me rising wages and I will accept that inflation and a rise in house prices might be a possibility. I see no reason to believe rising wages are about to happen and although slashing interest rates may (for some time) continue to support consumption, it can’t be maintained indefinitely.
Having said that, I think we can feel very encouraged by the fact that our banking sector appears to be strong in comparison to many countries, and in particular that this region of Canada appears to be holding up well so far. But let’s not get too far ahead of ourselves, please.
April 15th, 2009 at 10:08 AM
Crikey, all excellent points. I wanted to revisit one of your earlier posts where you linked to an article on inflation/deflation (http://tinyurl.com/c592oe). One of the more interesting points the author made was this one:
“Collapsing property values simply are not synonymous with hyperinflation. So inquiring minds might be asking: Did we already have a hyperinflation (of credit) and is a hyperinflation by monetary printing going to follow?”
To that I would only add that the Bank of England just printed (not borrowed) £150bn last week to inject into their economy. And when countries (such as the US) lose the ability to raise capital through debt offerings, the only recourse left is to start the printing presses.
So the question I would pose is this: with interest rates almost as low as they can possible go, what options will government have to then counter rampant hyperinflation once they start expanding the money supply? Further, how will this impact businesses and consumers alike?
April 15th, 2009 at 10:11 AM
“but I seriously doubt that inflation is going to be a worry”
I am inclined to believe Warren Buffet over you. Sorry…however, to further that thought, I don’t think inflation has anywhere to go but up with this low of interest rates. Once the machine gets rolling…
================================================
cyn_d…you should be very skeptical of anyone who tells you the following:
“I don’t believe that Saskatoon will be very impacted from oil in the province. Other parts of the province forsure, but highly unlikely in Saskatoon. You have to be close to oil for real estate to go up”
It seems clear enough to me that oil in a province that is the 2nd largest producer of oil in the country is already having a large impact on real estate. Never mind looking into the future.
==================================================
Jason, if all we created was a ‘bubble’ due to speculation than the relative historically large population growth and for once a growing year over year population must have been all pretend? Surely some of the boom was real? or was it all a bubble pipe dream??
The speculation spurred alot of interest yes. But the speculators are correct. At $100+/barrel oil, Saskatchewan is going to take off. Oil prices got dragged down so things slowed down faster than expected due to the states meltdown. But if oil would have stayed @ $130/barrell we would still be going full steam ahead. It is a no-brainer. Alberta as well, give them back $130/barrel oil and they are booming again. It is not rocket science.
If we see $130 oil in the next few years Saskatchewan is going to take off again. Guarantee it.
April 15th, 2009 at 10:11 AM
John,
I find Buffet quite endearing, and I didn’t say inflation (hyper or otherwise) isn’t going to happen. So he will be right, just not for awhile. The momentum is just too strong in the opposite direction for the time being. Unfortunately, you didn’t answer any of my questions about how you see this inflation happening in the near term. Too bad, I was looking forward to it.
“But if oil would have stayed @ $130/barrell we would still be going full steam ahead.”
Why do you think demand destruction occurred? Deflationary pressures, perhaps?
“If we see $130 oil in the next few years Saskatchewan is going to take off again. Guarantee it.”
Uh, okay.
April 15th, 2009 at 10:12 AM
John, you’re misquoting; the exact quote was “You may be right eventually, but I seriously doubt that inflation is going to be a worry any time in the near future.” Emphasis on ‘near future’.
There is absolutely ZERO relation between the price of oil and real estate in Saskatoon, or for that matter, any other commodity. On the other hand, there’s a pretty good correlation between speculation/creative mortgages and the price of real estate…
Relatively large historical population? You mean the gradual return to our pre-Saskatchewan exodus level? Yes, there’s no question we’ve been fortunate to have a period of economic prosperity. If you’ve lived in this province long enough, you’ll also remember that stretches of drought, economic decline and year-over-year deficits are common, too.
There are a lot of “if’s” in your last statement. And “if” people had continued to spend, live and consume well beyond their means, we’d be looking at a disaster of biblical (instead of historical) proportions here. Will oil return to $100/barrel+ someday? Probably. Will that save the speculators in the Saskatoon real estate market from losing a ton of equity? Probably not.
April 15th, 2009 at 10:12 AM
John,
$100 + barrel of oil does not benefit the majority of people in this province. It creates some jobs, but it really justs lines the pockets of a few at the top while fleecing the rest.
When crude oil was over 140/barrel I knowed I paid a lot more money at the pump than I will be getting back due to the tax cuts because of the oil revenue.
A nice little chart for oil prices
http://www.inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart.htm
April 15th, 2009 at 10:12 AM
High oil prices are good for our province George, people need those jobs and the rest of the province loses out on taxes with the slow down in the oil patch.
April 15th, 2009 at 10:13 AM
George,
Higher priced oil was a huge benefit for Saskatchewan. The debt we paid down and the extra 3 billion we were able to set aside to get us through this time. Didn’t we all get an income tax break? Look what oil did for Alberta. I would agree that the impact on home prices is pretty marginal.
April 15th, 2009 at 10:13 AM
this friggin sucks for us!
“the US has almost filled their strategic reserve to capacity. Land-based oil storage facilities are at capacity and oil producers have started storing oil offshore on floating supertankers. Even with demand for oil from China (etc.) increasing, we still have to resolve the issue of quite a bit of supply before we see oil prices increase, ie: we’ll have to literally burn through the excess inventory, reduce production in existing wells (either artificially or through natural declines over time) and increase demand.”
April 15th, 2009 at 10:13 AM
Stoon you gotta be kiddin me?
Black gold isn’t going to help Saskatoon.
Good for the province.
All the good stuff’s down south.
Prices go up here?
Bet everyone moves to Estevan from Saskatoon for jobs if oil prices go back up.
April 15th, 2009 at 10:14 AM
“cyn_d…you should be very skeptical of anyone who tells you the following:
“I don’t believe that Saskatoon will be very impacted from oil in the province. Other parts of the province forsure, but highly unlikely in Saskatoon. You have to be close to oil for real estate to go up”
It seems clear enough to me that oil in a province that is the 2nd largest producer of oil in the country is already having a large impact on real estate. Never mind looking into the future.”
—————————————————–
John, I would be interested in your proof of the correlation between the price of oil and housing prices in Saskatoon or Regina for that matter. I can see how there is some correlation as when oil is priced high and drilling is up, there is more money flowing into the province overall which creates spin off effects to more people than the oil company workers. However, to say that the level of oil sales in Saskatchewan will directly cause an increase in real estate is misguided in my opinion. Drilling in this province will mostly focus on the Balken region near Estevan. With the increase in people coming to that region to work it is logical to presume the demand for loding will go up and will cause prices to increase. However, for the same to happen in Saskatoon you would have to have a large influx of people moving to the city and I’m not sure why this happen because of an increase in drilling activty around Estevan. I agree with whoever posted it, I do not anticipate many oil companies setting up offices in Regina or Saskatoon if they already have an office in Calgary. The move would be too costly and the vacancy rates for office space, in downtown Regina at least, are too low to make it attractive for a rush of new companies to set up shop here. So while there may be a few junior oil & gas companies created in one of our two larger centres, I don’t think it will be enough to say that increased oil drilling/prices will have a direct effect on the price of real estate in Saskatoon/Regina.
I do however think that an increase in available credit, declcines in mortgage rates, and the general easing of restrictions on who can get a mortgage have a direct impact on the price of housing. That makes sense from a supply/demand perspective as the degree to which the above factors make it easier for more people to get a mortgage, the more demand there will be for a mortgage.
Although I will give you this, as was seen in the run up to $150 oil, supply/demand does not always make sense as the bulk of the oil boom was formed from artifical demand fueled by hedge funds and pensions gambling on the price of oil futures.
April 15th, 2009 at 10:19 AM
Regina would benefit a bit, it does have oil company regional offices, but more important, it is the shopping center and weekend hang out for young well paid workers from Estevan. Best Buy in Regina would be way busier if oil prices pick up.
April 15th, 2009 at 10:19 AM
Norm, yes, look at what oil did for Alberta: their first deficit in over 15 years. That’s quite an accomplishment!
All jesting aside, those tax revenues came on the backs of consumers and businesses, and I can’t imagine what the long-term damage or effects would be… Actually, I can: the property reassessment/taxes on my (former) home went up 58% this year (and that’s only to 2006 values!!) I wonder how many municipalities (including Saskatoon) are going to face near bankruptcy as a result of these huge infrastructure buildouts…
Rigger, read the latest copy of National Geographic and let me know if the quest for oil was worth the long-term environmental devastation we’ve wrought in Alberta. Terms like “desolate” and “wasteland” come to mind. The only thing beneficial with high oil prices is that we were finally seeing investment and development of alternative fuels in the form of clean diesel, electric and hybrids and fuel cell technology.
April 15th, 2009 at 10:19 AM
“There is absolutely ZERO relation between the price of oil and real estate in Saskatoon, or for that matter, any other commodity.”
Wow…
That was quite a statement. Your saying that if oil, wheat, potash, etc. went through the bottom, real estate prices would not be affected even though thousands upon thousands of people province wide would lose their jobs? You believe there is ZERO correlation between the two?
Wow…that would be impressive. You have quite an interesting view on the economy.
April 15th, 2009 at 10:20 AM
Jason,
I was thinking more along the lines of taxes and incomes. I hear a fair bit of chat around here about how great the money is in Alberta.
I read the story from NG. Some of the images are just brutal. Here’s a link to the story for anyone interested in checking it out.
http://ngm.nationalgeographic.com/2009/03/canadian-oil-sands/kunzig-text
April 15th, 2009 at 10:20 AM
John, yes, that’s exactly what I’m saying: the price of commodities is not directly tied to real estate. If, as you suggest, every industry in the province were to collapse, I would then theorize that we’re talking about a depression at which point the economic effects would be felt at every level (including housing). But that seems a lot different than suggesting that obtaining a high value for one type of commodity invariably leads to higher real estate values.
Norm, it remains to be seen if lower income taxes and reductions in PST are sustainable; I know property taxes didn’t go down this year…
April 15th, 2009 at 10:20 AM
“So the question I would pose is this: with interest rates almost as low as they can possibly go, what options will government have to then counter rampant hyperinflation once they start expanding the money supply? Further, how will this impact businesses and consumers alike?”
Jason,
http://en.wikipedia.org/wiki/Hyperinflation
Here’s some historical context (which you’ve probably already well aware of
), but I’d be careful extrapolating what happened in the past to the present. I’m not sure that that governments will have to do much of anything to counter inflation in the near term, however- there is just too much debt to unwind. I’m sure you’re aware that very high inflation can cause great difficulty for consumers, especially in the short term, because wages may not keep up with the declining purchasing power of the currency. It can also cause a crisis in other industries such as banking (the money the bank gets back may be worth far less than the money it originally lent out). I tend to think that bankers are well aware of this, and will lean on governments hard to prevent this from happening (it’s not like the banking system hasn’t had their share of crises lately, either…). Whether or not they will be successful, and to what degree, remains to be seen.
April 15th, 2009 at 10:21 AM
Crikey, I definitely agree that we’re in uncharted waters here. Even when one references the Long and Great Depressions there are differences. I’m concerned that we’re headed toward a period of deflation and that in the process of trying to counter it we actually trigger rampant inflation.
April 15th, 2009 at 10:21 AM
Crikey, they will raise interest rates to slow the economy and reduce the amount of money entering the system. Thus putting the brakes on inflation.
With interest rates so low, and entering new waters for cash injections from countries all around the globe, the question to be asked is when the economy gets going on all cylinders, how high will interest rates need to go to stop it?
It should be noted that the Feds are also selling treasury’s to try and offset inflation risk. Experts are undecided if this will help.
Deflation is when the inflation rate drops below zero. They were wondering if that would happen in the states last year already, but according to many experts that is no longer a concern. They are much more worried about hyperinflation.
April 15th, 2009 at 10:22 AM
L.oki,
Deflation is actually a contraction in the money supply. The consequence of a contraction in the money supply is lower prices. Money supply up or down is the cause of either the inflation or deflation. Not the other way around.
Secondly, inflation as has already been discussed does not have to result in growth. Any growth that would be seen would be growth in nominal terms not real terms.
Nix
April 15th, 2009 at 10:22 AM
Nix,
I’m not sure what your talking about…sorry. Did you read my whole post?
Deflation is a contraction in money supply (i.e. a negative inflation rate)
I wasn’t talking about inflation growth in this post so I’m not sure what you are referring to…
-
April 15th, 2009 at 10:22 AM
L.oki,
My argument was with this statement: “Deflation is when the inflation rate drops below zero.” (False)
Your statement should have read: Deflation is when there is a contraction in the money supply.
ie) inflation or deflation is a consequence of a increase in the money supply or contraction in the money supply.
Therefore, inflation or deflation is a symptom of the money supply not the cause.
Nix
April 15th, 2009 at 10:23 AM
**cough** **cough**
ermm….Nix…that is what I said…when the inflation rate drops below zero you have a contraction in money supply, called Deflation.
Anyways..i’m sure we are all clear on it now
Thanks
April 15th, 2009 at 10:23 AM
“when the inflation rate drops below zero you have a contraction in money supply”
I think what Nix is trying to say is this:
Inflation and/or deflation are terms used to *describe* what is happening with the money supply, it doesn’t *cause* what’s happening with the money supply. Your sentence above seems to indicate the opposite.
April 15th, 2009 at 10:23 AM
I am a first time home buyer, and I was just curious if laywer fees were more expensive taking out a mortgage from out of province? For example, do they charge more for all the faxing they have to do with title or occupancy certificate?
Thanks to anyone who can help!
April 15th, 2009 at 10:24 AM
Lance,
Typically your legal costs will include fees (charges for the lawyer’s service), and disbursements (monies paid for outside services on your behalf). If there are additional costs involved in taking a mortgage with an out of province lender you should expect to be billed for those. That said, I would think that they would be very marginal. I wouldn’t think it would amount to more than the cost of a couple of courier packages.