Saskatoon Real Estate Resource Centre Blog

The inventory numbers are pretty striking, as are the underbid/overbid numbers. It's nice to see some sanity returning, even if I'm two or three years away from buying anything.

A question, Norm -- when you say that agents are re-listing properties when there's a price reduction, does that imply that the same property is counted twice?

Wow, I'm surprised underbids are still that low!  I suspect they'll be higher next week and overbids will be down.  We'll be over the 1000 inventory mark for sure!!!  :'D

an interesting bit of inventory trivia for buyers to chew on...

data is for city of saskatoon

may 9.07 there were 45 sfh (ex condos) priced 300K+

may 7.08 there were 427 sfh (ex condos) priced 300K+

happy shopping

try not to cut your fingers

I wonder how much psychological importance 1000 listings will have. Like, will that scare some people into selling?

Norm, when was the last time there was 1000+ properties on the Saskatoon market?

here are some tales that I've heard coming out of alberta...

1.  Heard from a friend that his friend listed his house in calgary.  They bought during a bidding war period and consequently weren't able to get an inspection done.  They went to sell it and failed the inspection.  I wonder if this will happen here in a few years when those who purchased last year during our bidding wars also weren't able to get an inspection.

2.  I have a friend who owns a home building company in Lethbridge.  They are a small outfit carrying about 15 houses a year.  They've sold one in the last 6 months and have dropped the rest by 30K.  Some builders have just walked away, some have followed suit and dropped their houses by 30K, and I think for some this has done them in.

3.  I have another friend who has recently returned from calgary to live here.  She has been trying to sell her condo there for 3 months with no luck.

I wonder when these will become tales of SK....

The few open houses I made it to this weekend were pretty quiet.

missylu,

not that I don't agree with you but Saskatoon's RE only really boomed for about 1 year, while Alberta has boomed since 2005.  Overbuilding and speculation has played a HUGE role there.  Alberta had over 3 years of their boom, we had 1 year.  Calgary has over 15,000 listngs right now.  That would be like Saskatoon having about 4,000 listngs.  Speculation has played a role here as well but I don't see too much overbuilding here, yet,so far.  But I would predict overbuilding in the upper homes.  Homes in the 500k and up range.  And these homes are not finished yet, no driveway, landscaping,deck, basement, no finished garage.  The smaller homes will sell, but I see the big homes staying on the market longer. Who can afford theses big homes when it is all said and done?

For an example of speculation and (un)affordability.  Take a look at saskhouses and any house for sale in Stonebridge. Any house for sale there is speculation because they are all built by builders. I won't quote any specific house, but take one for 500k.  The seller probably signed the contract for 340k last year.  To finish this house, you are looking at about 50k more.  Crazy!

As to your points.

1.  I am sure there are people who got caught in bidding wars without home inspections may not be able to sell and will be stuck with the property until it is a knockdown or gets lit up.  

2.  As for builders, they have made a tonne of money here the last year or so.  New house prices have climbed about 60% since Jan 07. But I KNOW materials and labor have not gone up even 15%. So for them to take an even 100k or bit more drop in house sale prices they still would be above water.  

3.  As for your friend, Calgary has about a 8 month supply of listings, Saskatoon has about 2 months.  A properly priced property will sell.  

Norm,

Names are being drawn for the lot draw tomorrow at 2pm, I plan on attending!  Until we get a lot we can't get a contract.  I just got off the phone with a City Land Branch rep, he says there are significantly more applicants than lots available... hooray.  I'm bringing one whole rabbit (4 feet), a bouquet of 4 leaf clovers, and a pile of horseshoes to the draw tomorrow.  ;')

Bill the cat,

I'm not sure psychologically "1000 listings" will really affect the market, but I bet the growing number of reduced listings will help us roll right on over to a buyers market!

missylu,

Sooner than most people would like to believe.

Rambo,

Good to hear, with less traffic coming through open homes panic buying and bidding wars should be pretty much extinct.

Awesome, thanks for the stats, Norm.

And then the private sale stuff is on top of that for total inventory numbers, I guess.

Woohoo! It looks like mls.ca is claiming they're finally gonna update their site... way to catch the market on it's way up. ;)

Heather, Good luck, let us know how it goes tomorrow.

I think that Calgary & Edmonton are in a rather special situation: Calgary has a million people and 15,000 listings, and Edmonton has a million people and 10,000 listings. For comparison purposes, Toronto has six million people and 18,000 listings.

Saskatoon has a thousand listings and 200,000 people: in order to reach Calgary's inventory level there would need to be 3,000 properties listed.

But most of the listings are apartment-to-condos, proving beyond a doubt that you don't need to overbuild to create an oversupply.

and good luck on the lot draw, Heather!

found this on another blog, garth turner's. for your amusement, folks, and why we can refer to some as sheeple.       http://tinyurl.com/4h7znr in houston,  and in fort mac,   http://tinyurl.com/5pewwk. check it out.    

Lynn , those comparisons are amazing , I think it's time to move South.

what I find amazing is that both places are big oil economy based cities. yet people are willing to live in a camper for almost 40,000 more than that beautiful home in houston? I think people in fort mac have been brainwashed somehow. or let me expand on that thought, people in canada ( especially in saskatoon) are frickin brainwashed for falling for the " buy now now now quick before its too late AAAAAHHHH!" mantra from the 6%ers. not you Norm. I dont think you are one of those that are out to hose people. I cant remember who said it but asking a real estate agent if I should buy is like walking on to a used car lot and asking if I should buy that car.

Thanks fellas for the extra luck, every bit counts!!!

lynn,

Sheeple... LOL, that's hilarious!  Wow, that Houston mansion you couldn't even buy here for a cool mil, and it's 390K down there.  Stunning.

Lynn,

not that I am justifying the place in Fort Mc compared to Houston, but money earned is a big difference in the two places.    Even though Houston is a world leader in energy, they have a population of over 2 million and the majority do not work in the energy field. Per capita personal income is at $36,852 in Houston.  People who work in Fort Mac are either in construction or oil.  Rents are absolutely crazy so I can see house prices being crazy as well.  The only way house prices would come down there is if oil crashed. Average household income in Fort Mcmurray is somewhere around 135k.

In 1998 I was offered a job there to basically pound nails with no experience for 18 bucks a hour with all the overtime I wanted.  I'm sure it is probably double that today.  Wesco works up there I am sure he can tell you some stories about wages and living costs.

even with the discrepancy regarding wages it is still the huge difference in what you get for your money is just what I was pointing out. no one can tell me its justifiable to spend that much to live in a trailer, I dont care if it is in disneyland or the lost gardens of eden, it is a sad comparison to the houston home. people in fort mac may be rolling in the dough but are getting fleeced at the same time. I know I know big economy there, but obviously lower expectations for what you get for your hard earned money.

Concerning Fort Murray's real estate, the main reason it is so expensive is the revenue that people make off of renting it out. When you can pull in, at a mniimum in a horrible place, $1000 per room, people make alot of money. If you have a 4 bedroom trailer then your pulling $4000 a month just on rent. It is also true that people up here make major money and it has to be the highest gross income per capita in Canada and I'm wagering North America. It is horrible that is it like this, but that's what you get when there is more work (and more money) than places to stay.....

Well, that was the most fun I've ever had in a tiny room with 25 people standing around while Atch draws names!  You're looking at #136. *cough*

Looks like we'll be packing up and moving to Winnipeg, here I come Alex!!!

There were nearly 250 applicants, and 80 lots available.  About 3 in 4 names were ones Atch couldn't even pronounce.  (ethnic)

Now I have even MORE reason to hope our real estate market takes a downturn.  That may be our only option left, that or wait an extra year to build.  *ugh*

On the bright side... in another year we'd have a 30% downpayment rather than 20%... joy.

I'm going to go drown my sorrows in Heavenly Hash.  Yum.

Sorry to hear this, Heather. Must be frustrating to say the least.

Heather D.,

I think the city is going in the right direction with the 50k payback if you sell within 4 years.  If this was done a couple of years ago at this price, I know there would be less speculators in the market and the average price would be lower.  But with this new initative, more lots should be given to people like you.  There is definitively the demand.  

Personally, I believe ( hope) that lots should be given to individuals not builders.  And if the builder is good and reputable then people like you would get them to do the work. If not too bad for them. If this were to happen (never will) builders would have a fit.  And possibly some of city council would not have by pants with oversized pockets:)

Hey Heather, that sucks.  My name was in the hat too.  I haven't heard any news yet, but I suppose it may take them a day or so to call.

Jason,

Thanks, it is extremely frustrating!  Here I have a contractor who's ready and willing to build a nice new home for me for much less than any similar house on the resale market would go for... and yet I can't get a freakin lot!!!  It makes me want to start a drinking habit, seriously.

George,

I totally agree with your reasoning.  If they're good builders (and reasonably priced) they will get plenty of business.  Unfortunately when they are in control of the lots they can fleece whomever for however much they want in this kind of market.

Brian,

Pray you get a call Wed/Thurs.  They only call the initial group of people (ie. 1-100) to arrange appointment times.  Then as people start dropping out (for me that would require 51 drop-outs to get my hands on a lot) they call people further down the list.  If you don't want to wait around for the verdict, give them a call today (Wed), they should be able to tell you what # you are.

Hey Norm,

With that large addition in inventory last week, I'm wondering if you could give us an updated vacant/tenant ratio.

I believe the last total you gave us was 862 residential properties with 437 vacant or tenant.

Just curious if speculators are heading for the exits yet, I know I would be.

Some good news over CEP this morning. According to their latest polls, 70% of Saskatchewan residents now say they will not be buying a house in the province due to inflated prices. Great news! Here's hoping a good number of spec buyers lose their shirts should the market go south.

http://www.economicnews.ca/cepnews/wire/article/80732

Well, this is an interesting article in the Globe & Mail:

http://www.reportonbusiness.com/servlet/story/RTGAM.20080514.whousingsurvey14/BNStory/Business/home?cid=al_gam_mostview

Saskatoon's listings have increased 121% over last year.

The article argues that it's just sticker shock & that people will get used to the prices: I'm not so sure of that, of course.

Hmm, that links to some weird stuff jrochest. Do you have the the globe link handy?

http://www.globeinvestor.com/servlet/story/RTGAM.20080514.whousingsurvey14/GIStory/     and so it begins, folks. check it out.

Ah, found it:

Red-hot housing market loses its heat

As a flood of sellers sent home listings to their highest level on record last month, at the same time sales slowed as wary buyers remained on the sidelines.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080514.whousing15/BNStory/Business/

Sorry, guys: the tiny URL site was obviously not trustworthy -- how lovely!

Norm, could you delete my comment?

Actually, this was the article I linked to, Callum

http://www.reportonbusiness.com/servlet/story/RTGAM.20080514.whousingsurvey14/BNStory/Business/home?cid=al_gam_mostview

Now you can see why I tried to use a tiny url!

Is there anybody out there? Is there anybody out there?

Only 36 posts, where is everyone?

What do people make of the lot draw situation? Clearly there is demand in the market with that number of applications. That being said, there are also a considerable amount of listings. One would think that with the increased selection and prices coming down, there would be something for their needs. Or is it just the demand for particular areas?

Heather, and other who were not picked, sorry to hear about your misfortune. I hope some good fortune comes your way, in a lot draw for Rosewood or some other means. We value your contributions and would rather not see you go. Hoping you can find something in the market in the near future.

"Only 36 posts, where is everyone?"--Pink Floyd

I've noticed a slow down in posting as well.  Perhaps the nice weather has gotten people out of the office.

So here is some more lazy reporting in tbe Star-Phoenix.  Why question the numbers or why these people are saying "buy, buy, buy".  One is the president of Mortgage professionals, the other the president of Regina realtors, and the other the president of Saskatchewan home builders.  Yeah, they have no vested interest in their answers right???!!!!

http://www.canada.com/saskatoonstarphoenix/news/business/story.html?id=c921af7c-b8d8-407a-ab6f-c90457708f9d

I love how at the end of that article again they are pushing the first time home owner into the "I have to buy now or I'll never be able to afford it" BULL$HIT!!!!! I can't believe they're still trying to push that propaganda!!!

Norm,

More relevant than the straight yoy inventory comparisons, are those that take into account asking price distributions. The data is stunning, unambiguous and I gather from some of the other comments, not entirely unexpected.

In summer 06 less than 10% house sellers (ex condo) were asking +300K. This is not an unreasonable right side tail for a smallish berg with median household income of 55-60K. Certainly houses were cheap compared to other bubble markets, but, and this is the salient point, not overly so relative to local incomes. Today over 70% of the same sellers believe that their is worth more than 300K. I read in the local chip holder that incomes have not adjusted.

There is very little point in trying to guess how much prices may fall. It's really too early. One even might imagine a situation where nominal prices stayed flat, and the costs to borrowers lessened with wage increases. This scenario is made much less likely by the hundreds of millions of people willing to work for much smaller salaries than Canadians.

There are other variables with must be accounted for in estimating the magnitude of any correction. For instance, posted interest rates, while lower than a year ago, are higher than in summer 06.

Strong commodities prices seem a stiff breeze at our backs. But, as most of us are not directly involved in extraction, our main interaction with commodities is by consuming them. If the price of gas and granola goes up, later fools have less money for house payments.

Another possible headwind will likely be tightening lending standards. The real estate market is horribly exposed to credit tightening because nearly all houses are purchased with borrowed funds. The market for capital is global, and it is unclear how long the spigot at Canadian banks can remain open.

Given that the demand curve slopes down and the supply curve up, we can expect inventory to continue to climb. Eventually, as in other markets, prices will likely start to come down. The one thing that is the same about people from London, Madrid, Boston, Auckland, Brisbane, LA, Vancouver, and yes, even Saskatoon, is that they are all firmly convinced that they are different.

Norm pointed out that:

"254 active listings at 4/30/07 compared to 751 at 4/30/08. According to my calculations, that's an increase of 302%."

The bad math is the Globe & Mail's, not mine: 121% is a direct quote from the article.

But your numbers are even more telling -- there's a fair amount of inventory out there. Even watching from a distance, this is going to be interesting.

And I agree with 's' completely. There will be a significant correction, particularly in apondos, which are currently littering up the MLS like autumn leaves.

s said,

I agree with your comments.  But any market correction does not happen overnight. It is not like a stock where it can crash overnight.  In just one day it is possible oil could go from $120 a barrel to less than $50 because of all the speculation.  RE will always correct it just takes alot of time.  

Lots of talk of correction, sky is falling...

"There will be a significant correction, particularly in apondos, which are currently littering up the MLS like autumn leaves. "

Ha, that's funny, inventories of all types of housing are piling up.  That said, I have been confused with the pricing of condos and townhouses which seem to fetch a very good dollar, and in somecase a townhouse costs more then a house.  What happened? Have tastes changed?  

Have no fears all, there will not be a major correction according to the Scotia Bible:

http://www.cbc.ca/money/story/2008/05/15/housing2.html

(That was sarcastic) I can maybe agree with 3 of Ms. Warren's reasons, but 2 are definitely off for our market (maybe not Canada as a whole).

Have no fears all, there will not be a major correction according to the Scotia Bible:

http://www.cbc.ca/money/story/2008/05/15/housing2.html

(That was sarcastic) I can maybe agree with 3 of Ms. Warren's reasons, but 2 are definitely off for our market (maybe not Canada as a whole).

I assume that that's because you can still buy one for less than 300,000!

And I'm willing to bet people are still buying up old apartment units planning to rent them out for a few years and then flip them. Not so sure how well that's going to work, of course. :)

I assume that that's because you can still buy one for less than 300,000!

And I'm willing to bet people are still buying up old apartment units planning to rent them out for a few years and then flip them. Not so sure how well that's going to work, of course. :)

Today (May 15, 2008) CAAMP is predicting another 25-30% increase in prices, with 12% next year…

(Source is on last line of http://www.canada.com/reginaleaderpost/news/business_agriculture/story.html?id=5878f3cf-fdb8-47da-ba37-fd5c020037b5&p=2)

According to many indicators, there is a very good chance that we get a net migration into Saskatchewan of at least 6000-10000 people this year.  When you have papers all over Canada plastering "BOOM TIMES" all over their front pages, plenty of people will buy into that spin and move here and of course, prices will go up due to the demand, but I think that will be tempered with the speculators dumping their homes.

If tones of people do start to buy homes in June/July/August, ya, I guess we are in for another price increase.  

However, even if that doesn’t happen, my bet is that the $200-300k range of homes will stay flat with a marginal % increase year over year that is more in-line with reality than stupidity.  

The people who are going to lose the most are those that bought into $350+k homes, but keep in mind that most of those people also sold their existing homes for great sums to buy into those homes, taking on only marginal loans to do so, so it isn’t like they are going to lose their shirts.  

The market that “first time home buyers” can afford ($200-300k) will remain strong because that is what the vast majority of people in Sask can afford and will continue to buy into.  Before this madness happened, the $80-120k market was very solid.  That now encompasses the $200-300k range and if you can find a good solid house in that range, you are going to be safe.  

Hopefully the mayors of Regina and Saskatoon and the beloved Sask Party are smart enough to realize that this “boom” is only in housing and that if they don’t start to deliver on wages and jobs soon, they themselves wont have one in a few years times.  

Norm,

I'll sing it again then. The 7.4% rise in incomes is not entirely without controversy. Other factors arise. Does this take into account increases in overtime, is the rise evenly distributed, or confined to just a few "hot jobs?" How much of the rise is negated by price increases in food, fuel, etc? Looking at the link you posted, I see that the average hourly wage for 25-54 year olds is $22/hr. Granted city wages are higher than the province as a whole, but probably no where near double.

A longer time period would no doubt be informative. Here is some data from 03-07. Admittedly the samples are not exactly analogous to yours, but

http://www40.statcan.ca/l01/cst01/labr79.htm

I get a 17% rise over 4 years, or just over 3 1/2%/yr compounded. That's darn close to inflation over the same period. My own data for Saskatoon house prices does not go that far back, do you have some?

George

I agree house price declines are slower than collapses than stock prices. I didn't mean to give the impression that I thought they would halve by tomorrow. What is interesting is that what they lack in speed, they more than make up for in momentum. Japan happens to be the only modern industrial country to have experienced a severe contraction in credit since the 1930s.  Real estate prices peaked in Japan in the late 80s and declined until... 2006. If you bought a $2 million condo in Tokyo in1990, it would be worth between 800-900 K today. That is what a long slow decline looks like.

Do I think this will happen in Saskatoon? Not a snowballs chance. The average Japanese in 1989 had been saving over 10% of their incomes for two decades. In addition they had a remarkably stable jobs market, with a high percentage of workers employed at the same company for their entire careers.

In contrast, the savings rate in Canada has been in the low single digits for quite some time, we have more tenuous employment, and we tend to move more often.

This points to a much faster decline than Japan. The Yankee experience seems to support this. People in CA and FL cannot believe how hard gravity is pulling on their equity, and home prices are even falling in areas that did not boom. Scary. One might even argue that, because any downturn that may happen in Canada would be happening after clear slowdowns abroad, consumer sentiment here could turtle much faster here.

At any rate, who knows? I don't. My crystal ball is broken, so I just have to play the odds. Odds are, if Cap'n Crunch boards our credit markets, we'll all be walkin' the plank. Aaaargh!!!

Japan is well documented in their asset bubble in the late 80's.  Their land values went absolutely crazy making our increases the last year look like peanuts.  Even though families saved for 2 decades; when the crash came over 20 TRILLION was wiped.  Some districts in Japan saw over $100,000 per square foot.  Not surprised it still has not recovered.  

I'll agree with you again in that nobody knows what the future will bring here.  Enjoy your perspective.

I had to laugh reading through Garth Turner's real estate blog this evening. In today's discussion thread a guy from Ontario was asking if he should do like his friends and start buying up speculative properties in Saskatoon. The realtor he had talked to in told him that if he buys some starter properties right now that by the end of 2009 they will appreciate roughly $150,000 per unit. :) Anyone else find this hilarious?

Hey Heather -

Did you say there were only 80 lots available in the draw?  On the lot draw package I got, it said that 235 lots are available.  Did builders get the rest then?  Can builders just cherry pick whatever lots they want?  Anyone know how the process works?

That Scotia bank article is hilarious. I like how they said that there was not rampant speculation. I think it said...

   *  Home prices in Canada are not overvalued.

   * There's little evidence of widespread speculation.

   * Canada's housing market is not overbuilt.

   * Households are not over-leveraged, noting that mortgage carrying costs as a share of disposable income are historically low.

   * Overall mortgage quality is still sound, as Canadian lending standards are tighter than those in the U.S.

Now maybe they said this in reference Canada as a whole.  But in Edmonton, Calgary, Saskatoon, Toronto, Vancouver, where investors could not find enough properties to buy, this is not the case. How many people do you know bought investment properties. I know alot. Many without any idea what they were doing. They learned about the Big "E" word, and how to leverage their home to buy something.

I am curious as to how many houses are vacant. How many people have bought spec houses. When I visited showhomes during the boom, or quasi-boom, I was shocked by how many people were buying spec houses.

Speculation was rampant. I would love to know Scotiabanks reasoning as to why they said otherwise. Edmonton's and Calgary's, and soon Saskatoon and Regina will have huge inventory too as speculators will be unloading their properties. The smart ones have left out the backdoor, and the the others our just too greedy. I know this cause I am already out, hoping into my BMW in the alley.

Super Spec said...

"I know this cause I am already out, hoping into my BMW in the alley."

So you took your money out of an investment that typically appreciates and put into some that typically depreciates....Good thinking.

I don't know who to believe! Stats can http://www.canada.com/saskatoonstarphoenix/news/business/story.html?id=8ffc596d-11c0-44c3-8e6d-e22d38280402

or ......... Stats can

http://www.canada.com/saskatoonstarphoenix/news/story.html?id=1eb13f02-7f76-4b41-b613-40e1b24d23c0&p=1

Is there a boom or not?

George --

That's insane: how did they get 11.4 per cent of nominal GDP growth out of 2.8 per cent GDP growth?

What does 'nominal' qualify? I'm not an economist...

Here's the text of "Michael's" posting on Garth Turner's  blog:

"Do you have any thoughts on the Saskatchewan markets? Several friends of mine have been buying properties in this province as apparently they are going through a huge economic boom right now. They have been told that the Saskatoon and Regina housing prices in particular are going to climb through the roof, ultimately surpassing those in Calgary and Edmonton in value. They have been told by realtors that by the end of 2010 that the average home price will increase about another $150,000 as apparently these cities are now on the international radar and people from all over are looking to relocate in these Paris’ of the prairies. Due to the thriving natural resource industry in this province, I have been told that prices will peek at near or above Vancouver levels. I am currently renting right now, but have been looking to eventually buy here in Mississauga. A $150,000 cash in hand from selling a property in Saskatoon or Regina would go a long way to helping this dream become a reality."

I have to assume that he's a troll or a spinner, one of the two, but surely no-one could POSSIBLY be so stupid as to think that Saskabush's real estate values will top out at an average million dollars per SFH, which is what Vancouver's are.

The whole thing is here:

http://www.greaterfool.ca/2008/05/14/step-3-mainstream-media-gets-it/#comments

Norm -- I'm faint, but following: so there's not much increase in jobs or industry, but the stuff we sell brings in X amount more money?

I catch three fish and sell them for a dollar each, I have N real productivity

I catch six fish and sell them for a dollar each, I have a 100% increase in real productivity.

I catch three fish and sell them for ten dollars each, I have no increase in real productivity but a 100% increase in nominal productivity -- something like that?

Norm,

when the first report came, I thought it was mistake or something wasn't right but it was Stats Can reporting it. So I accepted it, but I guess I did not understand it. I thought with all the resources we have and the commodity boom our economic growth would be higher than reported.  I have felt in the last year we will be better off than Alberta in the long run because of our diverse economy and the numbers are starting to show that.  

One last thing, I couldn't figure out how we led the nation in wage growth in the last year while our GDP was just above the national level.  With these new numbers from Stats Can and understanding what they mean, it is starting to make sense.

Norm,

this Stats Can report probably deserves its own heading, should get some people bent outta shape.

They will be disappointed to hear the bad news because they want the real estate market to fall so they can buy in.

Now, don't get me wrong, I have no problem with seeing speculators burned, but the vast majority of the homes being bought are being bought by real saskatchewan families who need a home to live in, they didn't buy in to flip a house for $100k, they bought in to put a roof over their heads.

I really hope that Sask has really turned a corner and that jobs grow in both numbers and pay.  If that happens, paying for a $400k house wont be a big deal for people.  God knows we need better jobs than Rona, Walmart and Tim Hortons.  

Still, I think we are really going to level off anyways, since the Speculators will dump this year, keeping prices flat as people move in from other areas.  

Unless of course you see a LOT of people move into the process, then all bets are off and it is possible people from Ontario could start looking this way now that Ontario is tanking.  

George,

"Some districts in Japan saw over $100,000 per square foot."

Not exactly. This oft-quoted statistic is very misleading. The japanese bubble was huge, but not that huge. The price quoted is a land price, not the price a person would pay for a home. "That's insane!" you might say. "They had to pay extra to build on top of that? The bubble was even bigger than I thought!" Again, this is prime real estate in the most sought after neighborhood in one of the richest cities on the planet. You don't build a 3 bedroom bungalow on it. You erect a 40 story building with 10  units per floor. The top floor you make into a penthouse to live in, because after all, you are quite a smart guy. Just look at all that money Kazumori-san down at the bank is lending you. They wouldn't do that unless they were unless you were one clever little sashimi.

So you build. And you list your, ultra-mod sophisturbication units at a price of about $10000/ft. High? You betcha. This is quality. The drapes are wired and the toilet splashes clean warm water on your bum after you make a deposit. Unfortunately, only a few apartments sell at this price. You drop your asking. A few more sell. Now, you have a lot of empty units, and Kazumori-san is starting to smile nervously. But you guys are actually pretty good pals since you treated him to fugu that time, and he ate it and didn't die. If he drops the hammer on you, he looks like an idiot, and the bank must book the loss. So the bank starts carrying your loan as "non-performing." This very useful accounting procedure recently adopted by a few American banks. Hmmm. Anyway, the bank nurses you along for the next couple of years, while you sell fewer and fewer units at lower and lower prices. It is a fact that a relatively very tiny number of homes sold at stratospheric prices in Tokyo sometime around 1990. But as far as facts go, it's rather information poor.

In order to get more accurate picture of the impact of declining real estate prices on the typical homeowner, you must dig into the median and average data. I see data indicating the average home in tokyo sold for about $750/ft recently. Combine that with well documented median and average declines of 50-70% to the present, and you can figure that the typical buyer at the height of the bubble paid a little less than $3000/ft.  

Again, this is undeniably nutty behavior. Why does this matter, if our market is clearly not the crack-shack foolishness exemplified by the Tokyo market in 1990?

You pointed out that the Japanese paper loss was "$20 TRILLION." That stat is combined real estate and equities performance over more than a decade that saw homes decline 50% and a stock market crash of more than 70%. Compare that to the already $1-2 TRILLION written off by the big American banks alone, while nationally their home prices are down a mere 5-10% and the DOW and the SP500 are sitting within 10% of all time highs. After only a couple of years, the US is already booking losses within an order of magnitude of Japan's.

But Japan's bubble was likely at least two logs less nutty than commonly supposed. The economic impact of the Japanese crash was also mitigated by the fact that it was relatively small in comparison to the global economy. An isolated and  insular, wealth destroying archipelago, with great seafood, certainly, but not a crack-shack. It was more like a few people doing blow off the head of a sony robot. Now a much larger group is out in the garage smoking pot.  A group that collectively, has much more at stake. A group much less able to handle a loss.

Oh, yeah... they've got the munchies.

"The "real gross domestic product" numbers which we discussed in "Saskatchewan Underperforms" post are based on price adjusted estimates with the intention of measuring production growth. Price increases aren't counted.

The "nominal gross domestic product" numbers which this recent story is about take price increases into account. Therefore, the massive increases in commodity prices are counted into the equation where they weren't in the first story."

So which of the two numbers should we concentrate on?

If nominal GDP increased by 11.4% and real GDP increased by only 2.8% it means that INFLATION in Saskatchewan is running at around 8.4%.

Inflation rate = nominal GDP/real GDP = 1.114/1.028 = 1.084

Brian,

Yes there are 235 lots available total, but it's exactly as you say, the builder's get to cherry pick 'em!  Individuals get 1 lot to every 2 lots for builders.  Keep in mind lots from this particular area were also "presold" to larger building companies prior to the draw, bringing down the number significantly from 300.  (That's why you see lots as "sold" on the maps - 75 lots were sold this way)

Quite frankly this city doesn't give a damn about people like you and me, they are just concerned with business relations.

So I take it you didn't get a good number either?  :'(

Heather D.,

I hope for your sake and others that a day will come when the city is on their knees begging you to buy a lot.  Not that I am in the same boat, but I would like to build in a few years, but I wonder if it will even be worth the hassle of just trying to get a lot.  I wonder what the procedure is for getting a lot in Warman or Martinsville.

Hi Heather,

Thanks for the information.  Actually the good news is that I will get to "pick" a lot.  I was just disappointed to hear that there is only 80 available for individuals.  Will let you know how it goes!

While a rising GDP and rising commodity prices do not necessarily mean a proportionate rise in direct jobs, it definitely means more money circulating in the economy as the provincial government will take more in tax revenues/royalties. This explains why my province BC has been doing so well for the last 10 years(although the desperate situation of our lumber industry is now dragging us down). The mining and natural gas industries directly do not employ a ton of people in BC as they are capital as opposed to labour intensive industries, but they contribute hugely to the provincial coffers which enabled the BC government to keep taxes low and build infrastructure like crazy for the Olympics, highways, rapid transit  etc. Alberta's tar sands admittedly are much more labour intensive than say natural gas, metal mining or potash but maybe that is a sign that tar sands are not the most efficient use of capital for the oil industry.  In any event, Alberta similarly used the oil industry revenues to keep their taxes low and give rebate checks to everyone which ci