Consumer spending about to peak in Saskatchewan: Elliot
Doug Elliot, publisher of the Sask Trends Monitor newsletter is warning that consumer spending has “gone into some kind of bubble that’s going to burst.” In a Star Phoenix story titled, “Sask. Consumer spending expected to peak soon” Elliot warns that the big spending spree has to end sometime. He sees that “sometime” looming, perhaps as soon as early 2008.
Elliot notes that massive spending in Saskatchewan is based partly on economic reality to the extent that employment and incomes in the province have increased, but he adds that a variety of psychological factors that are hard to quantify have been encouraging people to spend more money, raising concerns that the level of consumer debt is increasing while savings are decreasing.
One of those factors is related to increasing property values which tend to “make homeowners feel richer and thus more inclined to spend,” says Elliot.
Read also: Your Saskatoon home is not your second income
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
There's 103 Comments So Far
April 9th, 2009 at 10:00 am
I can see where he’s coming up with a lot of this. It does make sense in a lot of ways as some of the people who are standing by as the bubble does it’s damage are homeowners. They have nothing to lose because they’re locked in at the low prices of yesterday.
As things go up, the dollar signs get greener in their eyes.
April 9th, 2009 at 10:00 am
Alex,
Unfortunately, lenders are all too eager to let people borrow most of the equity they have in their homes. I believe that the current practices allow homeowners to increase their mortgage to as much as 90% of it’s value. They’re probably also willing to stretch on the value a bit and I can see that many people will probably end up pretty deep in their mortgages.
This is how many homeowners actually end up screwing themselves, especially if there’s a down turn. If my house “value” goes from 150K to 300K and I crank my mortgage to 270K one can see how a problem quickly develops if the market slips 10 points. Now I’m in it for 100% of its value. If I have to sell it I’m really in a pickle. But, I need my big screen tv and these credit cards are killing me. No sense worrying about things that may never come to pass, right?
I spoke with someone last week who has been in the same house for 15 years. His mortgage is larger than the average selling price in his neighbourhood. Lenders are doing big “re-fi” business right now. This would be a huge problem if the market tanked.
April 9th, 2009 at 10:00 am
Norm,
You know, you draw my attention to the banks with information like that. It makes sense that perhaps in some ways they too are stewards of this insanity. Offering “products” (such a misnomer) where they perhaps shouldn’t be offered.
In so far that I advocate for people without any equity, I can say the same for those that do. Ownership is critical. Both the process of establishing it and the eventual “full ownership”. If society is leaden with debt, you will notice negative impacts right away across the board. It is a problem that can’t wait for statistics to catch up. The turnaround on decisions is too long right now to fix any of the problems cropping up – as you are seeing now.
Eventually Saskatoon will have eradicated any working youth who don’t live with their parents or other wealthy connection.
I know when the time comes for me to get a mortgage, I’m going to have to set out very strict rules. Otherwise, I can see a broker omitting quite a few important details on me in the hopes of bagging a good commission.
April 9th, 2009 at 10:00 am
Alex,
Yes, and it’s obvious that lenders can take their share of the blame for what’s happened to the American housing market, starting with lending money to people who have proven they can’t handle credit. The other problem we’re discussing is also prevalent south of the border. Turn on the TV for 15 minutes and you’re bound to see someone promoting “cash out your equity!” (I haven’t watched much TV lately and perhaps these messages have let up given the big credut crunch but at this year last time you’d see one on almost every commercial break). When you consider how hard it is to build equity it’s kind of a shame that it can be blown so fast and easily.
April 9th, 2009 at 10:01 am
Bankers might be the ones offering the ability to get deep in to debt, but let’s point the blame at those who really deserve it — the people that get the credit. You have to pay back what you borrow and every dollar you go in debt, is that much harder to get out of. Personal responsibility is ducked too much these days.
As for our new mortgage, all the land titles and papers and stuff finalized last week. We got a sizeable cheque back from the lawyer as per our request so we could do some changes around the house such as a new furnace / water heater and air conditioner. But at the same time, we took $10,000 and put it right back into the mortgage. 10,000 on the amount of our mortage is only around 5 or 6 percent. But that $10,000 applied now, will save us about 3 years on the mortgage and over $25,000 in interest payments. And ideally in a year or two I want to step up our payments 5 or 10%. I could’ve used that money to buy a flat screen TV now, but I can live with what we have until we save the money to buy it.
So live within your means people and try to get out of debt as soon as possible.
April 9th, 2009 at 10:01 am
Todd,
I completely agree with the idea that each borrower must take full responsibility for his or her debt and most of these people have nobody to blame but themselves for the circumstances they find themselves in.
The lenders, on the other hand, can be blamed for the cumulative impact that irresponsible lending practices have on the community as a whole. When reckless practices lead to the devastation of the housing market and a loss of 10 to 15% of people’s savings, you can’t blame the bum who won’t pay his bills.
April 9th, 2009 at 10:02 am
Todd,
Your comments reminded me of this SNL Skit
April 9th, 2009 at 10:02 am
I see that when a market decides it’s going to drag it’s customers in a direction, there is often little people can do to exert their preference.
Over half are cursed with a blasted passive streak or indifferent nature.
I find that the free market is only partially participated in as people have been trained since youth now to be good little consumers. Unquestioning and conflict averse.
This has cascaded to the mortgage situation where now the government is happy to have the banks SEEM like they have a solution. Sadly, these solutions (those which have the USA in a crunch) are nothing but cons and deep reaches into the pockets of people to expand what was already a grotesque profit.
My points tie back into each other diabolically so you have to pay close attention. Re-reading the above enough times will help you understand how free markets run out of control, despite people “wanting” the best for themselves.
It’s a lot harder to find that balance these days because not enough people speak out.
When it’s all said and done, I can’t see the liability in MUCH lower interest rates (over the same periods we have now). Increase the qualification criteria, and I bet the frequency of defaulted loans plummets. Granted, you’ll see a tidal wave of demand, but that’s what the qualification criteria are for.
It’s not like the banks stop making a disgusting profit though.
There’s a prejudice that gets applied accidentally to people like me who do work hard and have worked hard. When I complain, I’m told “you aren’t working hard enough” or “you’re in the wrong field”. Some people choose to skip-read my points and they end up assuming that I actually don’t work at all, or I expect everything to be given to me.
It’s interesting because I’ve only been out on my own for 10 months in my industry. While the pay I get is far from ideal, within those paltry 10 months, I have been able to work my way to earning more than anyone else in my graduating class.
It doesn’t say much for my graduating class, I know. But we’re not here to discuss that, okay? The point is, I don’t have a sense of entitlement. I have a sense that things are continuing to deteriorate and if it continues this way, bigger issues are going to be borne of this.
Maybe the banks and the profiteers should be the ones learning to live with a little less for once instead of the people (you know, the core of society). Doesn’t it feel nice to have that go both ways? What makes anyone else more entitled than me to have a home? Wealth?
You do realize people live in these things at some point eventually…
April 9th, 2009 at 10:05 am
Perhaps your most thought provoking comment ever. Nicely done!
You may be onto something here. I could probably support legislation that makes it a little bit tougher to borrow. Maybe lenders will begin to take some responsibility on their own as this Globe and Mail story suggests (for fear of ending up in the same boat as the US). Access to financing is important for a healthy and vibrant housing market but one can see that we have probably gone too far. Again, recent problems in the stock market and a desperate US housing market are indicators of how recklessness and “greed” can affect us all.
10 months in your business? You are a virtual babe my friend and they’ve hardly had time to recognize your worth. You have a good future ahead of you and it will likely arrive much sooner than you think.
April 9th, 2009 at 10:05 am
LOL!!
Norm, that skit is funny and sad at the same time. Unfortunately that’s the mentality of half the population.
Todd, I agree with you. It’s the consumer’s responsibility to make sure what they are purchasing makes sense. When it comes to mortgages, if you don’t understand something, get a lawyer. It is after all the most expensive purchase of most peoples lives!!
Alex, I’m not sure how making stiffer lending practises will help the situation. If the average person is having a hard time getting financing for so called “over inflated prices”, then to make stiff lending practises will only price out sigifigantly more families. Since most investors are privately funded it doesn’t really matter to them what banks do. I see a lot more rich people getting richer and a lot less families owning houses. I could be wrong though.
I’m sure you do work hard and I can appreciate the point you are trying to make. I too can’t fathum a person with 50million needing another 50 million. That being said, not all people with money are greedy bas*tards. Entitlement of owning a home is when you decide that you are going to own one. When I first started managing a Panago pizza a few years ago in Vancouver I was having a hard time. My boss said to me “Justin, I’ll never accuse you of not working hard. You’re an increadibly hard worker. You just need to start working smart.” I learned a lot from that comment and it applies to money as well. It’s nice to see you offering solutions rather than pointing fingers.
April 9th, 2009 at 10:05 am
Northstar,
I would be happy if lenders simply stuck to their lending criteria. There has been some movement from that in recent years. Lots of “products” available that don’t even require buyers to provide evidence of income, etc. It leads to people who are unable to afford to buy getting wrapped up in mortgages which will eventually go bad. As we’ve seen in the US (and felt in Canada) these practices aren’t good for anyone and people with money are affected more than anyone when the thing comes crashing down.
April 9th, 2009 at 10:08 am
Norm,
I agree that some of the mortgage products are questionable at best. I find some to be alright though. All I’m saying is that as housing prices increase, families need some different options to be able to afford homes. Going to a 35 – 40 year mortgage or a piggy back loan. So long as “verified” monthly income supports monthly expenses it shouldn’t be a problem. Without those options, fewer and fewer families would be able to get in to a house. Thus leaving only the people with money to own. It does seem like Canada has learned absolutely nothing from what’s happening in the States.
On a side note, what do you think market price should be on a 860 sq/ft, 3 bed 2 bath bungalow, single detached garage, built in 72′, 55 x 120 lot, finished basement in Montgomery? The condition of the inside is a 6 or 7 out of 10.
April 9th, 2009 at 10:08 am
Northstar,
My SWAG method evaluation comes in between 235 and 245 depending on the quality of the location.
April 9th, 2009 at 10:08 am
I guess my concern with all this aquiring of debt is what happens if we get into a recession like the states is in right now? Even car dealers are now letting people with no credit get a vehicle loan. Why can’t people just live within their means? I think that going bankrupt is supposed to help those in dire situations, not people that bought and bought and now can’t pay it off. We need to be accountable for our actions too. I do agree that credit agencies (banks, lenders) are making it pretty easy, but we have a head on our shoulders too. In the end we made the decision to do what we did, not the bank; they just helped us along.
April 9th, 2009 at 10:08 am
Northstar,
Different methods of chiseling more interest into monthly payments maketh not a solution.
You should know better than to EXPECT the market to take that direction. All it does is further see prices increase as people figure out new ways to entangle themselves in very bad debt.
STOP making the additional lending “products”. Not more. Only a greedy punk will expect people to scrounge up more money than the house could ever truly be worth.
April 9th, 2009 at 10:09 am
Alex,
I still don’t see why the banks are at fault here. They make sure that a person signing up for a 30 – 40 year mortgage knows how much interest they’re going to be paying over the term, more or less depending on the interest rates. Don’t get me wrong, I hate shoveling money out to the banks as much as the next guy; but it’s like Sunny said, these people have a head on their shoulders. Bankruptcy is one hell of a life lesson, but it’s the only way some of these people will learn.
Anyone who has a mortgage is going to end up paying more than their house is worth in the end, but that’s the cost of having something now rather than later. That’s something that I think should be stressed a LOT more in today’s society: THE COST OF BORROWING. And not just with loans, but credit cards too. If some folks had a better understanding of how credit card companies worked, they’d probably be more inclined to make purchases on their debit cards; or better yet, cash.
April 9th, 2009 at 10:09 am
Northstar,
As promised, I’ve put together a couple of thoughts as to where I think the market is going. Again, this is what I’m reading into the information available on the components that I feel are important to understanding where we’re headed, I invite you to go over the links provided and give us your take on the information therein. My components are based on what I’ve identified to be the general themes of this forum in Resource development, speculative investment, job growth, income growth, and immigration.
Let’s start with our province’s treasure chest of natural resources, most notably (and getting us the most attention) our oil sands. I’ve heard estimates ranging from no oil to more oil than Alberta. As the world begins to realize the peak oil issue, ecosystem disruption, and global warming issues, attention to alternative energy source development is becoming very real. In Kyoto, Canada’s environmental commitments are becoming very real and the conservative government is going to be under a lot of heat for not meeting those commitments.
http://www.canada.com/topics/news/politics/story.html?id=a307209c-65cf-4e5a-937e-fdbf11d0932c&k=47322
Like it or not, Canada will be forced to meet our Kyoto targets sooner or later. Unlike Alberta, Saskatchewan won’t get the same relaxed allowances to pollute for profit and cost benefit to even break ground in Northern Saskatchewan oil sands will go way down as alternative and much more expensive energy options become the only means to do so… oil sand production is already increasing very rapidly in costs (up 55% in 2006)
http://www.upi.com/Energy/report_oil_sands_costs_up_55_percent/20070306-115426-6634r/
There’s also the water requirements to separate the oil from the sand, likewise other massive infrastructure developments. I don’t want to get off topic, but the infrastructure that’s required to sustain this boom in sask, had been around in Alberta for a decade before their boom 3 years ago which is proportional to the one we’re seeing in sask today… with no oil sands infrastructure. Great Canadian Oil Sands (what is now Suncor) has had their fingers in the Albertan oilsands since the sixties. . Think of the years worth of environmental assessments, possible land claim issues, infrastructure development, operational establishment, etc… we’re literally looking at decades if it does come… and that’s still a big if (as stated earlier, it has to make fiscal sense to the prospectors.)
One concern of mine to note is the fact that we’re already dependent on commodities. Every step we take towards a resource based economy, makes us more vulnerable and susceptible to the pendulum of the commodities market.
Provincial auditor Fred Wendell points this out in his most recent analysis of the Saskatchewan economy. (I could only find this link on ckom.com, I had read a better article but can’t find it now)
http://www.ckom.com/index.php?p=ntnews&action=view_story&id=8175
In all of this resource speculation we’ve gained an enormous amount of attention from the quick buck community. (ex: http://www.prestprop.com/ ) Now, towards the end of the summer, we’re definitely seeing the result of speculative buying. Have a look at MLS and Saskhouses to see how many sale descriptions start with something along the lines “completely renovated head to toe” which basically means, new paint, laminate floor, and sometimes new appliances. I did a quick search on the condos in Area 3 just cause I knew for sure I’d be able to grab a few out of there without having to search through all listings in Saskatoon to get them. Although there are most likely more condo flips than houses, if someone took the time to check out the houses “renovated top to bottom”, I’d venture to say the count is excessive.
MLS®: 252499
MLS®: 252114
MLS®: 252010
MLS®: 253360
MLS®: 251982
MLS®: 253769
MLS®: 253244
MLS®: 253212
MLS®: 253212
MLS®: 253212
MLS®: 251209
MLS®: 252669
MLS®: 252670
MLS®: 253752
MLS®: 251745
Investing on the upswing is obviously the foundation for a free market, but in a market so unregulated as real estate and without an enormous economic foundation (as seen in Alberta), we end up with a bubble. See this link where Norm and Jay Thompson compare the similarities between Saskatoon and Phoenix Arizona. Jay also identifies the dramatic impact a slowdown has when the market takes such a dramatic jump without a proportionate foundational growth.
http://www.teamfisher.com/blogs/norm_fisher/archive/2007/03/02/and-suddenly-like-someone-turned-off-the-tap-it-was-over-jay-thompson.aspx
Lack of proportionate foundational growth you say? Indeed I do, this brings me to the most important analysis, Job growth and immigration. There are still few hard statistics to reference for job growth in Saskatchewan. There is this snippet from CREA but, as Norm pointed out, they seem to be inconsistent in their projections… then again, who is these days?
http://creastats.crea.ca/sask/employment_trend.htm
Supposing CREA has at least some foundation to their analysis, this information is unsettling.
For sake of argument, I’d like to compare Sask’s present boom to Alberta prior to and during their proportionately equivalent boom in 2004/2005. To compare apples to apples (or at least Gala’s to Macintosh) I tried to find a stat that would relay the volume of migration to Alberta prior to their boom (proportionate to our boom over the past 8 months)… I could only find this link showing migration to Calgary. Gross 57K people in, Net 21K people in.
http://www.statcan.ca/Daily/English/060927/d060927b.htm
Supposing, once again, that there is some foundation to CREA’s argument, here are the migration numbers to Sask for Quarter 2 2007. About 2000 net people on the plus side after over 5 years of Net losses.
http://creastats.crea.ca/sask/migration.htm
As for income growth, well there’s been growth consistent with what we’ve seen over the past 3 years.
Q2 2007 over Q2 2006
http://www40.statcan.ca/l01/cst01/labr69j.htm
2003 To 2006
http://www40.statcan.ca/l01/cst01/labr79.htm
Not quite the growth that Albertans had seen 3 years prior to their boom, proportionately speaking of course).
Now there’s no question Saskatoon has seen an explosion in real estate prices. Cause? Some argue resource development, others argue job growth, even more argue immigration… but those arguments fall moot without data to support them. But we still have a boom in real estate value… without foundational support to the aforementioned argument, the only reason left is speculation. Not all buyers, however, are speculative investors. We have buyers (those who actually plan to live in the house they’re buying) taking advantage of the various “products” available to them… The “products” usually involve ridiculous amortization periods and high risk borrowing practices.
As Northstar pointed out, there are trends to recognize… “everything in life goes through ebb and flow. Much like when land grows vegetation the next year rabbits show up to feed on the vegetation. Then the year after foxes show up to feed on the rabbits”. There is, however, one very large variable that’s been introduced, the aforementioned hyper-availability of credit. From 1980 to 2003 the debt net income ratio more than tripled in Canada, from 6.5 percent to 23.1 percent.
http://72.14.253.104/search?q=cache:woIILgoCixEJ:www.agr.gc.ca/pol/pub/dsb-rd/ppt/dsb-rd_e.ppt+Canada+%22debt+income+ratio%22+chart&hl=en&ct=clnk&cd=7&gl=ca
The more “products” come into the lending market, the more debt Canadians will take on. This makes the Canadian economy, as a whole, very vulnerable to fluctuations (as seen down south). My reference for this is Norm’s article above
So, All of this said, what’s my prediction? Don’t be a sucker to boom-talk buzzwords, demand that anyone with an opinion back their opinion with solid references. But most important of all, begin spending conservatively. Do yourself a favour and question whether or not some of the “products” lenders are offering make sense and contribute to your (and your family’s) financial stability.
J.
saskyjohn@gmail.com
April 9th, 2009 at 10:10 am
Batman and Sunny,
I agree with both of you.
Alex,
Is there anything in life that brings a smile to your face? A juicy steak? A nice firm behind in a thong bikini? Anything? Or is every moment lived in a cloud of anger? Must be hard.
Lets take your suggestion though. Let’s take away all additional lending products. Then when investors come in with their private money and accelerate a market, no one will afford a house but the rich. That’s a brilliant idea. I can see it now, 10% of the population with all the houses. If I haven’t seen enough pissing and moaning from you now, I’d hate to see it if that happened. You might actually go “Washington D.C. postal worker” on the “rich and greedy”. In fact, let’s take it one step further. Let’s all go back in time to the 50’s when you could buy a house for $5,000. Then we can all live in a world of make believe with golden cars and chocolate engines; and little fairies with funny hats. Then we’ll get the government to implant a chip in our brains so that they can think for us. Imagine all the trouble we’ll stay out of. Hey!!! no bad mortgages!!!
April 9th, 2009 at 10:10 am
Good run Johny.
I know I’ll be following such advice and ensuring that I don’t contribute to excessive price increases when I buy a home.
I also won’t be taking any curvy loan products that take advantage of stacking debt upon debt just to invent an appealing monthly figure.
There’s so much deception going on and I think the lack of foundation for this boom is part of it.
April 9th, 2009 at 10:10 am
Johny,
Very intelligent, informative post. You make a lot of good points. I guess the difference between us is the interpretation of the data. Ex. you obviously don’t believe in peak oil where I do. Much like the stock market there are bulls and bears and both have there reasons.
As far as your prediction goes, although you give good advice, it doesn’t display an actual market direction. What do you think the average price will be in May 2008? This question or informal pole is for everyone. In May 2008, I think the avg house price number will be $285,000. I think plus or minus 4-5% until Decemeber then an increase until May. What’s everyones guess.
April 9th, 2009 at 10:10 am
Interesting, I’m a firm believer in Peak Oil. But the fact that we’re running out of oil doesn’t immediately prove that Sask oil-sands are going to market anytime soon.
“As far as your prediction goes”… My statement was rhetorical by virtue of my arguemnt. Clearly my prediction is not $285K. Care to give us an argument for your prediction?… hopefully blind predictions are a little more obvious following my argument.
J.
April 9th, 2009 at 10:11 am
Johny,
I’ve already given my points on why I think we’re heading to 285k. As far as yor previous post, a lot of your “references” are articles giving peoples opinions. The only fact you presented was to do with job growth. Althogh peoples opinions are informative, they’re opinions. If you think my prediction is blind so be it. However your evidence holds no more weight than mine. I’m willing to put a number on it and say this is where I think we’re heading. If I’m wrong then I’m wrong and will admit it. What I won’t do is have a wishy washy opinion so that if the market goes up I can say “I said it was going up”, and if the market goes down I can say “I never said the market was going up”. If you feel the market won’t bare 285k by May then give a number that you feel the market will bare. Then your prediction has a bar to be measured next spring. Until that number is given you can claim to be right no matter what happens. At the least you could say ” I think the market will go down ” or ” The market is likely to stay at these levels for a while “. Something other than statements like this,
“My statement was rhetorical by virtue of my arguemnt.”
April 9th, 2009 at 10:11 am
1 more thing,
If you feel that alternative energy is in the near future (which you could be right), then it will be nuclear that takes over. Solar and wind and the others you referenced will be secondary players. With that being said, who has the largest uranium deposit in the world?
April 9th, 2009 at 10:11 am
Northstar,
Aside from Provincial auditor Fred Wendell’s opinion on Saskatchewan’s growing vulnerabilities to the commodities market, every source that I’d referenced was actual statistical data. And I think we can consider our provincial auditor an expert in his field.
Nuclear energy carries with it significant baggage. I do agree that it will become important in our lifetimes. Is this a new market to saskatchewan? No. Did we all of a sudden wake up to the fact that we hold the largest uranium deposits? No. Therefore, is Uranium going to sustain a bubble? No.
I don’t recall referencing Solar or Wind in my argument, but I will speak to the energy issue briefly. The only thing that will save us from peak oil is a significant shift in energy consumption. The government will have a growing responsibility to mandate practices in all sectors (residential, commercial, automobile, etc) to reflect that necessity.
Believe it or not, there’s much more to the cost benefit argument than whether or not people are willing to pay high prices for energy. Our economy is dependent on energy prices where they are. For example, Walmart’s entire strategy is based around the 2000 mile rule wherein they import cheap goods from 2000 miles away to bring to your market. In north american, bringing goods to market means trucks, boats, etc… a transportation system that is heavily dependent on fossil fuels. If prices of goods from china go up 25% because of the price of oil (at the risk of simplifying), Walmart and it’s consumers may start to consider local goods that will, relatively, become cheaper.
This is just an example of the complexity of our energy consumption. It all boils down to what the consumer is willing to pay (or can afford to pay). In all sectors, as oil goes up, so too do operational costs. A corporation’s primary goal is fiscal efficiency. As costs go up, Walmart will begin to shift it’s strategies accordingly… and this will inevitably move away from the energy consumption we see today. Now multiply Walmart by 100,000 and that’s how many corporations will be facing the same issue.
This said, I think it’s simplistic to assume that we’ll just replace oil with uranium. Uranium will play a smaller part than you think in peak oil.
J.
April 9th, 2009 at 10:12 am
Johny,
Half of your references are articles that are written on opinion. Your 2nd reference isn’t even a reference. All that pops up is “continue to more stories” and then it’s all solar stuff and how Korea wants Brazilian oil. You also make reference to Norms blog talking about the similarities between Phoenix and Saskatoon. I’ve gotten negative reaction comparing to Edmonton or Calgary let alone Phoenix. A city in a completely diferent country. You give 2 references supporting avg income increases ( a good thing ). And 2 more references which you admit is like comparing MacIntoshes to Galas.
I’m not trying to discredit your references. I actually think they hold some weight. What I am saying is you can’t tear apart my references and then provide the same type of references to back up what you are saying. Furthermore, especially when my references are confirmed by others. Jedi said,
“In the last few months the Star Phoenix alone has printed articles to support 90% of Northstar’s claims.”
Again, I still haven’t got a number from you yet, or at least a direction. Up, down or sideways?
April 9th, 2009 at 10:12 am
Hmm, must be a broken link. Try this one:
http://www.upi.com/Energy/Analysis/2007/03/06/report_oil_sands_costs_up_55_percent/6634/print_view/
http://www40.statcan.ca/l01/cst01/labr69j.htm
http://www40.statcan.ca/l01/cst01/labr79.htm
http://www.statcan.ca/Daily/English/060927/d060927b.htm
http://creastats.crea.ca/sask/migration.htm
http://creastats.crea.ca/sask/employment_trend.htm
http://www.teamfisher.com/blogs/norm_fisher/archive/2007/03/02/and-suddenly-like-someone-turned-off-the-tap-it-was-over-jay-thompson.aspx
http://www.ckom.com/index.php?p=ntnews&action=view_story&id=8175
http://www.canada.com/topics/news/politics/story.html?id=a307209c-65cf-4e5a-937e-fdbf11d0932c&k=47322
http://72.14.253.104/search?q=cache:woIILgoCixEJ:www.agr.gc.ca/pol/pub/dsb-rd/ppt/dsb-rd_e.ppt+Canada+%22debt+income+ratio%22+chart&hl=en&ct=clnk&cd=7&gl=ca
Here are my links. Please point out which half are “written on opinion”.
I’d reference quotes from other contributors to this forum in their support of my arguments but that’s pretty weak… I’d rather reference statistical data from professional analysts.
My arguments aren’t to conclude an average house price by next spring, what’s the point? My arguments are in efforts to educate investors in their decisions rather than influence them with off the cuff non-foundational guesses… I’m sorry if it hurts the value your real estate portfolio in the process.
All of this said, I feel challenged and I appreciate it
J.
April 9th, 2009 at 10:12 am
Johny
You said, “I’d reference quotes from other contributors to this forum in their support of my arguments but that’s pretty weak… I’d rather reference statistical data from professional analysts.”
You referenced “this” quote from “this” blog in your previous post. By your own admission, that’s pretty weak
http://www.teamfisher.com/blogs/norm_fisher/archive/2007/03/02/and-suddenly-like-someone-turned-off-the-tap-it-was-over-jay-thompson.aspx
This reference wasn’t in your last post.
http://72.14.253.104/search?q=cache:woIILgoCixEJ:www.agr.gc.ca/pol/pub/dsb-rd/ppt/dsb-rd_e.ppt+Canada+%22debt+income+ratio%22+chart&hl=en&ct=clnk&cd=7&gl=ca
What is this reference backing? The fact that government “might” get sued?
http://www.canada.com/topics/news/politics/story.html?id=a307209c-65cf-4e5a-937e-fdbf11d0932c&k=47322
This reference is opinion.
http://www.ckom.com/index.php?p=ntnews&action=view_story&id=8175
This reference supports people are moving to Saskatoon
http://creastats.crea.ca/sask/migration.htm
This reference supports the percentage gained on average income is more in Saskatchewan than it is in Alberta. When you click on the link, Alberta’s 15 and older income earners is up 5.3%. Click on Saskatchewan on the side and you’ll find the same category up 6.5% here.
http://www40.statcan.ca/l01/cst01/labr69j.htm
The point in predicting a number is so next spring people can look at your posts now and say “Johny was right in his views, the market is down.” or “Johny was wrong in his views, the market is up again.” It brings credibility to your statements of the market. If you don’t, then you can claim anything you want come that time. If you have no idea, then just say that, like Norm does. I gave you what you asked for after I said let it go 3 or 4 times, do the same for me. You don’t actually think you’re going to influence someone on their decision just because you stated a number do you?
I appreciate you too Johny.
April 9th, 2009 at 10:13 am
NORTHSTAR – SEE MY COMMENTS IN CAPITALS
Johny
You said, “I’d reference quotes from other contributors to this forum in their support of my arguments but that’s pretty weak… I’d rather reference statistical data from professional analysts.”
You referenced “this” quote from “this” blog in your previous post. By your own admission, that’s pretty weak
http://www.teamfisher.com/blogs/norm_fisher/archive/2007/03/02/and-suddenly-like-someone-turned-off-the-tap-it-was-over-jay-thompson.aspx
****YOU’RE RIGHT, I’LL WITHDRAW THIS LINK FROM MY ARGUMENT. EVEN THOUGH THERE ARE SIGNIFICANT SIMILARITIES IN THE SPECULATIVE INVESTMENT IN BOTH MARKETS… AND FURTHER I WAS HOPING TO INDICATE THE IMPACT OF THAT TYPE OF INVESTMENT FOLLOWING A BOOM AS SEEN IN PHOENIX TODAY. OR MAYBE I’LL KEEP IN PART OF MY ARGUMENT AND ASK THAT YOU (OR JEDI) PROVIDE THE 90% OF STARPHOENIX ARTICLES THAT SUPPORT YOUR ARGUMENT.
This reference wasn’t in your last post.
http://72.14.253.104/search?q=cache:woIILgoCixEJ:www.agr.gc.ca/pol/pub/dsb-rd/ppt/dsb-rd_e.ppt+Canada+%22debt+income+ratio%22+chart&hl=en&ct=clnk&cd=7&gl=ca
**** YES IT WAS, IT WAS MY LAST LINK PROVIDED.
What is this reference backing? The fact that government “might” get sued?
http://www.canada.com/topics/news/politics/story.html?id=a307209c-65cf-4e5a-937e-fdbf11d0932c&k=47322
****THIS LINK IS TO INDICATE THAT THE LAWSUIT WHEELS ARE ALREADY IN MOTION. A LAWSUIT IS IN PROGRESS NOW!
This reference is opinion.
http://www.ckom.com/index.php?p=ntnews&action=view_story&id=8175
****THIS REFERENCE ISN’T OPINION, IT’S AN ARTICLE BASED ON FRED WENDELL’S FINANCIAL REPORT WHICH IS PROFESSIONAL ANALYSIS.
This reference supports people are moving to Saskatoon
http://creastats.crea.ca/sask/migration.htm
**** THIS REFERENCE WAS TO BE CROSS-REFERENCED WITH THE MIGRATION STATISTICS PROVIDED ON ALBERTAN IMMIGRATION PRIOR AND DURING THEIR PROPORTIONATE BOOM… 2000 NET (AND FURTHER THE NUMBER PRIOR TO OUR BOOM WAS A NEGATIVE NUMBER) VS 21000 NET TO ALBERTA PRIOR TO THEIR BOOM.
This reference supports the percentage gained on average income is more in Saskatchewan than it is in Alberta. When you click on the link, Alberta’s 15 and older income earners is up 5.3%. Click on Saskatchewan on the side and you’ll find the same category up 6.5% here.
http://www40.statcan.ca/l01/cst01/labr69j.htm
**** DON’T BEND THE STATS TO FIT YOUR ARGUMENT. THE STAT YOU’D REFERENCED ACTUALLY REFERS TO THE AGE CATEGORY OF 15 TO 24 NOT “15 AND OLDER”. THAT DEMOGRAPHIC IS HARDLY INDICATIVE OF THOSE LOOKING TO BUY REAL ESTATE.
The point in predicting a number is so next spring people can look at your posts now and say “Johny was right in his views, the market is down.” or “Johny was wrong in his views, the market is up again.” It brings credibility to your statements of the market. If you don’t, then you can claim anything you want come that time. If you have no idea, then just say that, like Norm does. I gave you what you asked for after I said let it go 3 or 4 times, do the same for me. You don’t actually think you’re going to influence someone on their decision just because you stated a number do you?
**** I’VE LET IT GO. YOU JUST HAVE NO ARGUMENT AND YET CONTINUALLY TRY TO BEND MY WORDS AND REFERENCES TO MAKE ONE. BE CAREFUL NORTHSTAR, YOU’RE REALLY GRASPING AT STRAWS TO SUPPORT YOURSELF HERE. REGARDLESS, I’M DONE, I’M CONFIDENT MY ARGUMENT IS SUFFICIENT.
I appreciate you too Johny.
April 9th, 2009 at 10:13 am
Johny,
DON’T BEND THE STATS TO FIT YOUR ARGUMENT. THE STAT YOU’D REFERENCED ACTUALLY REFERS TO THE AGE CATEGORY OF 15 TO 24 NOT “15 AND OLDER”. THAT DEMOGRAPHIC IS HARDLY INDICATIVE OF THOSE LOOKING TO BUY REAL ESTATE.
Go back and bring up the site again.
Alta.
15 years and over 1,572.2 21.20 1,649.5 22.33 5.3
15 to 24 years 351.3 13.38 356.1 14.32 7.0
25 to 54 years 1,042.7 23.57 1,097.2 24.72 4.9
55 years and over 178.3 22.76 196.2 23.52 3.3
Sask.
15 years and over 403.5 17.72 412.3 18.87 6.5
15 to 24 years 97.4 11.07 96.4 12.04 8.8
25 to 54 years 259.1 20.05 266.1 21.07 5.1
55 years and over 47.1 18.60 49.8 20.36 9.5
It clearly says 15 and over 6.5%
15 to 24 8.8%
Now that I look at it, it doesn’t matter which row I look at, Saskatchewan wins in all of them.
http://72.14.253.104/search?q=cache:woIILgoCixEJ:www.agr.gc.ca/pol/pub/dsb-rd/ppt/dsb-rd_e.ppt+Canada+%22debt+income+ratio%22+chart&hl=en&ct=clnk&cd=7&gl=ca
**** YES IT WAS, IT WAS MY LAST LINK PROVIDED.
Sorry, I see it now. I apologize. That being said I’d like to know how much of Saskatchewan’s economy is Farming. I know it declines almost every year.
http://www.canada.com/topics/news/politics/story.html?id=a307209c-65cf-4e5a-937e-fdbf11d0932c&k=47322
****THIS LINK IS TO INDICATE THAT THE LAWSUIT WHEELS ARE ALREADY IN MOTION. A LAWSUIT IS IN PROGRESS NOW!
If the wheels of law are in motion then it’s worse. This will be dragged out in court for the next 5-7 years just so someone can say “You’re wrong”. They’d be better off not going to court and focusing currently on the situation.
You said,
“Aside from Provincial auditor Fred Wendell’s opinion on Saskatchewan’s growing vulnerabilities to the commodities market, every source that I’d referenced was actual statistical data.”
Does your own words not say Fred Wendell’s opinion?
Which is it Johny, opinion or not opinion?
Your references are the same type of references that I provided except supporting your reasons for a bear market. If I’m grasping at staws then you are grasping at straws.
“REGARDLESS, I’M DONE, I’M CONFIDENT MY ARGUMENT IS SUFFICIENT.”
If you are confident your argument is sufficient then predict a direction of the market. Then we can see if your right come spring. Simple as that
April 9th, 2009 at 10:14 am
Northstar,
I wasn’t actually intending to “compare” Saskatoon to Phoenix. It was more about the inevitability of change in a real estate market.
April 9th, 2009 at 10:14 am
Norm,
I know that wasn’t your intention. However the use of that blog topic as reference to this market is a comparison.
About the inevitability of change in a market
( using Phoenix as an example ). Here’s Phoenix’s stats over the past 3 years until July 2007.
http://southwestrealestate.com/news_2.html
If you notice the avg price, it hasn’t dropped at all since the big run in spring of 2005. It’s gone up another 15%.
Not to compare the 2 cities
P.S. wow!!! Scottsdale is expensive!
April 9th, 2009 at 10:19 am
Northstar,
If you read my original argument, the income growth stat was to compare Albertan income growth (prior to their boom, 2003-2006) to Saskatchewan income growth (prior to our boom)… you’re using the stats to compare recent income growth between the two cities… I don’t think anyone can argue against the fact that the Albertan boom is loosing steam. Check the other stat on avg weekly income between 2003-2006, the Q2 2007 income growth stat was to get us to Q2 2007… because our boom took place in 2007.
On the lawsuit, actually not 5-7 years to be able to say “you’re wrong”, 5-7 years (my guess is much sooner) to be able to force the canadian government to honor our Kyoto commitments and make Oil Sands development in northern sasktchewan much less polluting and, consequently, much more expensive… and less attractive economically.
On “Fred Wendell’s opinion”, sorry clearly a bad choice in words… replace that statement with “Fred Wendell’s PUBLISHED ANALYSIS!!”.
I don’t recall you using any references let alone “the same type of references that you’d provided”… still waiting on your references.
I guess that leaves you with one final dig, the fact that I won’t make a guess at what the real estate price should be… don’t hold your breath… not even our resident expert (Norm) is willing to make that kind of guess.
J.
April 9th, 2009 at 10:19 am
Tell ya what. How about: It’s overpriced and people are being forced out of being able to afford a home because of the lagging cost of living and the staggering mindless increase in prices.
This – Norm and others – is why I have declared my mind to be a statistic free zone. They serve as nothing more than to allow those who benefit from this situation to confuse the argument further.
Obstructing the outlining of any problems via statistics and distanced often desensitized information is the hallmark of every arrogant profiteer in Saskatoon right now. They’d rather wave their hands in your face and flap on about how everything points to their favor.
Of course it does. Keep telling yourself that while real lives down on the street – not in a laboratory of derived figures and extrapolated apathy – are being damaged by this. Keep telling yourself that all systems are go just because Saskatoon is almost personally hand writing a message to all youth saying “Don’t come back ya hear, we didn’t want to have space for you in the first place.”
It’s amazing how many people are dumb enough to stick up for this as well. Literally people who have bought into the cross eyed perspective given by the media but are actually harmed by it.
It’s such a point of brainwashed contention and nobody knows what hurts them or how anymore because of bloody statistics sending mixed signals.
LOOK AROUND.
If peak oil, uranium and anything else precious is a cursor it is still secondary and the most difficultly addressed concern to the most important fact: We need to keep everyone buying homes!!!
EVERYONE.
April 9th, 2009 at 10:20 am
Northstar,
You raise a good point. Though I couldn’t find what you were pointing to on that page, my pal Jay posts the following averages for Phoenix.
2003 – $196,400
2004 – $222,000
2005 – $300,100
2006 – $335,400
May, 2007 – $350,400
http://www.thompsonsrealty.com/Phoenix_Home_Sale_Stats/page_1129307.html
I suppose the larger problem is that they have around 55,000 active listings with only 5000-6000 sales happening in what should be the peak months. Those are some pretty slim odds of selling so I’ve got to think you have to be pretty aggressive to land a buyer. I wonder if people are spending similar dollars but getting more home for their money.
Johny and Northstar,
A fascinating exchange of ideas guys. While you both make some excellent points, I have to say as someone sitting somewhere in the middle that I don’t find either argument particularly convincing. I don’t mean to be the least bit disrespectful but I think both sides of this argument is based on a certain amount of speculation and where your thinking ends up is going to be guided by your gut. It feels pretty real and convincing to each of you, and I believe that you’re both sincere.
Truth is that there are a few big “ifs” that will determine where this market goes. Chief among them is migration. Given that tens of thousands have headed west over the last decade (average prices rose 70% between 97 and 06 despite this exodus), I really believe strongly that this little homecoming we’ve been experiencing could continue, perhaps even at a greater pace. If real estate sales in Alberta and Edmonton are in the tank then “ex-pats” are going to have some problems cashing in and coming back. If those markets take off again, these people may be feeling flush and willing to pay top-dollar for a decent house back home. If that happens, income stats for Saskatchewan are hardly relevant to where the market goes. The market may be driven by equity as opposed to income. We’ve seen that happen this year. Someone coming back here with 250K in equity has options even if the “average” hits 300K like Mr. Percy predicted. In fact, even if it hits 350K.
We must consider the significance of this one factor. In a market which typically trades fewer than 5,000 homes in any given year, 2,000 new families will have a huge impact on the supply and demand equation.
I really think the excitement is pretty much coming to a close for this year. Look for pretty stable prices and much more normal market activity between October and January. From there, look west. If those markets are cooking, look out!
…and Alex,
Does this mean we won’t see you at the “week in review” anymore? The tide may be turning man!
I am so with you!! All of the valid points which you make should matter in all of this, but unfortunately, they don’t. People will do what they’re going to do. They’ll do what they feel is right for them. In close to 15 years in this business I have yet to meet a buyer or seller who didn’t hold their own interests at the very top of the priority list. We’re not talking about bankers, agents, investors, the rich, etc, etc. We’re talking about every average Joe from every walk of life. If Mom and Dad are in their final years and I have a pocket full of cash, I’m probably going to be willing to pay more than you can to be close to them, and who could blame me?
“Like chaff we were borne in the wind.”
April 9th, 2009 at 10:21 am
Can someone please tell me what incomes in Saskatoon have to do with affordability? Theoretically it would make sense that if prices were out of whack with salaries then they should come to a standstill or drop until wages caught up. However, when one looks at most major centres in British Columbia, and in my opinion Edmonton, and Calgary, (I would include Cold Lake on this list, maybe even Red Deer), the prices seem to be far above what wages are. Kelowna – similar income to Saskatoon, average price near 450K! I wish I remember the link I found on either the Calgary of Edmonton blogs this blog has links to. It ranked average price of major citied in the WORLD and Regina was first and Saskatoon top five. It compared the situation of Perth, a similar size to Saskatoon and resource rich city whose average price was near 400K. I guess I would like to know where we are going. Common sense would tell us that wages would seem to dictate this, but there are enough precedents out there that show otherwise. Is average income a useless statistic, or is it relevant to ‘fundamentals?’
April 9th, 2009 at 10:21 am
Just for fun we could play a game of The Price is Right!(minus the prizes, spinny wheel,and hotties;-( Given the agricultural roots of this province, we could make a farmer’s bet. I am just meaning something fun, like a football pool. People could estimate next year’s average price for a specific month. The winner gets the absolute satisfaction at being able to guess numbers out of thin air. Johny, come on doooooooowwwwwwwwwwnnnnnnnnnnn….
April 9th, 2009 at 10:21 am
Excellent post Norm,
There’s one thing I would like to make clear. My opinions are only opinions. I feel strongly about my research despite what some may say. It’s that research that got me the money I needed. It’s that research that has me in the position I’m in currently. I had and still have entry stratagies and I have an exit strategy. If people think the market is going down, that’s great. If people think the market is going up, that’s great too. I’ve made my predictions known and stand by them no matter what happens. If the market goes down, I’ll be here admitting I was wrong. I’m not here to convince people to buy houses so that I can profit. Real estate is a semi long term investment for me and all but 1 of my properties cash flow.
For every ney sayer there should be someone with a positive spin and visa versa. This keeps a good balance and provides all points of view.
Johny, I stated once that we were posting the same stuff only from a different slant of view. It’s good to see you confirm that as well Norm. No disrespection here.
Finally, we will see who’s view comes to fruition next spring. Quite frankly that’s all that matters. I’ll congratulate whomever called it and I’ll expect the same if I’m the one who called it.
April 9th, 2009 at 10:22 am
Jedi,
I agree with you. Salaries do have a fundemental importance to house prices however I don’t understand the beef here. Saskatoon has average wages with below average house prices.
I tried to start the numbers game last week but you won’t get a response. No one here has the balls to make one.
Once again I’ll start. 285 – 290k End of May. What’s yours Jedi?
P.S. Will therebe contestants row? I bid $1
April 9th, 2009 at 10:22 am
OK – I think the boom has longer to run and the US Fed has just given it new life with their 1/2 percent interest rate cut . . . that’s supportive of commodities including oil, uranium, wheat etc. etc. (not lumber strangely enough). The other interesting thing is the new Prince Rupert port which will cut shipping times by a tremendous time between N. America and Asia. That will mean the intensification of industry all the way from Prince Rupert to Winnipeg along the northern CN lines. Edmonton is trying to make a pitch and ready itself as the industrial shipping centre for this expanded northern line. But why not Saskatoon? Why should Alberta again reap the benefits of location? Anyways, my two cents worth says that the average property in Saskatoon next July will sell for $295,000.
April 9th, 2009 at 10:22 am
I think we’re going to be lookin’ at another crazy spring next year if current prices hold steady, or even drop 5%. My guess is $300,000 by the end of April.
On a side note, does anyone else feel like we’re getting shafted now that the Canadian dollar is just about on par with the US? Why are we paying an extra 8 – 10k for the same car in Canada that was made in Ontario? Why are we still paying a 60% markup on books?
April 9th, 2009 at 10:23 am
Over the next couple of days, I will prepare a post with some specific criteria and a date at which time we’ll check out your predictions. That way, there will be little wiggle room.
Could be fun.
April 9th, 2009 at 10:23 am
Ron,
The interest rate cut yesterday doesn’t help our commodities exports as much as the high canadian dollar hurts them. I think that was part of Johny’s argument in pointing out our growing dependence or vulnerability to commodity fluctuation.
I predict an avg between $200,000 and $225,000 by April. There’s just nothing to support this bubble.
April 9th, 2009 at 10:23 am
I’m not an expert, but I don’t think Saskatoon is in a “bubble” and house prices will go nowhere but up up up, as the spring arrives. Av for SFH will go over 300K. The migration from Alberta is just catching on with trades people now. The wages are similar to Calgary/Edm. 2 or 3 years ago, trades incomes could buy houses and raise families in Calgary and that has changed dramatically. Saskatoon and Regina are the nearest possible options for out-priced Albertans who still want to live in a city.
April 9th, 2009 at 10:24 am
That’s cool and all, but where are all the jobs? I’m visiting from Calgary and would love to move back… I’ve been watching the job market in saskatoon for 3 years and nothing’s changed unless you paint/frame houses! I call bubble. No one’s going to buy a house here if there are no jobs. People were moving to Calgary/Edmonton because of the jobs not the wages, I did. I had to move away from saskatoon after university because there were NO JOBS, there are still NO JOBS!
April 9th, 2009 at 10:24 am
http://www.cbc.ca/canada/saskatchewan/story/2007/09/18/river-landing.html?ref=rss
April 9th, 2009 at 10:27 am
I like to see economic development as much as the next guy but this one falls short for me. I thought they were going to build something that would draw people! A spa would have been a draw – all I see is office space, hotel rooms, office space. Aside from a restaurant, what is the reason to go to the river landing area? This sucks
April 9th, 2009 at 10:27 am
I just read on another forum that economic anaylists are predicting a major recession in the US come next fall due to people incurring too much debt.
A couple of years ago I would have had little to no sympathy for these people living beyond their means, and borrowing more than they are able to repay, but with the rapid rising housing we have experienced here in Saskatoon over the last year, I am now more empathetic to their situation. During this unexpected boom, I have come very close to plunging myself into more debt than I feel comfortable with, because the majority say that housing costs are still very reasonable here in town, and that prices are only going to climb much higher next spring. So what to do? Do I wait until either I eliminate some of the student loan and other business startup related debt I have incurred and risk falling further behind should housing prices continue their current trend, or buy now, living dangerously close to my means, and enter the market before it increases another two fold? I’m sure this is the same dilemna these same people were stuck with and are now finding out if their gamble paid off – be it good or bad.
April 9th, 2009 at 10:28 am
Jason, it sounds like you are young in your career. My thoughts are that you should explore the option of getting in. Why? Ultimately there will be something in your price range. The important thing is not to be above your means. Talk to some real estate agents. Talk to some banks and mortgage brokers. Read stuff like The Automatic Homeowner (I think, same guy as automatic millionaire). Maybe the payments are better than you think. Also, as long as things aren’t too tight take a longer mortgage and as you progress in your career you can pay it down quicker. Or, after careful analysis, stay out. Plan so that if a car breaks down or something else pops up(they always do) you won’t be strapped. Also, compare what you would spend on rent versus owning. As long as you can afford the house you will be okay. If things go up, great. If they fall, crappy, but you can afford it and they will come back up. Maybe 2 years, maybe 10, but it will work out. Do your research and everything will fall into place. Good luck!
April 9th, 2009 at 10:28 am
Jason, STAY OUT OF SASKATOON!
It is no market to be buying in right now. It is highly over valued even more than what is being seen in Edmonton.
The economy here is floating on speculation and the job market is very touchy.
Businesses are losing employees if they aren’t involved in the primary boom related fields. Really, it all hangs in such a balance that you could easily see yourself paying way more for a house than you’ll wish you had.
As a city, Saskatoon has been robbed of it’s true values and converted into an arrogant Albertan economy. The feeling here has changed to be far more competitive than Saskatchewan was ever meant to be.
Don’t listen to people who tell you to lower your expectations or find something in your price range. If you are in fact young, your price range officially gets you a wreck and the going opinion amongst the blithe and arrogant rich is “haha you better fix that up!!!”
Some people can’t grasp the concept that a house is meant for living in, not constantly flipping. You’re always going to be required to make some kind of outrageous sacrifice here unlike anything people would steep to in other cities. Saskatoon is the first city I’ve lived in that treats having tenants in your own home as mandatory – even before the boom. It’s completely backwards. All the prices are derived from the notion that you should be doing everything possible to make the seller as much money as possible, regardless as to how it infringes upon your life and inconveniences you outside of ordinary circumstances.
April 9th, 2009 at 10:28 am
As an addition to my last post (sorry).
I think it’s really dumb that people expect you to have some house renovation knowhow just to own one. I have neither the time or the skills to renovate a home. Somehow, I think older people or those with more free time on their hands assume that if they can get around to doing it, so can everyone else.
Which is simply not the case.
April 9th, 2009 at 10:28 am
Renovating really isn’t all that bad. My wife and I renovated our condo without any previous experience and we recieved many compliments during our open house. Lots of people will criticize the ole “paint and flooring” flip but the truth is, it goes a long way toward making an older but sturdy place more marketable in the end.
April 9th, 2009 at 10:29 am
Jason,
I noticed you said this ” or buy now, living dangerously close to my means, and enter the market before it increases another two fold?”
Do you feel the market will go up? If you do, then it’s all about numbers. What intrest rates are you paying on your student loans and bank related loans? If they’re low and locked in, maybe you don’t want to pay them off quickly. How much monthly income do you bring in and how much are you comfortable paying out? What area and type of house would you consider a great house? What area and type of house would you consider to be alright to get in to the market?
If you feel the market is going up more, don’t let certain personalities convince you otherwise. Do your due dilligence and make your own educated decision. Also consider your gut feel. A lot of people don’t pay attention to gut feel and it’s one of the best things you’ve got.
The last point I’ll make is to remember there is good and bad debt. Society likes to potray debt as bad but that’s not true. Debt that in the end makes you money is good debt. I once put a down payment on a credit card for 2 months, then refinanced and made good money after selling. I don’t suggest you do that, but the point is how many people would tell you that doing that would be stupid? For me, I made $60k in 7 months, is that stupid? It’s a balance between knowing you’re not comfortable with stretching your finances because the numbers don’t work for you, and not being confortable stretching your finances because of past conditioning. Sometimes it’s good to stretch your comfort zone.
I’m not saying buy or don’t buy. Do your due dilligence and come up with your own conclusions. If you decide to buy I’m sure Norm or someone he knows can help you find a good property. I offer my help in any way as well (as far as numbers go). Good luck to you.
April 9th, 2009 at 10:29 am
Alex,
you once commented that you work hard and don’t have an entitlement attitude. This comment proves otherwise
“Don’t listen to people who tell you to lower your expectations or find something in your price range. If you are in fact young, your price range officially gets you a wreck and the going opinion amongst the blithe and arrogant rich is “haha you better fix that up!!!”
A lot of people started out in those wrecks and worked their way up. It’s quite obvious you have no intention of doing that. Have fun renting.
April 9th, 2009 at 10:29 am
Northstar,
You truly know how to twist the blade when it’s not in yourself. I think it’s obvious you derive deep and visibly insecure satisfaction from kicking people who are not as fortunate as you while they’re down.
I can only wish for a situation in your life where you might be on the side of the stick with less leverage and somebody will do the same to you. I will also guarantee that it won’t be me because unlike you I do not drop to such lows.
If you have something to say that isn’t more than jeering, goading and heckling – go for it man. But so far all I’m seeing from you is a lot of verbal masturbation.
April 9th, 2009 at 10:30 am
Jason,
Be careful when considering Northstar’s advice on buying. By his own admission, he is a real estate investor and it is in his best interests to keep people buying houses in saskatoon. I’d recommend you read Johny’s posts above. They made sense to me.
April 9th, 2009 at 10:30 am
Jenn and Alex,
Please justify your comments. Either you read at a grade one level, or have your own agendas. Northstar said to do your homework and make an educated decision once that is done. He even went as far as saying to trust intuition, such that even if your homework is saying yes and your intuition no, then trust your intuition. Nowhere does he tell Jason to get into the market right now. It is basically the same thing I said. Do your homework. If it makes snese, get in. If it doesn’t, don’t. No one is saying to buy or not buy.
If you are going to take Northstar to task that is absolutely fine. Simply point out the flaws in what he is saying, and provide a better argument. Alex, simply by wishing Northstar be in that position makes you the low guy. It’s kind of funny, you always want to come across as looking out for the little guy but really you only care about one person- YOU!
April 9th, 2009 at 10:31 am
Meh, I don’t need to justify anything. I just think that everything Northstar writes is to convince someone that this market is going up. Johny took him to task on it. Unlike Norm, I really think Johny’s arguments did make sense. he made it explicitly clear what factors he felt were important to house prices going one way or another and backed them up with statistics, not his own personal 13 point plan (which was pretty thin, and very speculative). So Jedi, I guess I’ll just echo Johny’s argument because it’s better.
April 9th, 2009 at 10:35 am
Alex,
All I’m saying is I started out in Vancouver in the crappiest condo, in the 2nd crappiest part of the entire lower mainland (next to East Hastings). Ask Ron from Vancouver about Whalley. I was that person that couldn’t afford, but I got in where I could. I worked up from there. I didn’t sit there and blame others because I couldn’t afford the $400,000 house, and I most definately lowered my expectations living where I lived. It Doesn’t feel good when others take personal shots at you does it? Let’s take a look at all the verbal masturbation “as you call it” that you’ve said.
“blithe and arrogant rich”
“Only a greedy punk will expect people to scrounge up more money than the house could ever truly be worth.” That was a personal shot.
“I can’t wait to hear all the rich start screaming out for their precious society-killing money.”
“look at the rich who feel like they are owed something because they endured hardship, so they are now robbing young people with extortionate house prices.”
“When you read the word “success” expand it back to what it dishonestly attempts to mask: “extra money for rich people”.
It’s no wonder that you claim you can’t afford a house. If you could you’d be “Rich and greedy”. That being said I do apologize for the “Have fun renting”. You’re right, it was a cheap shot. However if you don’t want your glass house broken, don’t throw stones yourself.
Jenn,
Cut and paste in my post where I told Jason he should buy. What I said is that after he’s done his own research, if he feels the market is going up, then act accordingly. Moreover I could care less if the market keeps going up because my properties cash flow. It could drop 20% and I’d still be up. I know long term the market will be higher and I’m fine with that.
April 9th, 2009 at 10:36 am
Jenn,
I respect your opinion. We will see this spring where we sit
April 9th, 2009 at 10:38 am
Jenn,
“unlike Norm”? How do I get wrapped up in this?
April 9th, 2009 at 10:38 am
Oh no disrespect Norm, I just read your comments on both arguments and you’d said neither argument was very convincing. I found Johny’s argument more convincing (with references) than Northstars. Or maybe I just appreciated that he backed up his position with references so that I could do my own Due diligence.
April 9th, 2009 at 10:38 am
Sorry Jenn,
I misunderstood your comment.
I would agree that Johny’s argument was well thought and presented, as always. While I agree that we are much more likely to see a flatter market as we move forward, I think even Johny would agree that none of us really know for sure what will happen. I don’t know too many people that wouldn’t have looked at you funny if last August, you’d said, “the average selling price of a home in Saskatoon will be around 260 in one year. I know I couldn’t have possibly believed it.
Thank you for your participation here!
April 9th, 2009 at 10:39 am
enn,
Just so you know the 13 points I stated is what I learned from one of the top real estate investing organizations in the world, “Rein”.
To reference my 13 points, here we go
1)Is the average income increasing faster than the avg?
http://www40.statcan.ca/l01/cst01/labr69i.htm
(Thanks for that link Johny)
If you go from province to province, you’ll find Saskatchewan at the top.
2)Is the job growth increasing faster than the avg?
http://creastats.crea.ca/sask/employment_trend.htm
(Thanks again for that link Johny)
Keep in mind that my initial investment here came in the first quarter of this year when on a % basis Saskatchewan was experiencing growth quarters for 2 years straight. The 2nd quarter this year is a bit of a concern however if you look at the 5 previous quarters, that totals nearly 25,000 new jobs. Even after 1 quarter of losing jobs, it’s still on an up trend. If a couple of more quarters come back with down numbers, then I’ll be worried.
3)Does the area have a stong influx of immigration?
This article shows that in 2006 while the provinces population was shrinking, Saskatoon was up 2.6%
http://www.cbc.ca/canada/story/2007/03/13/sask-cities.html
This report shows not only a population growth of .8% in quarter 2 of this year but also some other intersting things like labour force increases and residential construction permit increases.
http://www.sreda.com/resources/pdfs/sreda_q2report_28august2007.pdf
https://67.15.34.213/dmirror/http/en.epochtimes.com/news/7-6-21/56722.html
4)Will the area benefit from a real estate ripple effect?
Anyone can see that what is happening in Alberta and B.C. will spill over in to Saskatchewan. If only a little bit, that still constitutes a real estate ripple effect. The stats in real estate sales q1 and q2 prove that.
5)Does the area have multiple major employers?
http://foundlocally.com/Saskatoon/HR/Jobs-Employers.htm
Point here being that this isn’t a small town where 1/2 the population works at the mill. Saskatoon doesn’t have only 1 major employer that would cripple the city if it shut down.
6)Is the area good for retirement?
Just to get an idea of the baby boomer situation.
http://www.cbc.ca/canada/story/2007/07/17/census-canada.html
Here are the avg prices for a house right now in desireable cities in Canada.
Vancouver – $720,000
Calgary – $485,000
Toronto – $360,000
Montreal – $230,000
Reference: http://www.canadian-housing-price-charts.235.ca/canadian_housing_price_chart.htm
I don’t know what Saskatoon is but my guess would be somewhere around $270,000. It’s disireability to the elderly is great. Not too crowded, family atmosphere, lots of golf courses and other amenitites. Most importantly it’s a place they can take their $300,000 in equity from B.C. and Alberta and live mortgage free.
7) Does the area have major transportation improvements slated for the future?
Here are some references to projects in the province and Saskatoon as well an independant study on transportation requirements across major cities in Western Canada over the next 20 years.
http://www.highways.gov.sk.ca/Default.aspx?DN=edc65802-5359-4fcc-8467-0085d9ef43ef
http://www.gov.sk.ca/news?newsId=9422939f-6a86-40f2-8a48-62b4f7057e63
http://www.tc.gc.ca/mediaroom/releases/nat/2007/07-gc020e.htm
http://www.cwf.ca/V2/files/DreamUrb.pdf
8)Is there an increase in material cost?
Below the little chart on this link the very first sentence says “Saskatoon contractors increased their prices by 38.6% between may 06 and may 07′
http://www.statcan.ca/Daily/English/070712/d070712b.htm
9)Is there a labour shortage?
http://working.canada.com/movewest/sk/story.html?id=f8539526-2810-476d-99a5-eae9b1829d9d&k=10118
http://www.canada.com/saskatoonstarphoenix/columnists/story.html?id=72a9a081-cd56-4fdb-9bc0-50fad467b8f8
10) Is the area desireable?
I believe so. I admit this is an opinion related topic but most people who have been here comment on what a great city it is.
The 3 things left on my checklist are the government, development office and infrastructure. I admit, those 3 things are a little shaky at the present moment however I believe it will come around.
Finally to get back to the Elliot Wave Principal, anyone can look this up on google. If you research it you will find how Saskatoon just went through the 3rd wave of a 5 wave process this spring. Currently it’s entering the 4th wave which is a consolidation stage. The 5th wave is the last upward movement that takes place before a major correction. The 5th wave, although not as long and steep as the 3rd, is still a major move.
Once again, I’m not telling anyone to buy. I’m just stating which direction I feel the market will go and why. If you don’t agree than that is your opinion and I respect it. Please respect mine.
April 9th, 2009 at 10:39 am
I don’t really want to get into the same kind of fight as you and Johny did Northstar but the one link that I found most unsettling was the one both you and Johny had provided for job growth. Q2 2007 negative 5600 jobs made me jump out of my chair, I’m kind of surprised you used it in your argument here. Another thing is that it’s a little unsettling when our major employers are primarily government, that doesn’t say much about private sector growth. Your labor shortage article (one from 2006) reflects the same growth as the CREA one… and then job growth tanks into the negatives. The other one just seems to be Dwight Percy speculation (and I think you were pretty hard on Johny for referencing “opinion”).
Sorry Northstar, I’m just not convinced. Like Drew, I watch the job boards regularly too and I’ve seen nothing to suggest job growth in any sector other than construction.
April 9th, 2009 at 10:40 am
I\’ve been watching this board for a couple of months now trying to figure out if I should buy too Jason. Jenn is right. Johny put out a lot of importnat statistics. I don\’t know where we\’ll be by spring but I don\’t feel we\’re going to go any higher. And longterm we will go down. When banks are saying that saskatoon is 21% above it\’s longterm projected average, that says alot about where our real estate market is heading. If we had as many jobs (good jobs, not jobs building houses) as Calgary did for 5 years before there boom, I would feel more confident. But nothing I\’ve seen convinces me that our average price in houses is going to keep going up, that\’s just flat out denial of a bubble. The types of mortgages people are getting too, man, this could really be a problem. Did anyone see the CBC news lastnight? They said 1 in every 530 houses sold is now being forclosed on in the US. And then they interviewed people from Canada that are getting mortgages from subprime lenders. The point was, with our recent housing boom, more and more people are having to go that route. Which is kind of exactly what happened in the US before their bust. We could really be in for trouble guys.
April 9th, 2009 at 10:43 am
Jenn,
The only reason I was hard on Johny for referencing opinion is because he was hard on me for it and then used it himself.
As far as the job growth stats goes… If you’ll notice that I recognized the 5600 jobs lost in quarter 2. What I said is that the previous 5 quarters before, there was a gain of nearly 25,000 jobs. Even though that quarter wasn’t great, it’s still an up trend until we see a couple more quarters of not so impressive results. I hear what you are saying about private sector.
I’m not trying to convince you. All I’m trying to do is state why I think it’s going up and be respected for that opinion. I respect Johny for his research and his opinion to the downside. I’m just tierd of hearing about how I’m posting to pump up housing prices. It has nothing to do with that. I post to offer my opinion. Some people agree, some don’t
April 9th, 2009 at 10:44 am
Are we talking about Saskatoon job growth here?
According to a media release from SREDA, the recent Stats Canada Labour Market Survey says Saskatoon added 7,300 jobs as compared to this time last year. This represents the second highest growth rate amongst Canadian cities and is more than twice the national average.
http://www.sreda.com/resources/pdfs/sredanewsrelease_7sept07.pdf
April 9th, 2009 at 10:44 am
Some might be interested in reading SREDA’s quarterly report on Saskatoon for Q2/07. It’s looking pretty good to me unless I’m missing something.
By the way, I’ve never heard anyone make reference to Saskatoon as a “government” employment area. Regina? Yes, but not Saskatoon. This is a very diverse employment environment.
See the report at http://www.sreda.com/resources/pdfs/sreda_q2report_28august2007.pdf
April 9th, 2009 at 10:44 am
Norm,
I think Jenn was refering to one of my references about major employers in Saskatoon. Some of the major ones are the health industry and the city. Government jobs does mean union jobs though. They’re paid quite well with a lot of benefits.
Thanks for the reference to job growth and the q2 report. That further strengthens my position.
April 9th, 2009 at 10:44 am
That report is one of my references
April 9th, 2009 at 10:45 am
Wow – the blogs been busy today! Thanks for the advice all. Like it or not, I tend to agree with Northstar that justified or not, prices will continue to rise over the next year. This is just going on my gut feeling. With new projects like the Riverfront development, I can’t help but think we will see more of a big city mentality take hold on residents. With this, I guestimate that house prices will continue to climb. When I say big city mentality, I mean that sellers will start to equate the value of their two bedroom house in Saskatoon to those for sale in larger centres such as Vancouver or Calgary, and price accordingly.
In regards to my own home purchase, I have made the decision that unless a real jewel comes along to hang in there till spring and do my best to aggresively pay down my student loan debt. Even taking care of one of these would free up a good amount of $ and would make me feel a lot more comfortable about taking out a mortgage. I did make big decision last week and called back the architectural firm I was going to take the job with in Rhode Island and told them I had to respectively decline the position. Maybe I’m just a sucker for punishment, but even with its growing pains I just love Saskatoon and the people I work with and know here in town. I cannot stress how much I would miss taking a stroll along the river or even visiting the small shops and pubs on Broadway. On the bright side, I am finally starting to see the fruits of my small business, and this coming year I am going to adjust my rates to try and compensate somewhat for the rising living costs we have experienced. Soo – here’s hoping that come next spring I’ll be in a more able position to resume my hunt, and NOT looking at 250,000 for a small starter bungalow!
Cheers all.
April 9th, 2009 at 10:45 am
I think it’s important to watch the real world changes in the job market over the next while.
What statistics depict and what you will actually see are going to be very different stories all together.
If I had to look at the statistics, I’d like to see them broken down in to sector and just what criteria must be met to qualify as a “job” in this measurement.
I see a lack of competitive wages *cough*, and a lack of focus on anything but recursing the boom. So, Saskatoon will be a one-trick pony for the next bit as a FAD, and die out later on. You’ll probably get some aftershocks, which is why this market is not worth investing in because of the unpredictable behavior. The path taken by the provincial government is NOT a plan for growth except to attract old already working rich snobs. Even then still, their loyalties may not be in this province but in the status of the move and beware the inevitability that somewhere else may lure them away.
Saskatchewan has traded the chance for loyal and loving citizens for a brief updraft.
You do not attract and retain young talent by driving up housing costs, not increasing wages, creating rental shortages, letting your service industry decay and have a sloppy and amateur residential tenancies act. To top it all off, Saskatchewan is flavoring all of this with a thick coating of apathy.
The changes in the attitudes in this city alone show me a story of a city that is getting worse. Northstar epitomizes the self-made (credit given) insecure individual who insists on prancing his accomplishments around to people who are hurt by the current economy. No amount of praise, stroking, BMW or exotic Mexican vacation can appease these people.
Saskatoon is developing a more arrogant and selfish Albertan feel by the day. Many of the reasons I liked Saskatoon are overshadowed now by all the reasons why I would never move to somewhere like Calgary. The shallow status-living, the perpetual ladder climing & gold digging is so boring. People can’t think much further past their boat or car and it’s just a giant province-wide pissing contest.
Yay?
Again, go ahead and deny what I say is true because statistics never bother to measure elitist behaviour. To be honest, it shows you’re one of those people who read statistics and buy into them without thought.
April 9th, 2009 at 10:45 am
Northstar,
Yes, I should have read your complete post before I got onto those other things. While I agree that “government” organizations make up some of the larger employers we can’t forget that it accounts for less than 10% of the workforce. There is tremendous diversity in our small business community. Get in the car and drive around the north industrial area. Bet you’ll see many, many companies that you didn’t know existed. While they may not make the “largest employer” list, many of them are doing business on a large scale, some across the world.
April 9th, 2009 at 10:45 am
Norm
The Banks do have lending guidelines. I work for one of the Big 5 Banks and yes we are lending money, on the equity in homes at 80%. The customer still has to qualify for the credit. If he could only afford a mortgage on a $150,000 home 2 years ago when he bought the home, chances are he won’t qualify for a $260m equity take out. To qualify he must have debt service of less than 40% of gross income; for example a monthly income of $4500 can only have $1800 of total debt, including monthly mtg pmt, interest, taxes and heating, and all credit card payments and loan payments. So if you want the big house you won’t be able to afford the car to park in the garage, unless you pay extra to CMHC to get the 40 year mortgage they underwrite.
Having said that, in order to have a $258,000 average home in Saskatoon, and a car (a cheap one) to drive to work, you will need a job that pays 28/hr. And hope you don’t have to fix your car or your home.
April 9th, 2009 at 10:46 am
Alex,
The guy lives on Avenue H South and drives an economy car! Why do you insist on calling him an “elitist” and putting him in a BMW?
While I’ll admit he can be a little cheeky on you, it’s not like you’re defenseless, or that you don’t occasionally beg for a good whipping.
It’s also not like his ideas are borne of ignorance. He was asked why he feels the confidence he feels and I think he spelled it out rather intelligently. His confidence is demonstrated by the fact that he’s still in buy mode. Again, for me there remains too many speculative elements to feel confident either way but I wonder why you feel he deserves such a trashing?
Yes, there are those who always see the positive twist in what’s going on around them. Then, there are those who can’t even admit when the good news is good news.
If we could roll back a few months and say, “that’s enough of a real estate gain for one year” I’d be glad to do it. Fact is, we can’t. Why do we have to deny that there are other positive signs of growth all over the place?
Saskatoon’s housing market may be in a tough spot and there’s no doubt that some are hurt by it, but this city is not about to turn into a pillar of salt and wither away to nothing.
April 9th, 2009 at 10:46 am
Wow, thanks Norm! One question, (I’m sorry, I’m not very good at reading these things) does the report that you have provided contradict the 5600 jobs lost in Q2 of 2007 from the CREA report? I see that the report that you found was for the whole year. It says the labour force has increased but, unless I missed something, doesn’t say anything about job growth in Q2 2007. Did I miss something?
April 9th, 2009 at 10:47 am
City banker, I’d like to see more of you around here to talk about things. Would love your angle and I salute you for making a presence!
What are we looking at for the 119k to 149k range? Realistically without it being bad debt?
April 9th, 2009 at 10:47 am
Hi City Banker,
Thanks for the comment. You are someone I hope we’ll hear from again as we could use a little lender perspective.
I am aware that banks have guidelines and I am familiar with debt service ratios. However, you know as well as I do that it just keeps getting easier to incur more debt all of the time. Isn’t it true that you can actually crank your mortgage to 90% if you’re willing to swallow the CMHC premium?
I’m not suggesting that any program that offers greater flexibility is a bad thing. Six months ago, you’d be better off entering this market with a 40 year amortization than not entering at all.
You’ll notice if you go back through my comments that I didn’t use the word “bank.” I referred to “lenders,” which would include the private market that is financing a lot more questionable applicants. I think a lot of the potential problems exist there but would you agree that banks have made some moves over the last year to try to take a little market share back from “B” lenders, and did those steps not involve some relaxation on some of the guidelines other than GDS and TDS ratios? Are there not some relaxed application policies? Perhaps even lower down payments on revenue property purchases?
Thanks again for jumping in.
April 9th, 2009 at 10:48 am
Alex,
If you need to justify your struggles by blaming me then that’s O.K. I’ll take it.
Jenn,
You didn’t miss anything. Norm’s report covers the entire year as opposed to the other report that is just on q2. I tried to explain earlier but maybe I didn’t do a good job of it. Even though q2 was down 5600 jobs, the entire year q2 to q2 of 2006 is up 7000 jobs. Thus why I stated it’s in an up trend. If we see the next 2 quarters down then that trend will be over. If q3 report comes back as another increase in jobs, then the trend will continue.
City Banker,
Good to have you aboard!! I found out about the 80% rule today. $258,000 mortgage requires $28/hr in income total? So 2 people making $16/hr could do it providing good credit history?
Norm,
I can be a little cheeky sometimes
P.S. Where’s Johny? I miss him
April 9th, 2009 at 10:48 am
Jenn,
You’re correct that the report doesn’t address Q2 losses which I’m sure are accurate. It looks at growth over a one year period. I think the CREA graph would produce similar results. Yes, if you simply look at Q2, it looks pretty gross but I think that these types of numbers have to be viewed over longer periods of time. It’s like the “week in review” numbers which I publish. In any given week average sale prices can fluctuate wildly but when they’re looked at over longer periods of time they tend to provide more stable numbers which are indicative of market trends. Along the same line of thinking, it would probably be a stretch to say the job market is booming if Q3 shows an equivalent spike up to the downward spike in Q2.
This is me trying to sound like I know how to analyze the job market.
April 9th, 2009 at 10:48 am
Northstar,
“If you need to justify your struggles by blaming me then that’s O.K. I’ll take it.”
Awe!! You really are a great guy, aren’t ya?
“258,000 mortgage requires $28/hr in income total? So 2 people making $16/hr could do it.”
I think you’re probably a smart investor but your math skills are a little weak. 28/2=14.
Sorry, I couldn’t resist.
April 9th, 2009 at 10:49 am
LOL!!!
Whoops, and I haven’t got in to the whiskey tonight either.
Maybe next time I add 2+2 I should get my calculator.
April 9th, 2009 at 10:49 am
My prediction for June 16th, 2008 is 292,715. Johny, thanks for the well referenced post. You stepped up to the plate. My thinking is more in line with Northstar’s, but I appreciate the food for thought.
Jason, good luck with your business and finding a home.
Regarding debt, I am not happy that it is rather easy to rack up a whole pile of it, but one could make an argument that many other substances/vises are accessible and people choose not to do them(excessive alcohol, drugs, gambling, so on). I can’t tell you how many people I have interviewed that have marks on their credit history. My biggest disappointment is that these people never seemed to be taught about credit reports, credit rating, and the impact it has on their future. At the end of the day people are responsible for the choices they make. If people have to have new cars, and the latest cell phone and blu ray dvd player and new ipod, then there is a price to be paid. Someone needs to educate people that you don’t have to keep up to the Jones’, that you can work your way up to owning a nice house or vehicles once you are established in your career. My friend’s grandparents have a farm on the outskirts of the city. Their original house still stands today and I am not sure it is a whole lot more than 300sq ft. The whole house. These people are quite well off today, but still pinch pennies to this day. People need to be educated to save, contribute to RRSPs and other investments, pay off their mortgages earlier, and be responsible with their money. I don’t know whose fault it is (parents, schools, society that demands excess, advertising, all of the above) but lenders don’t deserve to shoulder that blame for this.
PS My employment is not in any way connected to the practise of lending or financially related
April 9th, 2009 at 10:49 am
Jason,
So glad to hear that your young is business working out well for you. Best wishes for the future.
Jedi,
Lol! That’s quite a prediction!
I agree with your thinking that every borrower must take full responsibility for the circumstances which result from the debt they incurred. Again, lenders must take some responsibility for the crisis which has been created by recklessly lending to too many deadbeats. These are two entirely different problems. They went too far in the US when they created “declared income” loans which didn’t even require income verifications from applicants.
Northstar,
You might want to double check the books to make sure that your properties are actually “cash flowing.”
Thanks for being such a good sport.
April 9th, 2009 at 10:49 am
Everyone,
You guys are great! Norm (thanks for hosting), Johnny, Northstar, Alex, Jedi, etc. I’m totally enjoying everyone’s comments and arguements. It’s so interesting to see what’s happened and where things might go. Thanks for contributing.
A little off topic…but here’s me.
I bought 7 years ago as soon as I could afford to (dropped out of university and got a job). I bought the smallest, dumpiest house in the nicest neighborhood I could afford (thanks to advice from Garth Turner columns in the SP), and have since gained some equity here in Saskatoon (and much plumbing knowledge). As the prices started to take off this spring, I guess I panicked (thought I’d be priced out of the market) and bought 10 bare acres 22 minutes west of town with the equity in my house (I always wanted an acreage, and at the time thought this might be my last chance).
Sometimes that gut feeling is worth following. I love my acreage, and have started some shelterbelts, and will build and move out there in the future, when I can afford it.
My advantage is I have always had a long term perspective and long term goals, and in the meantime, I will live in my small house, within my means.
I feel you really do have to start small, especially if you don’t have the income, or the chance of your income increasing much over time (City Banker’s estimate of 28$/hr blew me away). I live in a house that’s probably less than the size of the average garage, at 463 square feet. (A 1930’s gem, and don’t forget to seal off every single window with plastic for the winter and plug door drafts!).
So I’d just like to comment that there is really nothing wrong with starting small, and there will be time for a bigger house later in life. A small house is great, and so underated! Do you like to garden? The yard is much larger! Don’t like to clean? I can do the whole house in a few hours! You certainly can’t fill it with expensive furniture, or buy things you don’t really need, where would you put them?
In fact, you’ll live more within your means, probably gain equity (most of the time, especially in Saskatoon) and come out better off than renting, in my experience.
So the average house price is 250K, what’s the average house, 1000 square feet or more? Luxury. For those reading this blog, wanting to make your first home purchase but feel you can’t afford 250K, don’t be intimidated by small square footage. Buy what you can comfortably afford, and no more, and if you can’t afford at this time, don’t. But don’t give up. Markets turn, they go up then down, just try not to get in over your head when you do decide to dive in.
All IM(H)O!
Miss K
April 9th, 2009 at 10:50 am
Miss K,
Excellent advice!
In my opinion, your move to get in small was much smarter than sitting on the sidelines waiting until you could afford something more. Just seven years later you’re already preparing for your dream home.
Thanks for sharing your experience with us. You’ve got a great attitude. I loved your pro small list and I hope that we’ll hear from you again.
April 9th, 2009 at 10:50 am
Great post Miss K. My wife and I had a similar situation. We really wanted to own a house, but we just didn’t have the income to support that kind of debt. So we settled for an older apartment-style condo (one of those sorry excuses for a home that Alex is always going on about) in a nice area in spite of the protests from my in-laws who felt that a condo was going to be a terrible investment. Well, as it turns out, it was the best investment we ever made! The money we gained from selling our condo helped get us into our first house.
Building equity is better than paying rent; especially in a market like this where rent is pretty much expected to pay the mortgage.
Speaking of condos, would it be possible to post some recent stats for the condo market Norm? I’m curious to find out if it has cooled down much since the last posting.
April 9th, 2009 at 10:50 am
I wonder what it’s like now though for people getting into the market in light of our serious decline in affordability. Sounds like we were in similar situations Batman but I remember there not being much of an issue in affording a condo then. My condo was $60000 (which was a lot for a condo then) and my income was $14/hr. The person working my old job now makes $15.50/hr, she was just telling me that the cheapest condo she could find (mind you it needs to be 2 bedrooms, 1 for her daughter… mine was 3!!) is $189,000. That just doesn’t seem to make sense to me.
April 9th, 2009 at 10:51 am
Thats the problem Jenn. From my own experience, the lowest priced condos / start bungalows are running about 160,000 now. Bungalows in this price range seemed to require a little TLC and some general maintenance. One would think that condo prices would be much lower than a start home, but that doesn’t seem to be the case. The only thing I can think of is that as our population ages many of the boomers are deciding they would rather live the condo lifestyle. Here’s hoping that with the flurry of condo conversions and new condo developments (just did drawings for five new 60+ unit developments in the past couple of weeks!!) that prices eventually settle somewhat.
April 9th, 2009 at 10:51 am
I just did a search for condos in the MLS. You CAN buy lower priced condos, even 2 bedrooms, but as was pointed out before, you may have to sacrifice the area you live in. Here’s a 2 bedroom for 97,500. Click here to view
Just as with houses, it depends on the area and what you are willing to sacrifice.
April 9th, 2009 at 10:51 am
Jenn,
Affordability seems to be the name of the game here. I guess the flip side of your arguement is: can someone afford not to buy into this market right now? I’m sure there are lots of would be first time buyers sitting on the fence at this point waiting to see if the market is going to hold or crash. Meanwhile they’re burning $800 – $1200/mo on rent.
The market in Tucson is expected to fall 11% by the end of 2008 from it’s peak or “bubble” back in 2006 because of the real estate slump down there. Lets assume my family didn’t buy a $250,000 home because we didn’t feel the market could support that price back in 06. So we spent $1000/mo on rent for 3 years until the market bottomed out. Now the house we wanted is only $222,500, a savings of $27,500! But wait, we burned $36,000 on rent while we were waiting for our home to go down in price. Did we save money? Depends on how much would have been shoveled out for interest on the mortgage, size of down payment, etc. but I guarantee we didn’t save 11%.
Now I’m not saying Saskatoon is going to end up like Tucson, I just thought I’d use it as an example to point out the opportunity cost of rent vs. owning.
April 9th, 2009 at 10:52 am
Batman,
If I can find the time over the weekend I’ll probably do a little breakdown of average prices ending 8/31 for both condos and single family homes.
The condo market is feeling rather flat right now. There are 170 units on the market and they’re not flying off the market.
For Jenn,
The cheapest 2 bedroom outside of Area 4 is $159,900
http://www.mls.ca/PropertyDetails.aspx?PropertyID=6125609
There’s a pretty good handful at $169,900 and I would think that there’s probably some room to move on those given the slow movement we’re seeing.
Jason,
I really think this entry level condo market was impacted most by “investors” who scooped them up at 100-125K as quick as they were listed. They were also a target for 1st time buyers who wanted to enter the market as things took off. Most of the seniors are probably ending up in something which is a bit more upscale with elevators, underground parking, etc.
Batman again,
I’m not sure that the “money lost to rent” argument really works. There is a monthly cost to occupy a home which you own as well, either interest paid or investment income lost. However, I agree with your premise that over the long run you’re probably far better off owning than renting. I like the benefits even if it doesn’t increase that much in value.
April 9th, 2009 at 10:52 am
Admittedly, my arguement was fairly simplistic. It doesn’t take into account that while renting, you’re only spending $1,000/mo; however, when paying a mortgage you’re also subject to taxes, interest fluctuations, repairs & maintenance. All that aside though, if you’re in it for the long term-even with a 11% drop in market value over a 3 year span-you’ll still come out on top.
April 9th, 2009 at 10:52 am
I don’t understand why a first time buyer is required to live in squalor in areas fraught with crime. It just doesn’t add up to me.
In my eyes, I think it’s a deliberate attempt to segregate by class. I’m not saying a 4 bedroom mansion. Heck, I’m not saying anything but a bungalow. What I’m saying is that the homes right now that get branded as starter also get branded as rental properties. They often need work, and I’m sorry – I was under the impression that if you were starting out the whole point was that you likely don’t have the money (or time?!) to dump into refurbishing a house – let alone an entire block with your good will.
It tends to be that those of us who are making less also have even less time to boot.
This is made worse by the fact that people seem to think that just because you own a home you’re required to completely overhaul it. Get out of planet TLC please. I don’t mean to say you shouldn’t be required to to maintenance. What I’m saying is that some people actually intend on living in their homes.
Some of you need to stop making assumptions about what I say and start to read into differences between reasonable and unreasonable expectations. What I’ve noticed is whenever I try and put forward that the homes will be lived in, most of you screw your noses up and get very confused.
April 9th, 2009 at 10:52 am
Well, because of her debt and income (-$15000), she was only approved for $150,000 and that seems like a stretch on her income. On the pleasant hill building, guys, I understand the “everyone’s got to start somewhere” argument but would you feel comfortable as a single mother raising a child there? If that’s her only option is it fair to assume that a single mother, willing to work, and making $10/hr is plain S.O.L. and I guess given the rent increases dependent on welfare? That just doesn’t make sense to me. Where are these poor folks going?
April 9th, 2009 at 10:53 am
One minor quibble with Northstar’s reasoning — comparing Saskatoon to large cities is foolish, and is bound to distort your reasoning.
According to StatsCan, Saskatoon’s population is 202,000 people, and the “census metro area” is 233,923. Toronto’s city population is 2,503,281 and its “census metro area” is 5,113,149. Vancouver’s city population is 578,041 and it’s ‘metro’ area is 2,116,581. Montreal’s ‘metro’ population is 3,635,571. Calgary and Edmonton both have over a million.
There’s a real difference between the kind of economy — and housing market — that type of population can provide, and the kind of expectations that you can have of 233,000. Saskatoon’s more like, say, Kelowna, which is 162,276 but has always been an active tourist destination, or Sherbrooke, or St. John’s, or Windsor, all of which have between 300,000 and 180,000 people. Or even look at the larger secondary cities in Ontario, like St. Catherines.
You need to compare apples and apples, not apples and kumquats.
Also — a good place to retire? For those who are from Saskachewan and want to be close to their grandkids, maybe, but most of the retiring boomers are either going to want to move to a big city, where the action is and the good hospitals are, or to a nice mild climate where they can grow a garden from March to October. I’m not from here and I can tell you that the MINUTE I retire I am getting as far away from Saskatchewan winters as I possibly, possibly can.
No offence, Northstar, but if you *really* want to make money, go buy on the West coast of Vancouver Island — in Nanaimo or Duncan or any of the other little cheap friendly towns where you can still buy oceanfront property for under 300,000 dollars, and where there is no snow and little frost.
April 9th, 2009 at 10:53 am
enn,
My daughter could live there, over my dead body. Here’s an email I received from a “single mom” who lives in the area.
“Pleasant hill is not that great of an area to live in.But people like me on a low income are pretty much forced to live in the area where it is scary to go for a walk day or night.I lived in pleasant hill for 6 yrs and due to my landlord selling I moved into an apartment.The 1st week I lived in my house in p/hill I had a break and enter attempt while I was home in the late evening.I caought the perpratrators red handed and I went rt up to them asking what the hell r u doing they ran and I said dont come back.I thought i scared them.10 minuted later they were attempting to break into another house thats when i called 911 and they got caught.2nd break and enter attempt again I was home.I am a single mom just to let you know a guy broke my window and said if i dont let him in he was gonna kill me!!Again I called 911 the police came about 10 minutes later while this guy is trying to kick down my door the police came and caught him and then drove him home his escuse was that he was freezing.The guy lived 2 blocks away!!They let him go.Hookers would waslk right in front of my house and walk by and get picked up right on the street.Pleasant hill is not a good place to live.But if you cant afford to live anywhere else they say you get what you pay for so people on low income have to live in the dumps.That is my comment and now rent is so high there is gonna be no where for the low income people to live who try to make an honest living.”
Nice huh?
$10.00 an hour will qualify that single mom for a PIT payment of 520 per month. If it’s a condo, the condo fees have to work within that number. Not likely.
April 9th, 2009 at 10:53 am
jrochest,
No offense, but I don’t think I’ll take investing advise from someone who thinks they can get oceanfront property on Vancouver Island for $300,000. Please show me an MLS listing from anywhere on Vancouver Island (Oceanfront, not a condo) that is $300,000. Moreover Duncan is in the middle of the island, not on the water. You’d probably find it a challange to come up with anything in the Nanaimo area for under $500,000.
Are you an investor?
April 9th, 2009 at 10:54 am
I like how people are ignoring the unfairness of this. They only concentrate on the rich aspects.
It’s so obvious that greed is the only thing that drives this.
Nobody cares about the injustice of ruining what was one a very acceptable balance.
April 9th, 2009 at 10:54 am
I wanted to post the 100th post. Great blog Norm. I’m always eager to see the week in review. Norm what date would you say the BOOM really started and ended. I know it’s still going on , but what months was it at its peak?
April 9th, 2009 at 10:54 am
Loving Saskatoon,
Thanks for the comment. We’ve come close a few times but this is the first time we’ve topped the 100 mark for comments on a post.
It really started to get difficult to find a house through late 2006. Everything was selling very quickly and inventory levels were way below what is normal.
Through January and early February some fairly modest “overbidding” started to happen. By the middle of February we were seeing about 25% of listings selling above list price by around $5,000. We are also starting to see a few of those really exceptional sales of 20-30-40K over.
By the end of March we’re seeing those numbers spike up to around 50% with overbidding averaging closer to $15,000.
April, May and June see percentages selling over list in the 70-80% range and average overbids exceeding $20,000-$25,000.
Things started to mellow out a bit in July with the average overbid finally dropping below $20,000 again but we’re still well above 50% of listings selling over list.
Since August, we’ve seen a fairly steady decline in both of those numbers. Most weeks in August show overbidding decline to around $15,000 on average.
So far in September, we’re down to about 30% selling over asking price and an average overbid which is just under $10,000.
April 9th, 2009 at 10:54 am
This is a very good website – I wish we had such great sites for Victoria or Vancouver. While I realize that BC cities have a warmer climate, from an income perspective, Saskatoon stacks up very well to Victoria and Vancouver for salaries and incomes. I believe your average HH income is somewhere north of $60,000 which is around the HH income in Victoria, a city which in terms of GDP, facilities and population is a reasonable comparable to Saskatoon. $260,000 for a house is affordable for the average family. $580,000 for the equivalent in Victoria is much less affordable, nice weather or not. The average HH income in Metro Vancouver again is a little higher – I think just under $70,000 but you need on average $720,000 for a house. I’m not going to compare Saskatoon to smaller BC towns like Prince George or Williams Lake because I don’t think they are true comparables – their economies are not diversified to nearly the same level and the populations are just too small. I will also say that Saskatoon may have frigid winter weather but the city seems much more pleasant than many others in Canada. I would rank Saskatoon above Edmonton, Winnipeg, Regina, Abbotsford, Prince George, Kamloops in terms of environment.
April 9th, 2009 at 10:55 am
Articles in todays Star Phoenix:
Sask. highest retail consumption (or something, I will find out later, 11.8%, Alberta 8.4%, Ontario 1.4%)
Also, in reference to Saskatoon’s diverse economy/employers, ad on E10 or E11, stating Saskatoon holds 30% of Canada’s Ag-Biotech industry. I wouldn’t quote an an, except it was put in by SREDA. Sorry, quick post. Will be more specific later.