Saskatoon home seller has one strange pricing strategy
This image is a screenshot taken from the Saskatoon MLS system that displays the price history of a listed property. The home seller is clearly confused. He has adjusted his price 16 times including 9 reductions and 7 increases. That’s right. 7 increases. Oddly, the asking price is still higher than it was the day the home was introduced to the Saskatoon real estate market nearly 5 months ago.
Like almost everything else these days, this MLS history report reminded me of the volatility of stock market. I only wish that my investments were still priced higher than they were five months ago. 
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
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Norm Fisher
Royal LePage Saskatoon Real Estate
There's 88 Comments So Far
October 27th, 2008 at 9:21 pm
LMAO. Did you realise it’s the only property in saskatoon that met that search criteria Norm?? You may be singling them out haha!! Callum captcha: fact property – fitting.
October 27th, 2008 at 10:39 pm
Oops!
Figures that out of nearly 1700 listings there would just be one at that price. Thanks for the heads up. Didn’t want to do that.
October 27th, 2008 at 11:46 pm
Tough to feel sorry for a lot of sellers out there, guess they don’t get they actually need real price cuts to have a chance of selling, not just smoke and mirrors.
October 28th, 2008 at 11:14 am
Thats like fishing.
October 28th, 2008 at 12:26 pm
Real estate industry braces for downturn
http://tinyurl.com/6emksj
“A crowd of more than 1,000 real estate agents and brokers gathered at the Toronto Real Estate Board’s (TREB) annual general meeting Monday for a pep talk aimed at worried salespeople, many of whom have yet to live through a downturn.
The meeting came on the heels of a mid-month report from TREB showing sales for the first half of October in the greater Toronto area plummeting 21 per cent from a year ago, and the average resale home price dropping by 15 per cent…
Some other words of advice from the panel included “not reading the papers or watching television,” with media headlines being blamed for some of the fear hanging over the housing market.”
Now this I just don’t get. Ummm- excuse me… have they looked at the fundementals behind those media headlines? I’m not sure what the strategy is behind “not reading the papers or watching television” either. I can understand that a salesperson would have a hard time making a living if they were overly negative, but please! An agent that appeared cluelessly positive would worry me much more. You would think in this economic environment people would be pleased to deal with someone who is informed and realistic about the market, no?
I think marketing yourself as a “Let’s-deal-with-Reality Consultant” might be a great opportunity here.
October 28th, 2008 at 3:17 pm
Alternative motivation: “I’m on my meds/I’m off my meds”. Seriously, this person is delusional.
How many agents has this guy gone through? Or has he just been driving one unfortunate realtor bonkers since last May?
October 28th, 2008 at 3:33 pm
jrochest- glad to see you’re back!
I was actually going to recommend a referral to one of my collegues for that seller, but then I thought better of it.
Shall I reconsider?
October 28th, 2008 at 7:05 pm
Crikey,
That comment is so bizarre I almost have to wonder if it’s a misquote. Just totally stoooopid.
jrochest,
It is nice to see you again.
“How many agents has this guy gone through? Or has he just been driving one unfortunate realtor bonkers since last May?”
Just one. This seller and his agent are the same person.
October 28th, 2008 at 9:00 pm
“A man who represents himself will have a fool for a client.”
Applies to real estate as well as law in some cases I see.
The person who was trying to sell their townhouse identical to mine for $40K more lowered their price by $10K and then finally cancelled their listing.
October 28th, 2008 at 9:29 pm
New article on Garth’s site. Interesting graph or should I say scary for Canadian real estate and household finances.
http://www.greaterfool.ca/2008/10/28/half-time/
Real estates favorite economist back at it
http://www.reportonbusiness.com/servlet/story/RTGAM.20081028.whousingmerrill1028/BNStory/Business/home
“Falling prices, overbuilding and too much unsold inventory in Canada are creating a trend similar to that in the United States a couple of years ago, Merrill economists David Wolf and Carolyn Kwan said in a research note Tuesday.”
October 28th, 2008 at 10:13 pm
As a moderate bear, I don’t want to say “I told you so” too much – but where are all the bulls saying this guy is just playing the market, and that house prices will still rise this year and next?
October 28th, 2008 at 10:25 pm
Nick,
I dunno. Can’t see any reasonable argument for why this kind of approach would be effective. Normally if your house doesn’t sell in a month raising the price $1,000 doesn’t help.
October 28th, 2008 at 11:25 pm
http://www.cbc.ca/22minutes/videoplayer2.html
HI all – I’m not sure if I linked this right – but it is the “sponsor and executive” from this hour has 22 minutes.
October 29th, 2008 at 10:20 am
I have actually seen a few houses in Calgary do something like this….not to this extent but they keep dickering with their price depending on the season…(upping it in the spring only to remain unsold by summer). They tend to be done by a select few realtors. Those would be the greedy people I would just ignore altogether.
October 29th, 2008 at 11:06 am
I guess that’s yet another example of why EVERY buyer should have their OWN realtor. If I understand correctly, that’s a simple search that any realtor could do for their client. But I doubt if you signed this guy on for dual agency that he would reveal that chart to a potential buyer. Buyers agents could (and should) provide listing history for potential properties so that buyers wold know if they are dealing with sellers who are crazy (IMHO) lol.
October 29th, 2008 at 2:03 pm
Thanks for the welcome, guys: I’ve been reading but not posting, since I’m busy at work these last months, with classes starting and a publication to deliver. And, frankly, there’s not too much to say: inventory up, sales flat, prices due for a large correction, and nasty economic weather blowing up, world wide. All of us here pretty much know this.
This guy, though, was too cool not to comment on. Stupidity on an awe-inspiring scale, and a really good example of wishing prices in action.
October 29th, 2008 at 8:05 pm
Not sure if this has been posted elsewhere but heard on the radio this morning that the river landing project sold out in 4 days at a starting cost of 295K. Not bad for this market!
October 29th, 2008 at 8:33 pm
Jedi,
I spoke with one of their sales agents moments ago who described their launch as “an overwhelming success,” but no, they have not sold out yet. In any case, it looks like a nice project in a great location. I hope they manage to keep it together.
October 29th, 2008 at 8:37 pm
A quick question Norm. Is there any training provided to realtors for taking pictures for websites? I just looked at a house on the Points 2 Website – and I know what the furniture looks like – but NO IDEA what the house looks like. In addition – in the 15 pictures there is no picture of the front of the house? Do sellers not check these websites and see this and ask questions?
October 29th, 2008 at 9:32 pm
Hmmm. Might the builder be getting those “free” Dodge Calibers at quite a discount these days?
Moody’s cuts GM, Chrysler deeper into junk
http://tinyurl.com/6rz7q9
DETROIT — Moody’s Investors Service on Monday cut its rating on General Motors Corp. deeper into junk territory on the expectation that the auto maker’s liquidity will continue to erode into 2009 despite any benefit from the U.S. government’s $25-billion (U.S.) low-cost loan program.
GM-Chrysler deal may cost 25,000 jobs, consultant says
http://tinyurl.com/5zj63a
Chrysler offers buyouts of up to $75,000
http://tinyurl.com/6lwq26
Chrysler LLC is offering white-collar workers up to $75,000 (U.S.) in cash and vehicle vouchers valued at as much as $25,000 to leave the company under its effort to slash 5,000 jobs. Employees who accept the offers are expected to leave by Nov. 30.
Thank goodness someone is buying them.
October 30th, 2008 at 8:23 am
Pam,
Pretty much all of the mandatory training in this business is focused on agency, ethics, law and the technical aspects of a real estate transaction. There’s very little related to marketing, though there is no end to the good info that’s out there on the net and photographing homes is no exception. I guess many agents don’t get why this is so important.
Here’s a fun post I wrote on this very topic a couple of years ago.
http://tinyurl.com/badphotos
Crikey,
I smell a bailout.
October 30th, 2008 at 10:37 am
One story of a person in Alberta in trouble
Sadly, we’ve been caught with our pants down.
In what I believe will be a classic mistake of believing that we had enough time to build a spec and sell it, and the market would be high enough to make a $20000 profit.
Everyone held out, no dropping in prices over the last couple of months. Everyone believing AB was somehow innoculated against the financial calamaties. Today, major builder slashes prices by $20,000 per property. I had ours slashed by same amount last week, before the panic (and thanks to this blog) – but as of last week, according to our realtors stats, there were NO showings in their brokerage, ALL WEEK LONG.
We have no room to drop price further… will be taking a loss. Just a question of how much.
I’m so sad, and worried.
I love my husband though, and will stick by and not hold this against him. All we need is each other. In the end, it may be all we’re left with.
Don’t forget, at the end of the day, all this doom and gloom is about REAL people. Real people who believed what the “experts” were saying.”
http://albertabubble.blogspot.com/2008/10/more-of-same.html
October 30th, 2008 at 12:02 pm
“Don’t forget, at the end of the day, all this doom and gloom is about REAL people. Real people who believed what the “experts” were saying.”
It’s sad, for sure.
I’m sorry though, but cry me a freakin’ river!! REAL people got priced out of the market too, so spec builders could turn a profit out of hot air. REAL people are paying exorbanent rents that have greatly diminished their quality of life. And REAL people will, hopefully, be able to afford a decent home on a decent wage when things level out.
These guys build a house just to flip it? And they get caught with their pants down? Well, boo-hoo, but that’s part of the risk of investing in a spec home now isn’t it? And they were misled by the “experts” eh? Well, not all “experts” proclaim that housing prices will increase double digit year over year until oblivion! Mislead by their own selective observation biases and pumpers, is more like it. Actually, looking back, seems like they knew the market was going down but figured they “had enough time” to build and flip – so, the writing was on the wall, they just didn’t read it?
I know these guys are getting screwed and it sucks – but from my perspective, it’s hard to feel too sorry for these speculators.
October 30th, 2008 at 12:57 pm
With all the doom and gloom going around I thought the readers might like to watch this Youtube video on how to be a successful real estate flipper.
http://www.youtube.com/watch?v=JY9dnVy9YnY
October 30th, 2008 at 2:20 pm
guy_in_regina,
It’s nice to see your sensitive side occasionally.
I agree with you completely. Committing to hundreds of thousands in debt is a serious endeavor with serious risks. Ya win some, ya lose some.
Roger,
The Flipper Nation guys did a series of three videos before they packed it in. I guess you can only go so far with that theme but I wish it would have lasted a bit longer.
http://www.flippernation.com/
October 30th, 2008 at 4:00 pm
guy in regina,
personally I have no problems with people building homes themselves and selling them. I know there are one house guys that do a fantastic job contracting it out and or doing much of the work themselves.
What I don’t like is how there was too much speculation and it led to a huge price increases with people being priced out. If we had historic price gains the last two years so the average price would be around 180-190k now ( where I believe it may eventually correct) then it would not be a problem.
Credit has been too easy for anyone to get. Not anymore.
Funny thing, builders were not losing any money on houses they listed in 06 for 325k. In 08 the same house is being listed for 525k. But now they have this inventory problem. Hmmm, I wonder what prices have to do so that the houses can sell? Maybe move into line with historic prices?
There is a good post about this on Sheldon’s blog.
http://www.edmontonrealestateblog.com/my_weblog/2008/10/regulate-edmo-1.html#comments
October 30th, 2008 at 4:06 pm
Banks asking for credit card debt forgiveness
http://www.businessweek.com/ap/financialnews/D94520T80.htm
Irresponsiblity at its finest!
October 30th, 2008 at 4:14 pm
House listings begin to slow
http://www.reportonbusiness.com/servlet/story/RTGAM.20081030.wmlsstaff1030/BNStory/Business/home
The gap was most dramatic in British Columbia and Saskatchewan. In September sales fell by 34 per cent year-over-year in British Columbia, while new listings rose by 20 per cent. In the same period in Saskatchewan, sales fell by 5 per cent while new listings surged by 55 per cent.
Prices followed a different trend, falling by 7 per cent in British Columbia, and rising by 23 per cent in Saskatchewan.
On another note. I am guessing the TSX will drop tomorrow.
October 30th, 2008 at 4:18 pm
Have Canadians forgotten how to save?
http://www.financialpost.com/money/story.html?id=907054
We have no savings, our credit cards are maxed out, the mortgages on our homes are sky-high and we are stuck with longer car payments. Could Canadians be in any worse shape heading into a downturn?
Consumer credit represented 40% of personal disposable income at the end of the second quarter, according to CIBC World Markets. Mortgage credit, meanwhile, was 90.6% of personal disposal income. When those numbers add up to more than 100%, it means we have more debt than income.
“Canadians, like the Americans, have had a ferocious appetite for debt and credit and as a result we are sitting in this situation [for] good reason. We shouldn’t be saying we are nothing like the Americans,” says Ms. Campbell.
sorry, I have been gone for a couple of days, I am trying to catch up:)
October 30th, 2008 at 4:38 pm
Don’t be sorry George… you single-handedly keep us (me, anyway) up to speed
October 30th, 2008 at 4:42 pm
George,
Nice to see you back.
“I am guessing the TSX will drop tomorrow.”
This one is probably a gimme George.
October 30th, 2008 at 4:58 pm
In regards to the people building on spec, I also struggle to feel too sorry for them. In my eyes its the same as feeling bad for someone who lost too much at the casino. They should have assessed the risks they were entering into themselves and made an informed decision from there. It is easy to blame the ‘experts’ for leading them on, but at the end of the day they were the ones entering into the transactions themselves. Don’t get me wrong, I would never wish for someone to have their lives ruined/marriage end because of it, I just think that they took a risk and facing the negative consequences is something that should be taken into account when accepting the risk.
Further, I think there is nothing inherently wrong with people building homes on spec/flipping them. I think the housing market is a market like any other and the fundamentals of the market will guide whether the services of the speculators is necessary. Unfortunately for some, the fundamentals appear to have gotten out of line with the prices for homes rose too fast compared with the ability of people who could actually afford to occupy those homes.
Just my observations anyway.
October 30th, 2008 at 11:19 pm
This link is in honor of both the season and George’s bold TSX prediction:
http://tinyurl.com/6c6eym
Enjoy.
October 31st, 2008 at 7:52 am
Just found out last night that the rent for my 1-bedroom apartment just north of downtown is increasing to $1,000 come February 1. Our building has no fancy amenities, either, and that rate does not even include power.
A thousand bucks, people! For an apartment that is 750-some square feet. Do I live in Vancouver? Nope. Toronto? Nuh-uh. Not even Calgary, folks. I live in pot-hole ridden Saskatoon.
(Yet another example of this Bizarro world mentality Saskatoon is experiencing. My suite is not worth a grand per month–not by a long shot. Real estate values in this town need to suffer a catastrophic collapse, in my opinion. Inventory is up, yet prices are not going down. This is getting way out of hand! How does the market get away with this? What makes this particular housing market so damned weird? It’s just Saskatoon, people! We haven’t suddenly transformed into a larger, better centre. It’s still the same old town-that-thinks-it’s-a-metropolis.)
At this point, I don’t care if dimwits like John Gormley think I’m a “Saskatchawhiner.” I’m more of a SaskatchaREALIST living in a Saskatchanightmare. If he thinks I’m a whiner to complain about a boom that has done nothing positive but quadruple the cost of living within a 1 1/2 year span, then that fat-assed blabbermouth can use that “Saskatchawinner” wealth of his to help me with my monthly rent increases.
Obviously, I’m going to have to move from the location I enjoy, thanks to this boom. I can honestly say that all I’ve seen arising from this boom is a soaring cost of living, a rising homelessness problem, and general hardship for thousands of residents. So, explain to me again exactly the benefits of a Saskatoon boom…?
October 31st, 2008 at 8:03 am
That is brutal. That’s really too bad. I remember about 10 years ago in Regina when we paid 550 for a 3 bedroom apartment. It wasn’t the best area but it wasn’t the worst (I had my car broken into twice in 6mths). If I was still in Regina and that happened I’d be out of there so fast!! I feel for you .
On another note I was just going to write about how the markets seem to be holding steady at roughly 2% in the red and then the Dow takes a 100point swing.
October 31st, 2008 at 8:23 am
Robin,
So sorry to hear of this increase. I know that this has been a trying time for you. Perhaps there’s an opportunity here to ditch your landlord and improve your situation.
I saw a new ad on kijiji today. A guy has five one-bedroom apartments on Melrose that he seems desperate to rent. They are 800 and 900 with a rental incentive on the first month’s rent.
Best wishes.
October 31st, 2008 at 9:16 am
I’ve just resigned myself to rent for the next year (signed a lease earlier this week). My rent will be $1200.00 per month – about the same I would be paying on a mortgage for one of these over-inflated houses/condos anyway.
Regarding the discussion about real estate flippers:
I too lack sympathy for them. Some are claiming that the experts were wrong/lied etc. You do NOT need experts to tell you that the prices are ridiculous.
As a bear from the beginning of this BS, I can tell you how I knew this market would tank, and its not rocket science: fundamentals. What is the average income in Saskatoon? What is the average credit load people are carrying? Are incomes increasing relatively steady to the cost of living?
This will bring you to the inevitable conclusion that the average person in Saskatoon cannot afford the average house!! There is your evidence that this market was deadly out of shape. If you got caught flipping houses its because you lacked the proper knowledge to make it a safe venture. Its not as easy on TV, where house flipping was sensationalized.
I met a young couple a few weeks back that got caught in a flip. They resigned to renting the place to try to meet their mortgage payments. I had a look at their tenancy agreement, and it was ludicrous. They even lack the knowledge to be proper landlords! In my mind, many of these flippers are simply very ignorant people who should have seen this coming – and if they couldn’t, then they had no business investing in the first place.
I agree with the poster above, let John Gormley call us “Saskawhiners”. I’ve lived here all my life (that’s more than we can say for Gormley), and this is the worst situation we’ve been in in two decades (80’s recession might be comparable). This needs to purge itself – I just hope it doesn’t take too long so that we can get back to affordable living sooner than later.
/rant over
October 31st, 2008 at 9:33 am
Robin,
“explain to me again exactly the benefits of a Saskatoon boom…?”
As unfashionable as it may be, some sort of quasi class analysis is necessary.
The boom provides the most benefits to those who have the most wealth (i.e. homeowners, business owners, and shareholders). The boom is least beneficial, detrimental even, to those who have the least wealth (i.e. renters, minimum-wage earners, low-income or fixed income people, single parents, students, etc.).
Of course, it’s not that black and white – increased employment opportunities benefit many, as do tax cuts and debt reduction. Nevertheless, there is certainly a degree of “the rich get richer and the poor get poorer.”
My rent going up is good for my landlord, but bad for me.
October 31st, 2008 at 9:55 am
Well as for flippers losing cash? It is their own fault and it was generated by greed!!! I’m sure these flippers didn’t mind ripping off anyone when they were thinking about getting into this game, so why should anyone care for them if they lose their shirts? Personally I would love to see most of them go bankrupt, then maybe they will see what it’s like to be in a tough situation like Robin – A 1 bedroom 750sqft apartment for a grand? Common on -
As far as people feeling they were mislead by the media/real estate “experts”, of course they were. You couldn’t look in the paper or watch the news a year ago without real estate being a hot topic and people saying “If you don’t buy now, you’ll be priced out forever”. Now these same people just may go bankrupt and guess what they will be priced out in the future because they just “mortgaged” their credit worthiness for the future. People have to learn to make their own decisions and can’t blame anyone but themselves for poor decisions, no matter how much outside influence there was in their decision.
October 31st, 2008 at 10:08 am
One more post today – I need to get some work done sometime!
Here’s an excerpt I just read in Newsweek (Author: Fareed Zakaria):
“I’m betting that, in the end, the world’s governments will win this battle against fear. They have unlimited tools at their disposal, especially if they act in concert. They can nationalize firms, call bank holidays, suspend trading for weeks, buy up debt and equity, and renegotiate home mortgages. Most importantly, the American government can print money. All of these tools have long-term effects that are extremely troublesome, but they are nothing compared with the potential collapse of the financial system.”
The only redeeming part of this author’s message is that he recognizes that these “tools” will lead to negatives.
Zakaria, to my knowledge, is a foreign policy “expert” – he’s not an economist, has never formally studied economics, has never held a degree in economics. And yet, somehow, he is qualified, according to Newsweek, to write on the risks and benefits of government economic intervention.
The “tools” Zakaria speaks of, according to any qualified authors I’ve studied, are stop-gap measures designed to fend off panic, not solve problems. Most hilarious of his comments is where he views the government “printing money” as being something that is positive. It’s almost as if Zakaria has never heard the word “inflation” before.
Later in the article, Zakaria goes on to say:
“Amid all the difficulties and hardship that we are about to undergo, I see one silver lining. This crisis has – dramatically, vengefully – forced the United States to confront the bad habits it has developed over the past few decades”.
Here, Zakaria is totally wrong – so much so that it seems to me his understanding of the bail-out package is equivalent to that of your average chimpanzee. The US bail out package is nothing more than a cover for the bad habits – the US government is trying to keep them under wraps. If the US truly wanted to change, they would have required reform in regulations for lenders prior to giving out money. If they want to “unfreeze” credit markets, they would have drafted restrictions on the use of the bail out money into the bill – as simple as something to the effect of “The monies so distributed shall be used for the exclusive purpose of . . . “. They did not do that – they purposefully did not do that! The new announcement of the package designed to help out 3M + homeowners with at-risk mortgages is a sham – you must refinance and waive your rights to a “no-recourse” loan – read: if you default, they come after you until they’ve taken every penny you have, as opposed to being able to walk away. As much as this will make me sound like a conspiracy theorist, the measures taken by the US government in the recent month are nothing more than a forced distribution of wealth from the bottom to the top. They have forcefully taken REAL money from the taxpaying citizen, and given (yes, literally given – the paper they bought is near worthless) it to those in the upper strata of wealth.
These are your “experts” people. Total lack of economic understanding, and total lack of common sense.
I’m sorry for the off-topic post, but I get very frustrated reading such things from totally unqualified authors.
October 31st, 2008 at 10:29 am
I moved out here from Ontario in 2006, and I was shocked by how inexpensive housing was. It seemed too good to be true that I could swap a 600 sqft bungalow in Ontario for a place that was more than twice as big, and carry a smaller mortgage and pay less property tax, to boot. I’m really lucky that I got to upgrade like that, but in the end, no matter what the market says it’s worth, it’s the same house, and I’m paying the same mortgage, so nothing has changed for me since 2006. Stability like that is pretty nice in times like this.
The situation apparently WAS too good to be true, though, and now it’s different (except the tax, which is still low compared to Ontario’s rates). There’s a lot of talk about how unaffordable housing is, however I think a lot of people are just feeling the same shock I did, but in the opposite manner. While prices here have rocketed upwards over a very short time, I really don’t think we’re in for much of a dip. From my perspective, prices were too low, and now they seem about right… still cheaper than much of the country, and yet our local economy looks relatively healthy.
I hope that anyone who wants to buy a home won’t let that sticker shock stop them. It’s too bad things changed before you got your shot, but it’s still a wonderful experience to own your own home, and you CAN afford it, so if that’s a lifestyle you want, don’t dwell on what could have been, go out and make it happen. If I could afford my starter bungalow as a single person on a smaller than average income in Ontario, you can do it here in Saskatoon. It’s not easy, but unfortunately it looks like the easy times are over for the foreseeable future.
If your own house something you want, you CAN find a way to afford it. For me, that involved several years of sacrifice and hard work (extra jobs when possible, living with roomates, no restaurant meals, no entertainment events, buying ONLY the necessities, and on sale when possible, no cable or Interent, etc…). It sounds a bit like being grounded, I know, but you can still have lots of fun on a budget. Think how much you could save if you cut back one some stuff. And when I did buy my first place, it was small, and it needed work, so I did the work, and I LOVED it. Now I can enjoy the results of those years of effort for the rest of my life, because I managed to scramble up on to the property ladder. I’m lucky to have moved here when I did, but it’s true, at least to some degree, that you make your own luck. So stop complaning and go out there and make yourself some luck… that’s my rant.
October 31st, 2008 at 10:48 am
Heather, well said!
I’ve also had enough of people here assuming that Saskatoon is “lesser”. If you think other cities are so great, then please move to one of them and stop whining. The rest of us, who happen to like it here, won’t miss you. Yes, Saskatoon has its issues, but so does every other city.
October 31st, 2008 at 11:36 am
Heather,
I’m sorry, you must be a different Heather than one that has posted on here. The other Heather has a better grasp on the housing market than you. You have no clue.
Prices here where too low and we were undervalued? In the Phoenix, they called it the “catch up effect”. Ask them how the catch up effect is treating them now.
Fun on a budget? Does that include getting meals at the food bank? Being house poor is not fun. I was a student once and experienced this. The problem now is that people that are working live paycheque to paycheque and are broke because of high housing and other costs. To say suck it up and make your own luck is totally wrong.
We all have been living in a fantasy world where credit was easy and cheap to get. The average family can not afford the average house. Most cars on the road are new and bought with credit. Student loans, credit cards, people are swimming in debt. Now credit is contracting and because of this we entering a time of deflation. Everything from house prices, gasoline prices, electronics etc will come down in price. Personally, I don’t think we will be too different than Japan where they have not recovered from their property bubble of the late 80’s. It won’t be as long as Japan, but this recovery will be long and painful.
When it comes to debt we are not different from the States. Take a look at this graph.
http://www.greaterfool.ca/wp-content/uploads/2008/10/debt-to-income.jpg
October 31st, 2008 at 12:29 pm
The fact that Saskatchewan is a nice place to live (and I truly think it is) has very little to do with this issue. The act of encouraging people to put themselves into a large amount of debt to put all of their financial “eggs” in one basket and then asking them to happily resign themselves to being house-poor is ridiculous. This economic downturn is going to be especially nasty to the young adults in this city. Almost everyone in this age group with any cash (and many with none) went all in on the real estate market. They’ve seen their parents make money and they were never aware of the massive drop in the early 80s. Many others nearing retirement who are hoping to fund their golden years with the proceeds from their houses are finding they may be depreciating in value and difficult to sell, and not only that, but they are seeing the value of their pension funds and stock portfolios sink precipitously in nominal value. Let’s not even discuss those who HELOC’d their homes to the hilt thinking there was no way their homes and/or portfolios could ever deline in value. This is an extremely tenous finacial situation. The trickle-down from the financial crisis to it’s impact on the consumer (and the empoloyement numbers) has barely become visible yet. I’m happy that many were able to buy before prices essentially doubled in a ludicrously short amount of time, but not everyone was so lucky. The strategy of “stretch yourself financially to the max” may have worked here in 2006 when the credit and commodity skies appeared to be the limit, but could be disasterous for a large majority of the population now.
October 31st, 2008 at 1:26 pm
George and Crikey, sorry… left out one detail; let me clarify. I mean that I did all that saving while I was renting as a student, so that I could go ahead and buy a house with an actual 25% deposit when I finished grad school; now I can relax and enjoy. I’m by no means encouraging pepole to take out huge loans; I think that’s a very bad strategy, frankly. I’m just saying that buying IS possible for most people at the current prices; I know, because I’ve been there, recently, and I did it quite successfully on a very small income of 15,000 annually while saving, and 30,000 annually after graduating. I missed out on some stuff, sure, but that was a choice I made then to live the lifestyle I have now. All I’m saying is that if I can do it on that income, not many people should find these prices ‘unaffordable’. Higher, yes, unaffordable, no.
October 31st, 2008 at 1:50 pm
Heather/Pungo,
I imagine you will get some backlash from your comments about “stop complaning and go out there and make yourself some luck….If your own house something you want, you CAN find a way to afford it” and with good reason.
It is hard for us first-time buyers to hear those comments for someone who got in on a house when the market was low, from someone who had equity in a pre-existing home.
Sure, we can make “several years of sacrifice and hard work (extra jobs when possible, living with roomates, no restaurant meals, no entertainment events, buying ONLY the necessities, and on sale when possible, no cable or Interent, etc…)” and then we can afford the mortgage on a house. And then what? We have to pay that for the next 25 years – so should we skip out on all the experiences in life so we can “afford” a home. You still have all the expenses once you get into it.
Gail Val-Oxlade (‘Til Debt Do Us Part) says that your mortgage should not be more than 2.5% of you gross income. What is the average income for a Saskatoon household? I really don’t know, but let’s say in a two person working home each earning $55,000K, that would mean they can “afford” a house of $275,000. What kind of house does this buy you in Saskatoon? I mean really buy you? Finished basement? Garage? Safe neighbourhood? Close to schools and ammenities? Is it “ready to move in” or does it still need $50K worth of work?
And on top of that, for first time buyers, how long do you think it takes to save up for a down payment? 5% of $275,000 (assuming the above is somewhat accurate) is $13,750. If you want a decent down payment (10-20%) that would be between $27,500 – $55,000.
Divide that into monthly savings. For 5% – $13,750 / 12 months = $1146/mo; 10% – $27,500 / 12 = $2292/mo; 20% – $55,000 / 12 mo = $4583/mo. Can you afford that? Can you afford that on top of a $1K/mo rental fee as we see from Heather’s post above? That is not an uncommon rental rate.
These are the numbers that first time buyers are facing today. I’m happy for you to get in the market when you did, but to tell others to “stop complaning and go out there and make yourself some luck” perhaps you should do some number crunching first to see if “luck” is out of reach for the average Saskatoon household.
October 31st, 2008 at 2:02 pm
You know, now that I look at what put for an average income, I think $110,000 is high. My point is that the average (or median) house is still $270K according to last week’s numbers.
No, I don’t think first time buyers need the best house on the block, but I do believe that all buyers deserve something decent, and it is extremely difficult to find something “decent” for under $250.
If the average household income in Saskatoon is lower than $100K, it will take several years for them to save enough for a decent down payment. So do they leverage themselves to the limit, or do they try to save between $1-4K/month…
ok, I’m done now….
October 31st, 2008 at 2:17 pm
Last I heard, cyn_d, the average household income in S’toon was around $77K per year (most recent statistic I read said roughly $790.00 per week – so there is differing information here).
That would put affordable average home price at $192,500.00, or if we want to use the new ratio people are talking about (being 3.0-3.5 x annual income), that would put the affordable average home at $231,000.00 – $269,500.00.
In my opinion, and in today’s market, one should not go above the 2.5X mark, as there is a great risk of immediate depreciation in home value (anyone want to debate with me about that, feel free).
God help unmarried/single income people to afford a home.
-Dr. Doom and Gloom
October 31st, 2008 at 2:17 pm
cyn_d, I was a first time buyer in Ontario, which was just as hard, if not harder, to break in to than Saskatoon is now. Rent was high there then like we have here now (I kept mine cheap by sharing some less than opulent places with roommates). I’m just trying to offer some encouragament amidst all the gloom.
Also, I’ll admit I’m getting tired of all the complaining about high prices/rents on this blog. They aren’t THAT high! It took me about 5 years to save my downpayment… and it was quite affordable. One year to save a downpayment, you’re right, is probably a bit on the impossible side. But why should saving for a house only take a year? And why should that house be all the things cyn_d lists? It’s your FIRST house! Huge purchase, it SHOULD take some effort to save for, and you can either work your way up the property ladder to getting all those amenities you want next time, or keep saving for a few extra years.
Sometimes I feel like I’m 30 going on 80, looking around at all the young people expecting to get everything for so little effort, complaining about how hard it is to save money, perhaps while sipping on a Starbucks coffee. Why, back in my day…
October 31st, 2008 at 2:23 pm
By the way, cyn-d, I love ‘Til Debt Do Us Part. Definitely recommended viewing for anyone having affordability issues… just before they call to cancel the specialty channels. Okay, I’m done now, too. see you next time I take a sick day
October 31st, 2008 at 2:31 pm
Heather,
I can certainly appreciate optimism, but you’re points simply cannot stand. I refer you to this passage from your post, above:
“And why should that house be all the things cyn_d lists? It’s your FIRST house! Huge purchase, it SHOULD take some effort to save for, and you can either work your way up the property ladder to getting all those amenities you want next time, or keep saving for a few extra years.”
Admittedly, some buyers want too much for their first house. I can give you that point and have chastised first-time buyers for the very same thing.
However, you’ve referred to working your way “up the property ladder”. In order to work one’s way up a ladder, a gain has to be made. Such gains were expected (I submit, even taken for granted) in normal increasing markets like we saw pre-2006. You will not find a gain in this market for years to come, I’ll bet dollars to donuts on that.
Friends of mine, who happened to be first time buyers, already owe more on their house than its worth – conservative estimate of $30,000.00 and realistic estimate of about $60,000.00. How is that “working your way up”?
October 31st, 2008 at 2:40 pm
“Sometimes I feel like I’m 30 going on 80, looking around at all the young people expecting to get everything for so little effort”
Nice stereotype/predjudice.
80 indeed.
October 31st, 2008 at 2:50 pm
According to StatsCan, the median family income was $76,600 in 2006.
http://www.statcan.ca/Daily/English/080611/d080611c.htm
Average weekly earnings (individuals) increased 5.4% through 2007 to $742.62. Average weekly earnings are up around 2.5% this year to $760.63. That would have most two income households averaging just over $79K per year.
http://www.statcan.ca/Daily/English/080226/d080226c.htm
http://www.statcan.ca/Daily/English/081029/d081029b.htm
Affordabilty advocates, Demographia, tracks affordability trends. They use a median income multiplier and say that markets where you can buy a median priced homes for three times the median income are “affordable.” Markets where homes cost 3.1 to 4 times income are “moderately unaffordable.” 4.1 to 5 is “seriously unaffordable” and 5.1 plus is “severely unaffordable.”
http://www.demographia.com/dhi.pdf
I’m not sure that it’s reasonable to assume that the median income has increased as much as the average income, but I’d be surprised if it isn’t 80K today. That would put $240K in the affordable range. We will come in somewhere around $270K as a median for October.
I understand that it’s not easy for a first time buyer these days, but don’t kid yourself into believing that this is a problem which is unique to Saskatoon. With recent and continuing corrections we are probably still better off than most. We are somewhere below 3.5 times median income right now and we will be closer to 3 times than 3.5 times before year end.
Things are changing rapidly.
October 31st, 2008 at 3:17 pm
I can defintely empathize with many people here. When I was in Vancouver making 45k/year and an average house was 500k (back in 2005) I decided enough was enough and moved. Unfortunately now, you have no where else to really go. Sure there are many countries out there where people have it worse…Perhaps a 50x income to house ratio. However, knowing that doesn’t really help our situation here. I ‘m angry that that I still owe twice my income but that’s because I’m a very frugal and conservative spender and yet I realize I should consider myself very lucky. I actually preach this to my wife regularly as I make it known to her many people cannot afford a house now.
Heather,
I don’t know how any student can afford saving for a downpayment as a studnet now. It’s a blessing to not owe 40k when you graduate. So assuming you make your 15k a year, tuition and books for a year is at least 6k/year which leaves you 9k. Take that and divide by 12mths and you have 750/mth. Take away 500/mth for rent IF you rent a room from somebody’s house and that leaves you $250. now pay $75 for your transit pass (cause you can’t afford a car) and that leaves you with 175/mth for food and any entertainment. In this case you have to barely eat anything AND NEVER go out. How the heck do you save for a downpayment on top of that? Maybe back then, but no way in hell now.
October 31st, 2008 at 3:27 pm
Sorry… this is completely off-topic, but I just have to vent a little:
Pakistan to receive $9bn from IMF in fight against bankruptcy
http://tinyurl.com/6aq928
“Pakistan is to receive a $9bn (£5.5bn) bail-out loan from the International Monetary Fund as the country has three weeks to stave off bankruptcy.”
Iceland, Hungary, Ukraine and now Pakistan… where does this end?!
Thank you- rant now off.
October 31st, 2008 at 3:51 pm
Canada. Cause we are financially sound
House prices: what goes up always comes down
http://www.greaterfool.ca/wp-content/uploads/2008/10/case-shiller-index-oct-30-081.jpg
Crikey, don’t forget about Argentina
http://www.reportonbusiness.com/servlet/story/RTGAM.20081031.wargentina1031/BNStory/Business/home
October 31st, 2008 at 4:18 pm
Oh yes, Argentina.
I guess the novelty of them defaulting wore off years ago. Silly me.
Can the IMF default, or do they just keep printing?
November 1st, 2008 at 3:41 am
I just went down to River Landing and discovered that:
1. The average asking price is around $550 sq/ft before adding taxes
2. You have to pay for all sq/ft including the walls within the footprint of the unit. usable living space about 10% less
3 If you figure it out a 1000 sq/ft unit (900 sq/ft of usable living space) will cost around $600,000
They shouldn’t be selling any, right? ..think again… With just over a week into the the initial offering, and sales exceed 100 units! They are sold out of all 2br units with any kind of a river view.
Somebody forgot to tell all those buyers that the market has crashed or do the know something we don’t want to hear?
November 1st, 2008 at 7:41 am
Crikey,
“Iceland, Hungary, Ukraine and now Pakistan… where does this end?!”
I don’t know but I’ll be really choked if it doesn’t involve another significant correction on the stock markets.
“Canada’s S&P/TSX composite index made similar moves. It had been down as much as 27 per cent during the month, but has rebounded more than 14 per cent from its low.”
http://tinyurl.com/6atotr
An interested look back in time to another housing correction.
http://tinyurl.com/safehouses
Tim,
That’s amazing!
Do you have any idea what percentage of the entire residential project is sold? What kind of a deposit is required to hold a unit?
November 1st, 2008 at 11:41 am
Norm,
The “safe as houses” link takes you to the ‘GlobePlus’ login page.
I think this might be the same piece:
http://www.reportonbusiness.com/servlet/story/RTGAM.20081031.wrcover01/BNStory/Business/home?cid=al_gam_mostview
$600K for a 900 ft. condo!!! Wow. Most of these buyers must be johnny-come-latelys from out of province, or what?
November 1st, 2008 at 12:00 pm
Thanks for the heads up on that guy. I thought I had pulled it on the open side of the site.
November 1st, 2008 at 12:12 pm
Re River Landing
I know some people that are purchasing a unit and talked to them about it, so this information comes second hand (please correct me if you know otherwise).
In any case, my understanding is that reserving a unit currently only requires a $1,000 deposit which is refundable if you back out. Within 2-3 months they will have all plans solidified and be asking for a 10% deposit on the unit. Awhile after that they will be asking for another 10% and that will be everything you put down prior to the final purchase.
I believe 100 of the units (I’m not sure how many there are in total) were up to be reserved and they all were. Of course, a refundable $1,000 deposit isn’t all that big of a commitment, but I understand that there are 8-9 person wait lists for particular units!
Also, I’m not sure how the pricing works but I don’t think it’s as simplistic as the $/sq foot. The terraced units at the south end were substantially more expensive than some of the other ones and the upper floors seemed to be more expensive as well (which is pretty normal I believe).
November 1st, 2008 at 12:25 pm
Well the penthouses and about 20% of the units are held back for the next and final offering. I suspect after a price increase. So including everything residential they appear to be better than 60% sold. They already have a large waiting list for those. so unless you looking for a 800sq/ft 1br good luck. If all the buyers are johnny-come-latelys then there must have been bus loads of them. Check it out you won’t believe it! The River Landing sales office is open daily from noon till 5. And it’s either strange but true of its’ foreshadowing of things to come.
I find it a bit surprising when there are a number of renovated 1000 sq/ft units in the Halmark and Milroy with equally as awesome views priced in the lower 300s. They must be bargains???
November 1st, 2008 at 12:38 pm
George Said,
“We all have been living in a fantasy world where credit was easy and cheap to get. The average family can not afford the average house. Most cars on the road are new and bought with credit. Student loans, credit cards, people are swimming in debt. Now credit is contracting and because of this we entering a time of deflation. Everything from house prices, gasoline prices, electronics etc will come down in price.”
Nice try George there is a difference between Deflation and Deleveraging. Deflation can only occur in an enviroment where the money supply is contracting. This is clearly not the choice world central banks have chosen. Once the deleveraging is done expect the sentiment to switch from a deflationary scare to inflation.
November 1st, 2008 at 1:52 pm
Bottom of $20 – $25 for oil?!
http://www.theglobeandmail.com/servlet/story/RTGAM.20081031.wtakingstock1101/BNStory/energy/home
“Too bad they weren’t paying attention to a veteran energy economist named Philip Verleger Jr., who insists oil never should have gone much above $70 a barrel; that it did so only because of “a perfect storm” of U.S. policy mistakes, European economic developments and currency shifts; and that it could well end up back in the low $20s before the global economy gets back on its feet.
“I think it will go a good deal lower, particularly next spring [when oil markets are traditionally weakest],” Mr. Verleger said in an interview. “If this thing follows a natural cycle, I think we’ll see something as low as $20 to $25.”
Mr. Verleger, who recently set up shop as a professor of strategy at the University of Calgary’s Haskayne School of Business, has been an adviser to U.S. presidents, as well as big energy producers and consumers. He has testified before Congress, debated with oil hawks and openly challenged their assumptions, which he says are based on a poor understanding of oil economics.
Forget about speculators or even peak oil, which won’t affect prices for decades. The reason oil prices shot so high, in a nutshell, has to do with a boneheaded U.S. decision in August, 2007, to put much more light sweet crude in the Strategic Petroleum Reserve.
This occurred just as European demand for the stuff, which is used to make low-sulphur diesel, was soaring thanks to truck traffic to the new Eastern European members of the EU. Currency issues also came into play, forcing up the dollar price of crude.”
November 1st, 2008 at 2:00 pm
Thx Interesting link Norm,
Surprised by how much Regina has higher average wages
Saskatoon $76,000
Regina $82,000
Edmonton $87,000
Kind of funny with that much of a difference that Saskatoon house prices are higher than Regina. I know we’ve talked about this being historically the case, but just doesn’t make a lot of sense. And funny that Saskatoon prices can even be comparable to Edmonton, when they’re making $11,000 more a year, and pay lower taxes.
http://www.statcan.ca/Daily/English/080611/d080611c.htm
November 1st, 2008 at 2:47 pm
Awww, it’s nice to know that Flaherty can be so flexible with our tax dollars, no?
Canada May Act Further to Aid Banks, Pensions, Flaherty Says
http://tinyurl.com/55lyef
Nov. 1 (Bloomberg) — Canada’s government may double its purchases of distressed loans among steps being considered to aid banks and private pension funds amid the worst financial crisis since the Great Depression, Finance Minister Jim Flaherty said.
The government is willing to buy more mortgages from commercial banks, after agreeing this month to purchase as much as C$25 billion ($21 billion) in real estate loans.
“We can do more dollar value if necessary,” Flaherty said in an interview late yesterday in New York. “We can go another C$25 billion; if we have to do more we will do more.”
November 1st, 2008 at 5:19 pm
Nix,
a bad choice of wording on my part.
Even though central banks are printing money like it is going out of style, deflation is here because there is less money in the system than before, but for how long?
This is how I understand it.
http://inflationdata.com/Inflation/Inflation_Articles/Inflation_and_Bailout.asp
November 1st, 2008 at 7:06 pm
Nick,
Must be the fact that Regina is far more government (incomes). I am also at a loss to explain how Saskatoon can be so much higher than Regina. I really thought that Saskatoon prices would fall behind Regina’s at some point but that doesn’t seem to be in the cards anytime soon. Over the past couple of months there’s about a 17% difference in our median prices. As for Edmonton, I think we are in the process of sorting that out. Saskatoon has declined as much in the past few months as Edmonton did in a year so the gap is getting wider. They are about 14% higher (average) than we are. Their sales to listing ratio has been improving steadily over the past few months so there’s probably some chance that their declines will slow in 2009.
November 1st, 2008 at 7:19 pm
George,
I read the article that you posted. I am not sure the author of the article really understands monetary inflation. For example the author stated:
“So if we assume a 20% contraction in the stock market we are looking at the NYSE and the NASDAQ dropping a little over $7 Trillion dollars in value.
So even if the government pumps $1 Trillion back into the economy there is still a net deflationary effect.”
The 7 Trillion dollars does not disappear it just changed hands. The original 7 trillion dollars that was invested by say Joe the Plumber no longer exists in his hands. However, somebody took the other side of the trade and bought the whole way down. Also something to think about how much money was made going short and how much of that original 7 trillion dollars is on the sidelines. Answer all of it. It however is true that a deflationary scare cannot take place without a true deflation backdrop.
Another way of looking at it is if I put 50 dollars in the savings account the money does not disappear it is just waiting to make a purchase in the future. I suspect at some point in the future something will be done by the government to increase the velocity of money. When this occurs deflation will no longer be an issue.
Think about it the Federal Reserve had to create a deflationary backdrop to scare the politicians into granting them and the treasury extraordinary powers to essentially print without limit.
Personally if I had to choose whether to live in an inflationary environment or a deflationary environment I would chose inflation. Wheelbarrows full of money to buy stuff sound better than cheap stuff with no money to buy anything.
November 1st, 2008 at 10:01 pm
I’m amazed at how negative everyone was over Heather’s comments. I know I was able to save enough for a house deposit while I was in grad school. Sure I had more of an income than just my stipend, but when you’re getting $22/hr to be a TA it is really no that hard to put aside a few hundred a month. Since I upgraded and got a real job, my take home income has dropped because I can no longer pick up the extra jobs I once had access to.
Saving a deposit while going through school really isn’t that hard. But then again going through university I didn’t go our drinking every weekend with my friends – because really why do I want to spend $100 for a night out only to be too sick tomorrow to do anything?
November 1st, 2008 at 11:06 pm
Robin,
So sorry to hear that. I know my rent is at 850 as of last month for my little 1 bedroom apartment in 1960’s decor and i fully expect the company to up it again.. with no upgrades…i tell ya, if it wasn’t for my girlfriend that i love being here in school, I would be out of the province so incredibly quickly.
I agree that a HUGE catastrophic crash has to come to lower these prices.
I mean my place for example, they replaced some carpet in the hallways (which by the way is pilling and is showing movement, meaning it was CHEAP), but the rest of the units are sitting empty. The company says they have over 50% sold and have had that for 6 months…though no one lives in the units, and the couple of units that have been ‘remodeled’ haven’t sold for over 6 months. Yet they seem to keep raising the rent. I guess they have to pay for the emptiness somehow, why not charge the people that ARE renting more money.
I’m truly scared of what will come in the new year for rental increases. With everyone thinking these prices are justified nothing will happen. With gormley and other nutjobs that don’t think of things from other people’s points of view spouting thier garbage, nothing will change. Best change will be to leave, and i truly believe that.
Even people that I work with think the whole standard of living is good here are only saying that becuase they DO have money. What does a person do when they have no savings beucase hte costs are too high here…can a person even afford to propose to thier girlfriend? can they afford a wedding? money is a real worry for myself at least and i’m working my butt off. Is that the standard of living someone should hope for? I think not at least.
I haven’t commented in quite some time about the whole financial situation, as I dont’ have the knowledge to chime in on things in that respect. Have kept up the reading on things though. Very interesting conversations going on.
November 1st, 2008 at 11:16 pm
I would LOVE to see Heather’s calculations on how her saving’s are possible especially today, and especially here. I’m not a financial genious but please share how this is entirely possible. Even if it means breaking it all down. Say, for schooling, while at school, and then say the plan for savings when one is done and gets a job here in that field. Until someone provides these things, no one is going to take the whole “you just have to sacrafice” malarky on face value. I do my budget monthly, and the money just runs out…no frivolous spending no trips, etc.
Please enlighten us with real numbers.
November 1st, 2008 at 11:56 pm
sam,
to answer your question,
Saving a deposit while going through school really isn’t that hard. But then again going through university I didn’t go our drinking every weekend with my friends – because really why do I want to spend $100 for a night out only to be too sick tomorrow to do anything?
because you only live once, and your only young once. Life is about living it to the fullest and enjoying everything while you can, not hording and saving your nuts like a miserable squirrel and then being a an angry old crazy when your 60 because you missed out on everything….I personally know a few people who currently suffer from this syndrom.
If everyone was to buy a house at the current prices in saskatoon..this would be a very miserable town with nobody ever having fun, needless to say local businesses would fail because nobody would have any disposable income.
So Im taking everyones negativity as positive and hoping it brings our little prairie town back under the international radar to a town that everyone thinks is just a berry that grows on a tree again, and not this fake metropolis that everyone has made it out to be.
we shouldnt even be in the same news article as the rest of thes million plus population cities, yet we’re in competition with edmonton who has 4 times the population as us…Am I the only one that finds this insane.
Acording to my basic math we should be 1/4 the price as edmonton just like we were 2 years ago, maybe even a little less as we dont have the oil surrounding our city like they do that empoyes thousands. We have a potash mine that employees a couple hundred if you include the truck drivers and various sub contractors here and there.
Dont forget about the blessed PST we all get to pay that increases our cost of living by exacly 5% compared to the cities in alberta that we find ourselves in competition with
peace
November 2nd, 2008 at 3:40 am
I find some of the complaining about prices hard to take seriously when cyn_d posts about the necessity of having a finished basement and a garage for a first time home buyer. There are a lot of decent, even new, houses in Area 4 (e.g. non-ghetto) neighborhoods that fall under the $275k limit posted above. You can even get in to smaller places in neighborhoods like City Park and North Park for that money.
Many friends and co-workers I know have bought in those areas in the last two years instead of throwing a pity party about not being able to purchase new in Erindale when they are at the start of their careers and married lives.
November 2nd, 2008 at 8:06 am
Thanks George: I don’t agree with the other Heather at all! Absolutely our housing market is overpriced, just as many others are as well in Canada. At least prices are on there way to becoming better. :’)
Hah, just got a rent increase of $150, WAY more than 1% inflation! Of course they state some BS excuses of why they “need” to raise it. It comes into effect February, we’re moving into our house at the end of March. I’d love to see these buggers forced to lower their rent when they can’t find a tennant.
November 2nd, 2008 at 8:46 am
L-Bird, Sam and Heather
I agree – when we bought our 1st house I was in University and my husband was working at a gas station – our houses needed work (LOTS) – but we assumed that our first house would need work. We were able to save for a deposit, by being realistic about our goal – we knew we wanted to buy a house and so that was our goal – yes it meant sacrifices – but that is what we expected.
I just did a quick search and there are 30 houses for sale in area 2 (houses not condo’s) between 200,000 – and 260,000 – no they are not perfect – but area 2 would be considered a decent “safe” neighbourhood – definately not the ghetto or the “hood”. Are none of those houses acceptable for first time buyers? Prices are coming down – but let’s also be realistic about expectations.
November 2nd, 2008 at 10:25 am
Forgive me for promoting but further to Pam’s point, here is a dandy east side starter home for $249,900 MLS. Not perfect, but very cute.
http://702.teamfisher.com
Way, way better than my first house for sure. Of course, my first house was about $75K but our total household income at the time was around $24,000-$30,000 (commission). Buying that house was far from a cake walk.
Even if prices fall back to the 3 times income standard, and they probably will, buying a home will require some sacrifices. Almost every big problem that we’re facing right now results from everyone wanting everything right now. I think we’re about to learn that life doesn’t work that way, at least not for long.
Future buyers can take some comfort in the fact that things are definitely moving in your direction. As others have said, a market which is unaffordable can’t sustain itself for long and we’re seeing those corrections occurring now. It seems that the rental situation is continuing to deteriorate. Perhaps withing a few months time it will once again make more sense to own than to rent.
November 2nd, 2008 at 11:06 am
Norm,
“Perhaps withing a few months time it will once again make more sense to own than to rent”
I believe you are right. The lower prices go, the bigger the gate opens up to let more buyers into the pool. Price is the biggest factor in owning a home but not the only one.
Where and when prices bottom here I don’t know, only an educated guess but using the formula on Garths website we could get one idea especially if our economy in Saskatchewan keeps chugging along.
http://www.greaterfool.ca/2008/11/01/its-the-yield-dude/#comments
November 2nd, 2008 at 2:24 pm
George,
P/R is a legit issue.
Amy Goldbloom, RBC economist wrote this last October about price to rent ratios. Of course, lots has changed since then.
“Housing markets across the major cities in the Prairies have long been the most affordable in the country. But, the recent pick-up in Saskatoon’s market has quickly changed conditions. Regina and Winnipeg have seen their price-to-rent ratios move up during the last few years after stable valuations through the 1990’s but are still at modest levels. The bigger story is Saskatoon where the recent pick-up has caused price-to-rent ratios to soar. In contrast to Calgary, Edmonton and Vancouver, the pick-up in Saskatoon has been very concentrated in the last year. The sudden and steep acceleration in price-to-rent ratios coincides with the sharpest deterioration in affordability on record. More expensive conditions already appear to be pricing people out of the market. Fifty percent price gains are starting to weigh on demand and softer demand should feed through to cooler price gains ahead.”
I guess it’s also important to note that soaring rental rates do make owning a home more attractive financially (not necessarily more attractive than renting, but more attractive than it would be if rents were stable).
I do agree that 16 times annual income is probably a good benchmark but I don’t think it makes sense in all instances. That formula would make Robin’s one-bedroom apartment worth $192K. Probably more of an example of how warped rents have become. Should be more like $130,000/16 = $8,125/12 = $677.
BTW, somebody should let Garth know that a five year mortgage can be found for far less than 7.2%.
November 2nd, 2008 at 4:42 pm
“soaring rental rates do make owning a home more attractive financially”
Absolutely. But they also make buying a home more difficult, as you have less capacity to save a downpayment and (in my case) pay down student debt.
November 2nd, 2008 at 5:42 pm
I’m not seeing prices low enough considering the state of the lending market these days.
Not nearly low enough. We’d need to see some 1999 to 2002 prices before people with student loans and rent will be at flight-speed.
Seriously – think about it.
Callum captcha: “Trust Sweden”
November 2nd, 2008 at 11:00 pm
Alex,
1999 to 2002 prices would sure clear up that inventory problem we have.
While I agree that we are a ways from a housing bottom here; time and price wise, I don’t think we will see those prices. Time wise 2011? Average price wise 150-210k? This is with a good economy and low interest rates. Who knows with the worldwide credit crisis.
These are just guesses, I always believe the market will do what it needs to sort itself out.
November 3rd, 2008 at 1:07 am
Norm/Pam,
Not many here would disagree getting into a mortgage requires sacrifice. I’m by NO means one who lives frivolously, I’m very frugal. This is why my husband and I can afford to build. (And have a downpayment of more than 20%)
That being said, housing IS too expensive, and that’s being realistic. Things need to come back to 3X income for sure.
November 3rd, 2008 at 6:44 am
Heather,
I’m not disagreeing. I think you’ll see that by spring. Unless house prices roll back to numbers like Alex and George are proposing, buying a home will still require some sacrifices for most of us.
George,
“150-210…good economy…low interest rates…”
When you throw out numbers like these, which are alarming to say the least, perhaps you could expand on your thinking a bit? If it were Callum predicting an increase to $325K he’d have already been called every evil name in the book.
November 3rd, 2008 at 1:19 pm
Norm,
I don’t buy the notion that we were undervalued in 05-06. Builders were making money then and housing was still affordable for renters and buyers. It was a sellers and buyers market. Every housing bubble in the last few years whether local,national or international had fundamentals that justified increases at the beginning from job and wage growth but then things went crazy and many are paying for it now.
I have said it before that if we did not have the bidding wars, the looser lending in 06,07,08, fear, panic, and greed among other things, average prices would be around 180- 200k with historic growth. Not only do we have a real estate market in not too great of shape, there are hundreds if not thousands of buyers and renters that are in financial dire straits. Many are house poor and with house prices depreciating, it is over for the housing ATM. This is why Edmonton and Calgary do not have the retail sales growth they once had. People are feeling less weathly because their biggest asset is losing money.
The quicker that prices drop to historic levels, the better it is for the majority. Here is why:
Better affordability – not only for buyers, but renters as well.
This will also lead to more immigration which will help the labor shortage which leads to a bigger tax base,more house sales and more retail sales etc. Many people will move here if they can get a good job and an affordable place to live.
More house sales- This will clear inventory. This helps the real estate industry get more sales and it also help builders to keep building so they don’t have to lay off tonnes of staff like in Alberta. The construction industry is a big part of our economy. On average if it takes 4 man years to build a house, if we go back to building 500-600 houses a year, many jobs are gone.
Money left over each month- so they can go out and spend it on the economy or gosh, even save some of it!. The problem we have right now is that people have 0 savings and are resorting to using credit to finance their lifestyles. They are hoping for wage increases in the next few years to reverse that trend but I would not count on that with the world credit crisis.
The quicker the market goes 525k to 400k in the new areas and a average house goes 270k to 190k the
better for the majority of the real estate industry and the city economy as a whole.
For people to say 3x income for owning a home, make sure that includes debt. Rarely are there people with no debt buying a house these days. Student, car and credit loans are through the roof. Buying a 240k house with 80k income and a bunch of debt in the world credit crisis is crazy to say the least.
Owning a home has many hidden costs that most first time buyers are not told and or do not realise. It seems the real estate industry just wants to get people into homes no matter what the cost and once they are in, the home owners are left to fend for themselves. This is what happened in the states and it has crepted up into Canada. Not everybody in the real estate industry is bad. There are many great people there but they have been covered up by the
greed fear and panic that has swept this market place throughout the world.
The consumer is the biggest part of the economy.
The biggest financial purchase a consumer can make is a house and most people have to make this purchase with credit. Throughout the world at different times houses have been unaffordable big time. The consumer has no money and can’t get much credit.
Now prices throughout the world are declining, some are downright crashing. But it is too late, the biggest worldwide financial crisis since the Great Depression is upon us.
Affordable housing where builders still make money is great for everyone.This is my reasoning for prices to be at historic levels. Will they go there? Who knows where the bottom is. The market will do what it will do.
November 3rd, 2008 at 1:20 pm
I personally don’t want to be predicting numbers in this game, but to me it’s more about seeing WHO can buy a house anymore. Whole areas of the population have been shut out of the market for good, and in order for those to be let back in the market locally, prices would have to severely drop back to what they were…either that or pay has to go WAY up.
In the case that it doesn’t go down it just makes other places that we’ve ‘caught up to’ that much more attractive.
November 3rd, 2008 at 2:59 pm
George george george,
remember, when you put all these good points, you forget one thing. everyone that wants to get into the market and can’t right now is just being irresonsible and is expecting to buy a brand new house, suv, take trips and spend money at coffeebucks….remember, as some people say, u can save up enough for a down payment even while goign to school!….
back to reality….
I can’t believe I missed this but Pam, I have a question. So if everyone is just expecting too much, then your house price of 200-260k which you say is reasonable…would that be possible today for a couple, one in university and another working a gas station, to buy such a house?
very good points, all of them well grounded in reality which many people seem to forget when “their” asset goes up, and leaves people in the cold.