Saskatoon housing options still exist for first-timers: Remax
Remax Press Release – Kelowna, BC (April 22, 2008)
“While higher housing values and tight inventory levels have hampered home-buying activity so far this year, longer amortization periods and alternative housing types have offset the impact on most major markets across the country, according to a report released today by RE/MAX.”
“Despite a higher degree of frustration in the marketplace than in previous years, the RE/MAX Affordability Report found that first-time buyers, in particular, remain steadfast in their determination to purchase a home. In fact, entry-level purchasers are adjusting their expectations by sacrificing size, location, and even long-term financial freedom, to overcome challenges such as rising prices and serious supply issues. Innovative financing has become key to homeownership in today’s environment – with longer amortization periods gaining favour in 62 per cent of the major centres surveyed. Low or no down payments were popular with first-time buyers in 38 per cent of markets.”
In Saskatoon, the report indicates “A two-bedroom, 900 square foot bungalow in good condition can be purchased from $200,000 in areas such as Confederation Park, Fairhaven, Meadowgreen, Mayfair and Westmount. The least expensive home sold in the city to date was a 535 square foot bungalow which traded hands for $80,000.”
Remax Saskatoon agent, Ivan Toledo told Star Phoenix Business Editor Murray Lyons that “people looking for affordability are discovering neighbourhoods such as King George and Westmount, where some existing houses are for sale and Toledo is working with two different builders on in-fill projects, building semi-detached, two-storey houses.”
“They will buy a little drug house or whatever on a 50-foot lot, knock it down, subdivide it and put up new construction,” Toledo said. “We have the lowest cost new construction in Saskatoon.
“It’s basically a Stonebridge (style) house and if Stonebridge is selling for $360,000, we’re selling ours at $270,000.”
Read to Remax Affordabilty Study 2008 here.
Read the Star Phoenix story here.
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 79 Comments So Far
May 13th, 2009 at 11:35 am
Sure there are options for the first-time buyer but honestly, how good are these options? If the real estate market in Saskatoon does eventually take a downturn. What are the odds of breaking even on one of these houses if I had to sell? Wouldn’t this segment of the market be the first to be impacted?
May 13th, 2009 at 11:35 am
It’s so frustrating to keep seeing prices for homes of sub-par integrity and quality go up and up and up, when I know that they aren’t worth a fraction of what they’re selling for.
This city desperately needs a “NO VACANCY” sign.
May 13th, 2009 at 11:36 am
Jeff, I couldn’t agree more. There are several areas on the west side of Saskatoon that are fine to live in, but the majority of alphabet soup is sketchy at best.
I think this article was a very poor (might I say tasteless) attempt at tipping the balances in the favour of the seller, in a housing market that is starting to achieve some balance. Uses of terms like “drug house” do not exactly lend credibility to the writer of the article either!
May 13th, 2009 at 11:36 am
It was definitely written in poor taste and downright insulting as well. If it wasn’t printed on the front page of the Star Phoenix I would have said it was pretty good piece of satire.
May 13th, 2009 at 11:38 am
Copied from a post on the other debate ” http://www.macleans.ca/canada/national/article.jsp?content=20080312_110944_110944 ” Yes crime happens everywhere, but a lot of it happens in the west end.
The West End may have some okay areas, but the actual article spends a lot of time going through the virtues of the new DUPLEX (ie half a house) in King George which IS one of the scary areas.
“They will buy a little drug house or whatever on a 50-foot lot, knock it down, subdivide it and put up new construction,” Toledo said. “We have the lowest cost new construction in Saskatoon.
Did they get rid of all the other “drug houses” in the areas? Are the drug dealers (makers?) just moving to larger houses in the area to consolidate operations? I’m sure drug dealers want the economies of scale.
I’m with Jeff, if I saw that article on this site first, I would have thought it was some sort of satire.
Living in King George, on drug house row, is not affordable housing. And like everyone else here has said, we’re not Vancouver, among other things our crime is higher. We’re not a similar market what so ever. And one by one, we’re passing all the similar markets in price. Without our wages keeping up, living in Saskatoon’s worst areas seems to be the only thing to keep housing “affordable” which is still more than a good area only 2 years ago. Has that much really changed in the last 2 years for everyday residents of Saskatoon?
May 13th, 2009 at 11:38 am
Not sure why the Star Phoenix cover is affordable duplex’s in the west end/King George instead of 2nd murder of year at suspicious house (a duplex) in west end, with heavy activity.
http://www.newstalk650.com/incoming/20080423/saskatoon-police-suspect-murder
Pretty front page worthy.
May 13th, 2009 at 11:38 am
“How good are these options?”
Exactly. I didn’t post this reference because I thought the points made were spot on. I respect the fact that everyone has a job to do, but I don’t think these are the kinds of “affordable housing” solutions that I’d be looking for when my kids are ready to enter the market. The areas mentioned that I might approve of them living in are already well beyond $200K for a “house in good repair.” I wouldn’t walk after dark in some of the others.
Saying that our young first-time buyers can still affor to service a 40 year mortgage in our poorest neighbourhoods in not very comforting.
Alex! Where are you pal?
May 13th, 2009 at 11:39 am
I don’t agree with the article, but I live in King George and love it.
May 13th, 2009 at 11:39 am
Northstar –
Was the little house that you bought and fixed up in King George? Are there mini-neighborhoods or microclimates that are particularly bad or good?
I must admit, as a fairly recent transplant to the city, that I was surprised — and not in a good way — at the split between the older neighborhoods. I saw some remarkable, beautiful houses in Riversdale, on particularly on Spadina facing the river, and it’s always struck me that Riversdale is likely to improve like mad — it’s a beautiful old part of town, easily as nice as Nutana.
I’ve also done plenty o’ living in “Oh my god, you can’t live THERE” places over the years! But the gang & street violence in the poor neighborhoods here is much more troubling than the ‘junkies/hookers/dealers’ on the corners of the poor neighborhoods I’ve lived in over the years.
May 13th, 2009 at 11:40 am
Saskatoon is affordable still? Give me a break. What al od of persuasive spin.
This is just more profitable disinformation.
http://www.nationalpost.com/opinion/story.html?id=466093
Why don’t we just continue to ride our economy into the ground like the Americans? For all the wisdom and insight of the self-proclaimed economic geniuses, there’s sure a lot of denial being bandied about. You might be able to run a pretty profit these days, but I hope you realize it’s in a very fragile sandbox.
Let’s talk about how current systems and structures HINGE on the very creation of debt within our own country. That means you’re taking money from the guy next to you – who borrows to get it, who then takes money from the next – who borrows as well….
Noticing a pattern here?
I’m not just some hippie from Winnipeg telling people off here and elsewhere. If this is such a good thing, why can’t everyone benefit from it?
May 13th, 2009 at 11:40 am
I was hoping you were just playing Devil’s advocate by posting that article here, Norm! I agree with Alex, despite having the benefit of witnessing the housing crisis unfold in the States, we are still for the large part throwing caution to the wind. I can’t help but feel we are going to be in even worse shape than our friends to the south, however. While everyone says that their problem was caused by Ninja mortgages with extremely low introductory interest rates, I have to question how this is any different than buying in now with our Bank of Canada interest rates at an unusally low point. This isn’t going to stay like this forever, and come five years from now when people go to renew are these rates going to be at similar lows? Add in the 40 year mortgage period into the equation and 0% down, and it comes down to the same thing – We are lending money to people that should not be able to afford to get into the housing market. This in itself it preventing the market from returning to something more in touch with the average incomes of Canadians. All these new creative financing methods, that we are being told by banks are designed to help financially challenged aspiring home owners, do is allow for prices to increase even further unchecked. I can’t believe people are so willfully ignorant as to ignore all the warning signs and continue to plow ahead on the same course that has currently brought the US to its knees.
Here’s another great article on affordability in Canada I read this morning.
http://tinyurl.com/66uztn
May 13th, 2009 at 11:41 am
I still think buyers just need to vote with there feet – go to where housing is affordable and refuse to get into the bidding wars here. Lost in all this argument on how crime ridden the west is or isn’t is that 270 k is a lot of coin and would buy you a nice home elsewhere. Might be a good time to move to a rural location, many which have a lot of trouble filling jobs and none which have prices anywhere near Saskatoon
May 13th, 2009 at 11:41 am
Northstar,
On the fringe, as you are, you probably enjoy one of the nicer locations there. I’m sure you’ll agree that the thought of having your daughter walk from the bus stop on 20th Street West to the say, 400 block of S South at 7pm wouldn’t be very comforting. It doesn’t work for me.
Alex,
I’ve been waiting for you all day.
Jason,
Truth be told, I knew exactly what kind of response this post would bring and I couldn’t resist raising it for that reason. it just fit too nicely with much of the talk that’s occurred here. If Royal LePage had said it, I probably wouldn’t have brought it up.
May 13th, 2009 at 11:41 am
Alex and Jason,
Both great articles. Thanks for sharing them.
Garth Turner refers to 40 year mortgages as the “Canadian sub-prime.” Throw in a five percent down payment, tack on 3.5% in CMHC fees, and stretch the payments over 40 years. You better hope you don’t see any kind of a downturn. A 10% drop could leave you trapped for years.
May 13th, 2009 at 11:42 am
The ‘”Canadian sub-prime”‘ we have sub prime mortages here. Go to the bank. It’s what I have. Below prime means a low rate of interest and sub prime does not mean poor credit, which is the American issue, people with bad credit who defaulted on their mortages because they had banked on continuing increases in house prices. They would have defaulted sooner if the interest rates had been higher.
Just like here, the take home is don’t buy a house if you can’t afford it, because you can’t depend on its price going up. Just like the states we are in some serious trouble if prices dip, as people are taking out mortages they can’t afford with the assumption prices will keep going up, which is not certain since, regardless of exactly how much more you’ll make in Alberta, places with higher incomes have more affordable housing.
May 13th, 2009 at 11:42 am
Hey I just figured how to spot the speculators … just check out all the town houses with 1-780 phone numbers on them. Jerks. On the plus side, there are apparently a lot of empty/available town houses in the east end.
May 13th, 2009 at 11:43 am
Jim,
Thanks.
What you have is a variable rate mortgage which fluctuates with the prime rate
Subprime, as it relates to the US market means loans granted at above market rates, often, but not always to clients who are less than credit worthy.
http://en.wikipedia.org/wiki/Subprime_lending
Most of these US mortgages that went bad were given low introductory rates which were later scheduled for increases affecting payments by double in some cases.
Low qualifications expanded the market significantly leading to unrealistic price increases. When the payments doubled, many were unable to make the payments leading to a surplus of properties owned by lenders. The result was a crash.
http://tinyurl.com/4gld5l
http://tinyurl.com/4c2y7m
May 13th, 2009 at 11:43 am
Maybe I should have clarified, my mortage “floats” at significantly below prime, hence it is also sub prime. Subprime as it relates to the US market has little to do with being below prime as mortages here are less than prime. Poor credit history, increasing interest rates and getting non credit worthy people into the housing market (like our 40 year mortages) are all factors not related to being sub prime, although that may be why some signed up. Calling them sub prime ignores what actually happened and is pointless, again given that while still sub prime by definition, our mortages are apparently very different. Point is, just because Wikipedia and Fox News say something, doesn’t mean it’s proper English or the way people who understand the issue need to talk about it. To say we don’t have sub prime mortages, because while our mortages are still sub prime, they are not on people with as bad of credit as those with sub prime American mortages is pointless. We have subprime mortages. Lots of them. Creditworthiness is another issue we may or may not have.
May 13th, 2009 at 11:44 am
A lot of you no it alls on here are really ignorant. Conrad obviously has a problem with the province that helped raise him, not to mention that his folks made a life from, they sound like slum lords making the welfare rent bucks off the provincial government. You people are part of the problem. I have lived in Caswell hill since 1991 and used to take my little dog for walks any time of the day or night and never had problems.
Edmonton and Calgary have nasty neighborhoods too, with crack houses and the whole nine yards, and developers with vision have been cleaning them up for years with infill housing. Saskatoon has only just started to be able to afford this.
Ever go on a tour of Vancouver’s east side? or how about Downtown Ottawa where even drug users scare people off from our own Parliament Buildings. Nothing like only hearing what you want to hear if it supports your biases.Sounds like a bit of racism and prejudice too.
May 13th, 2009 at 11:44 am
I was wondering. When the number of houses on the market is talked about, does this account for the large and increasing number of houses on private sights like http://www.saskhouses.com or http://www.kijiji.ca?
Also, surprisingly, the places listed on these private sights seem more expensive than mls, especially for some similar condos.
Is that people just fishing to see what they can get?
Otherwise why would a private sale condo be more?
Or are real estate fees added to mls houses after?
There are an amazing amount of places for private sale
May 13th, 2009 at 11:44 am
Jim:
I don’t think you understand what is meant by “subprime” mortgages. The “prime” suffix refers to the perceived quality of the borrower. It has nothing to do with the interest rate being charged. So borrowers who have a history of missed payments, bankruptcies, low credit scores, etc are what are called “subprime”.
So when Canadian lenders are offering mortgages with 0% down, or 40 year amortizations, or cashback to cover the closing costs, etc – people see a lot of parallels with what was going on in the United States. Basically if you need a 40 year mortgage to buy a home – you probably can’t afford to buy a home.
Proper English or not, you are referring to “below prime” mortgages as “subprime”.
Interestingly, subprime mortgages are getting an unfair share of the blame for the U.S. housing implosion. Subprime mortgages aren’t causing foreclosures, falling house values are causing foreclosures. One study found that subprime borrowers are 14 times more likely to go into foreclosure if their house has declined in value as opposed to increased.
http://money.howstuffworks.com/number-one-reason-for-foreclosure1.htm
The simple explanation is that people aren’t stupid. With a traditional “prime” mortgage, if people put 25% down then their home would have to fall 25% in value before they were “upside down” on their mortgage (owing more than the asset was worth). But most subprime mortgages were given with 5% down or less – so a 5% drop in the value of the home and people have no incentive to keep making the payments. The worst part is that it’s cyclical – falling home prices make people walk away from their houses, which floods the market and pushes prices down further, which causes more people to walk away from their mortgages, etc, etc…
May 13th, 2009 at 11:45 am
Kevin what are you basing that on? I don’t think I mentioned my parents at all. Now they’re “slum lords making the welfare rent bucks off the provincial government”. That’s pretty personal and really not called for. I appreciate being from here. I just really don’t think it is fair to expect new families to buy $270,000 housing in King George. I don’t think I have a problem with the “province that raised me” because I say people should refuse to bid up prices and consider rural areas. Lanigan or other nice small communities nearer the potash boom are more affordable. I would encourage Kevin to re-read my earlier comment, above somewhere, to decide if he really thinks any of what I said supports his views. To make it easy for everyone, it’s copied below.
Yes I spelled “their” wrong
Conrad said:
I still think buyers just need to vote with there feet – go to where housing is affordable and refuse to get into the bidding wars here. Lost in all this argument on how crime ridden the west is or isn’t is that 270 k is a lot of coin and would buy you a nice home elsewhere. Might be a good time to move to a rural location, many which have a lot of trouble filling jobs and none which have prices anywhere near Saskatoon
# April 24, 2008 5:03 PM
And while we’re name calling, I think Kevin is a jerk
May 13th, 2009 at 11:46 am
I am pointing out it’s a stupid name, apparently sarcasm and the like don’t come through this too well, I would prefer “Under qualified” or something of the sort. And I completely agree. A 40 year mortage means you likely can’t afford that house. Making you under qualified, or a sub prime candidate.
May 13th, 2009 at 11:46 am
While I’m on here, I checked out that Kijiji. If increasing wages and a labour shortage are behind the increase in housing prices, why did I just find a nice brand new house in Lloyd for $265,000? They have a more expensive work force, with higher wages, and a bigger labour shortage than here?
If they’re building the same houses with the same material, with higher paid workers, but charging less, that means builders here are marking up a tad much.
May 13th, 2009 at 11:46 am
I think I had also pointed out that these people who weren’t credit worthy were defaulting because of declining house values, bought on the assumption prices would go up and not willing and unable to take a loss.
May 13th, 2009 at 11:47 am
As a follow up to my last comments, homes are still affordable in Saskatoon based on the fact that the housing market was depressed and far below reasonable values until the past 18 months. The market saw a surge due to many factors including commodity prices, and market situations in other areas of Canada and the world. Construction takes time to catch up to demand so prices shot up. Simple math. Home is where the heart is and people are bringing their skills and money home because they are smart and know that something has radically changed in Saskatchewan. It will take time for some people to ever beleive in change but it is happening because of countries like China and India, needing our resources. Saskatchewan like Alberta sells natural resources. Alberta has been pumping their oil into the USA for 60 years, that is why they are where they are.
Check out the MLS Edmonton site. The first 400 listings are for strictly house trailers and converted old 1bed condos. Not until the $170,000 amount shows up, does an actual house appear. And its in an area called REDEVELOPING! Check it out yourselfs. Alberta’s two largest cities have been overbuilding housing for 10 years just to keep prices down or it would be even worse.
Run down neighborhoods need pioneers to rebuild the area and price out the rental homes and the deadbeats, its been going on in Calgary for years. If they can’t cut it they have to move on.
Cheap housing attracts cheap deadbeats!
May 13th, 2009 at 11:47 am
Sorry Jim, didn’t get the sarcasm (lol, I’ve had the same thing happen to me as well). My apologies, it’s just that a lot of people I talk to don’t seem to fully understand what the media is talking about.
Kevin:
I gotta go with Conrad a bit here – the West side is a dive. Sure, it may be better than East Hastings, but that’s kind of like saying being stabbed is better than being shot (I wouldn’t want either one). I lived briefly in Alphabet town and worked on that side of the city for most of my years in Saskatoon. It’s not racist, it’s basic socio-economic issues. Poverty is rampant on the westside (I can provide oodles of statistics of wages, employment, etc). So is substance abuse. These lead to crime. Etc, etc.
And I wouldn’t say that developing shiny new infills fixes anything. All you’re doing is pushing the poverty into another area. Unaffordable housing only exacerbates the problems.
So if you want to talk about ignorant – go explain to the hardworking single mom who’s trying to build a life for her family but is being evicted for some condo conversion that “cheap housing attracts cheap deadbeats”.
May 13th, 2009 at 11:48 am
Kevin you sound like the guy trying to drive up west end real estate so you can unload some housing you bought for cheap …
And yeah 170,000 doesn’t get you a decent house in Saskatoon either…
Not really sure what your point is.
Thanks for playing the race card, when no one else mentioned it though. That was classy.
May 13th, 2009 at 11:48 am
Warren,
If you don’t live here in saskatoon then why are you so interested in this blog. Doesn’t edmonton have any blogs to be involved with?
Poverty exists everywhere in Canada in all communities of every size and economy. Newfoundland is as poor as it goes but the crime is among the lowest in the country so crime & poverty are not necessarily always related. More to do with cultural factors.
Edmonton and Calgary have gang wars too with drive by shootings. Winnipeg has neighborhoods where they can’t even sell a house for 15,000 because of local crime.
If you buy a rundown property for $20,000 and rent it out for $600 month to whoever, your going to make money. Then you can live on the other side of the City and point fingers.
I’ve seen what 40 years of slum lords have helped create in Caswell Hill or Riversdale. Member(s) of the Wolfe family own whole blocks and have been just recently been selling them to developers and the city for redevelopment for 100 time the dollar value they purchased them for. Plus the fact that most of the rent they earned for those properties over the years came from Social Services. Riversdale has been a good investment for certain types of people looking to make money from poverty groups.
The renters wreck the properties and move on to another one, the property stays unrepaired because the City has poor bylaws for property maintenance.
As far as single Moms go, Saskatoon isn’t the only City in Canada that has Condo Conversions. What do Single Moms in Alberta do? Fort Mac has an average rent of about $2400.00 per month. But Macdonalds pays 15 bucks an hour! Calgary, Toronto or Vancouver isn’t much better.
People need to adapt to change. No one’s immune to change if your a renter. I’ve been renting for 20years and am only getting into my own home now because of hard work and sacrifices, not 50 grand from Mom and Dad to get me into the big house the year after I graduate College. Renters always need to be ready for a move regardless of local conditions. Most of the condo conversions are in apartments that where getting rundown from little or no major renovations since they were built 40 years ago. Rents don’t cover the cost of major renovations, so in fact Saskatoon’s housing stock is being improved and increasing property values and neighborhoods.
The single Mom may have to get married or find a girlfiend to share space with , if things are so bad.
May 13th, 2009 at 11:49 am
Conrad,
Sounds like your trying to Keep Saskatoon Cheap and Poor so your parents can keep the rent Money coming in from the Government. You admitted they made bucks from rentals, not me. I’m a renter who saved my money for my first home this year. I’ve helped my neighbours in caswell hill improve the neighborhood the past 15 years I’ve lived here, by living a clean life and helping out with community cleanups, landscaping and community events. Thats how you can help make life better for everyone.
No one is playing a race card but how you talk makes you sound stuck up.
May 13th, 2009 at 1:13 pm
Sad to say, I’m in a 40 year mortgage.
I guess on the “bright” (pathetic) side, it’s only for about $120,000 instead of $200,000. I like to think I’m still within reasonable limits. Especially considering I undercut what most places charge in rent.
Wages do need to go up, but lending does need to freeze and quite possibly get some subsidy for EXISTING loans.
Likely without warning.
Much the same as students are asking for help, many other parts of the economy – and housing isn’t exclusive – need it too.
Just thoughts, don’t go all libertarian on me.
May 13th, 2009 at 1:13 pm
Kevin:
Edmonton might have blogs – I live in Calgary, what’s your point? I’m interested in Saskatoon because I still have lots of friends and family who live there and are of course affected by what goes on (and I’m generally just a curious person).
“Winnipeg has neighborhoods where they can’t even sell a house for 15,000 because of local crime. ”
Please provide an example of this – I searched mls for Winnipeg and the cheapest home is 133% more than you say.
“Edmonton and Calgary have gang wars too with drive by shootings.”
I’m sure they do, I don’t recall ever saying that they don’t. I didn’t realize the topic had changed to Alberta.
“Fort Mac has an average rent of about $2400.00 per month.”
No, it doesn’t.
http://www.woodbuffalo.net/linksFACTSHome.html
I sound like I’m being harsh, but you’re just quoting such bogus numbers. You make some good points about the westside situation, yet you were the one who said you walked down the street in Caswell Hill at any time day or night and never had any problems? Saskatoon’s west side is (for the most part) a very dangerous place to live. I don’t have the answers to the problems. I posted about this a while back and I still think a healthy first step would be to legalize and crack down on prostitution, but that’s highly unlikely to happen any time soon in a city that doesn’t even allow a casino to be built within its limits. All I know is that ridiculously unaffordable housing is not going to fix anything.
And it’s strange that you accuse people of racism and then state crime is not because of poverty but “More to do with cultural factors”?? Incidentally, Saskatoon’s poverty rate is higher than Newfoundland’s and MUCH more concentrated in select neighborhoods (hence the problem with the west side).
May 13th, 2009 at 1:14 pm
Warren,
Well I figured you lived in Alberta anyhow.
My point is that you and others like you are on this blog slogging Saskatoon for its economic recovery and its future, yet you live in a City in another province, rolling in lots of money, that likes to brag about it yet has a huge homeless problem and poverty and crime just like anyone else. so why single out Saskatoon and Saskatchewan? Alberta has more construction built on spec and flipping than anything Saskatoon will ever probably see. Yet Saskatoon has some of the activity and suddenly its a huge shock that has no reason to be and its must be a rip off.
I mentioned that a lot has changed in the resource sector and Saskatchewan’s commodities are in demand. The Bakken Oil Pool at estevan is proving to be the second largest find in Canada for easy to recover sweet crude oil and improved oil extraction technologyplus COS injection. Saskatchewan will also likely see a diamond industry, natural gas opening up more than ever, Higher Grain and farmland prices, Rare earth Minerals, Potash is the best stock in Canada and new companies and mines worth billions are being built today. That would be one of my points.
Ya a four bedroom apartment in Fort mac is 2300 dollars, if you can get one. And its in the middle of now man’s land surround by a sea of oil. I’ll take Saskatoon and its warts over Fort Mac thanks. Culture is not a reference to any race but a culture of poverty that is passed down from one generation to the next. Most violent crime in saskatoon is between those who are related,married or are friends.
May 13th, 2009 at 1:15 pm
Warren,
According to some of the latest statistics, Saskatchewan has a lower incidence of Poverty than the Canadian average.
In 2001 Sask. had an incidence of Poverty Rate of 15.8, Newfoundland 18.8, Quebec 19.1, Man. 17.5, B.C.
17.8, AB 13.8, Canada 16.2.
http://www40.statcan.ca/l01/cst01/deffamil60a.htm#3
3. The incidence of low income is the proportion or percentage of economic families or unattached individuals in a given classification below the low income cut-offs. These incidence rates are calculated from unrounded estimates of economic families and unattached individuals 15 years of age and over.
Is there any crackdown on prostitutes in Calgary? Not likely. The Saskatoon Casino was built at the White Cap dakota
Reserve. I would have liked to see it in saskatoon, but its turned out to be more successful out of town where there is a new golf course and hotel for that community.
May 13th, 2009 at 1:18 pm
Kevin you said “Sounds like your trying to Keep Saskatoon Cheap and Poor so your parents can keep the rent Money coming in from the Government. You admitted they made bucks from rentals, not me.” I never said that. My parents have never rented anything to anyone in their life, they’ve also never owned property in Saskatoon. I’m offended by you saying that and still think you’re a jerk. Maybe you’ve got me confused with some one else (I don’t see that anywhere above on quick scan) or maybe some one else named Conrad has parents who rent places… or maybe you’re just making stuff up.
And “No one is playing a race card but how you talk makes you sound stuck up.” after YOU previously said “Sounds like a bit of racism and prejudice too.” and called everyone “ignorant” who didn’t think $270,000 to live in King George was a deal, because we think it is dangerous. And yeah, making fun of how somebody talks. You’re a great asset to the west side.
You’re making up random stuff about my family and myself (please find my previous comments where I said anything about my parents renting to the government, I would like to see them, because that would be news to me!). You seem angry that your parents didn’t buy you a house after university. Big whoop. Neither did mine. Welcome to the real world. Stop blaming other people for the problems the west end has, we’re not bad people because we don’t want to live in a higher crime end of town in housing that is still way too expensive for most first time home buyers. I think I’ve just added meeting you to my list of reasons not to move to the west end.
May 13th, 2009 at 1:19 pm
And Kevin, your making up statements I never made draws into doubt any “facts” you have here. Warren said something about Saskatoon having high poverty rates – you countered saying Saskatchewan doesn’t – they may sound the same but are actually different.
And it’s great that all that oil is in Estevan, which is probably almost as close to Winnipeg as Saskatoon, and just south and east of Regina, where housing is cheaper. In fact, for $270,000 in Regina you can buy a house in a nice area, that isn’t a duplex on the spot a drug house used to be. So maybe natural resources that aren’t even close to Saskatoon aren’t really a great reason to drive house prices up now. Why would some one pay more to live in Saskatoon, with “ignorant” people (apparently everyone but you) a higher (yes crime elsewhere but higher here) crime rate, including higher rates of violent crimes, when they could make more and pay less, and live safer elsewhere?
May 13th, 2009 at 1:20 pm
Regina was just an example of cheaper housing and being closer to some of the resources that are, according to Kevin, justifying our high house prices in Saskatoon. Regina is not an example of lower crime. Regina is the one place with more violent crime. Thought I’d point it out so Kevin doesn’t get confused again.
May 13th, 2009 at 1:22 pm
My final posting of the day, Kevin just got me really mad, and in the effort of poking holes in everything he said (oh natural gas is really low now too) check out wikipedia’s picture of Fort Mac, Kevin’s “sea of oil” no where in sight!
http://en.wikipedia.org/wiki/Image:Fort_mcmurray_aerial.jpg
I encourage everyone to actually look at these things before making premature judgements on places:
http://www.fortmcmurraytourism.com/
May 13th, 2009 at 1:25 pm
Jim,
Sorry, I missed the sarcastic angle of your comment and thought that you were arguing against the points you were trying to make.
Maybe “subprime” isn’t the best way to describe these loans but I’m afraid that we’re probably stuck with it now.
Warren,
I think it’s a bit of a chicken/egg argument. Regardless of how one looks at it, people are either unable to pay (didn’t have the foresight to see changing terms), or unwilling to pay (don’t care that they stick their bad decision on someone else). Paying a mortgage on an “upside down” loan doesn’t make you stupid, it makes you honorable.
That’s not to say that the lenders are not at all accountable.
May 13th, 2009 at 1:25 pm
Geoff,
When I talk numbers of listings, I am referring specifically to MLS. It would be terribly challenging to accurately track private sales. Even of you could manage to track those which are for sale, there’s no sale data available when they do sell.
The price on an MLS listing is inclusive of whatever fee the seller has agreed to pay.
SaskHouses in probably the largest source of private for sales. They show 186 properties in Saskatoon, up about 10 from a week ago.
I couldn’t say why the prices are higher.
May 13th, 2009 at 1:26 pm
I am a renter and was wondering why so many people have been moving out of our building in the last month or two. Our lease is up in our apartment shortly, so we just received our new lease offer from the landlord. They have decided to raise our rent 30% because of “current property value” as they call it. At least they are honest about their motivation. Our very small 2 bdrm apartment will now be renting for $1200 per month. (Think I know why people are leaving in droves now).
Considering that we pay all utilities on top of that, and really the company doesn’t do an extraordinary job of upkeep, I am afraid this is just too much to pay. We were in the buying game until we realized that prices are out of this world, and not reasonable in the least. We figured we’d wait it out, and hope for the best, but it doesn’t look like we are going to be able to swallow $1200 per month for this. We could easily afford it, but I think it’s absolutely ridiculous.
Any experts out there think it is worthwhile to pursue a “40 yr mortgage” on an overpriced house, vs paying $1200 per month on rent for a very small 2br apartment? I think this type of situation is a factor in the prices staying high, as people are “forced” to buy into the market (kind of like choosing the best “worst case scenario”).
May 13th, 2009 at 1:27 pm
Conrad,
Sorry for the identity crisis. By the way it was Wesco fromk a previous blog, whose family makes money from rentals. But regardless your other blogs I’ve reread certainly support the Fact that you can’t wait to get the hell out of Saskatchewan. Fine, hope you have a good one. Alberta is overrated and overbuilt and has more flippers and construction built on spec than anywhere in canada so be careful when bying that 600,000 home in Fort mac or edmonton, the value could go down as well, just from too many homes on the market and labour shortages slowing the Alberta Economy down.
I’m not justifying $270,000 homes in Riversdale but I am defending a lot of great people who are the majority in Central and West end Neighborhoods in Saskatoon.
They deserve some equity in their homes too. Perhaps the neighborhood will be improved like Nutana and City Park, maybe not, if your not a risk taker or a visionary then don’t buy. City park and Nutana both where dumps fourty years ago too, until the professionals, hippies and artist moved in.
Edmonton is currently being built on oil from Oil Sands in Northern Alberta and around Cold Lake. Not anywhere near Edmonton either.
Saskatchewan will eventually develop the oil sands deposits in the Northwest.
I am positive for Saskatchewan’s future and really dislike the negativity you are blogging. That is my point for being on here.
By the way you should let us know exactly what career in Alberta you will be persuing thats going to be making you so much money. I’m sure all the others on here are as curious as well.
May 13th, 2009 at 1:29 pm
Kevin, you have a major chip on your shoulder. Get over yourself already.
You seem so eager to slam everything Alberta and build up Saskatchewan as being something completely different and better. What gives you the impression that Saskatchewan/Saskatoon won’t end up “overrated and overbuilt” as well?
May 13th, 2009 at 1:29 pm
Thomas C,
About your comment: “Any experts out there think it is worthwhile to pursue a “40 yr mortgage” on an overpriced house, vs paying $1200 per month on rent for a very small 2br apartment?”
I have the same question. There’s a lot of talk on this blog about the foolhardy getting themselves into a 40-yr mortgage, and I have to wonder what’s the downside compared to paying 1200+ in rent? In my case, I have a 35 yr mortgage at around 5% for 5 yrs (on a 235 K house purchased last spring), so with property taxes and mortgage payments I pay just under $1400 per month. Now there is no way I could rent the equivalent of my home for $1400 (walking distance to university, in a neighborhood with well-kept homes) – I have no idea what it might rent for, say 2K a month? Using that $1400 to 2K comparison, I realize that over the long-term the financial costs of my purchase are high due to interest, but are they higher than renting? Rent or buy – not too many other options out there people. Seriously, I’d like to know, because I’m no math whiz. Or would the people who are against the 40 yr mortgages suggest that I find someplace less expensive than 2K a month? Just wondering, because if I and others like me are digging ourselves in with a 35 or 40 year mortgages, what are our alternatives? At least I have a home and land to pass on to my kids, at least I and my family don’t have the stress of worrying about moving when my hypothetical rental goes condo (although there aren’t many left in the city to condoize, are there
?). So please enlighten me – anyone – why should I not have signed on to a 35 year mortgage?
May 13th, 2009 at 1:31 pm
Julie and Thomas,
You raise some good points about the rent/price ratio and this is something that has to be taken into account when deciding whether to buy or continue renting.
Though I think it’s a shame that people have had to go to 35-40 years to afford a home, there may be some sound advantages when market rents are so high.
The potential downside to this type of mortgage is the slow growth of equity which occurs as a result of the long-term retirement of the debt. This is not such a problem if the market continues to experience increases in values. You obviously see the benefit of that. The potential problem is a slip in market values. If, at some point, you find yourself owing more than the house is worth you may have some issues. Really, this is only a significant problem if you have to move. If not, you can ride it out. Historically, property values have steadily increased over the long term.
Bottom line; if the mortgage payments are affordable and you don’t see a forced move of some kind in the near future, a longer term mortgage can provide god opportunities.
Also remember that you can pay it off faster than 35 years if your situation changes and you’re able to put more towards your mortgage. I would encourage anyone who has taken a long term mortgage to re-evaluate with each renewal to determine if you’re in a position to pay it down faster. Increasing your equity position will provide greater opportunity and flexibility in the future.
Best wishes.
May 13th, 2009 at 1:31 pm
Why all the bad press on 40 year mortgages?
I think it depends on one’s situation. If that is putting you at your max with nothing down, then there is a lot of risk.
Our situation is that we are both young, starting our careers, and wanted the lowest possible payment just so we never felt crunched. My salary will increse substantially over the next 10 years and my sig other’s go up as well. Our goal is to have it paid off in 20. We just took 40 as we don’t know the costs of starting a family and wanted some wiggle room in case of an unexpected expense.
Please don’t paint all 40 year mortgages with the same brush.
May 13th, 2009 at 1:32 pm
Kevin – I’ve never said I would consider moving to Fort Mac. I just think it’s unfair, and prejudiced, to make criticize a place most have never been to – the pictures online all make it look nice.
The reason I am considering moving to Edmonton is that I do not need to pay 600,000 for a house. There is that Royale LePage link kicking around that shows houses there are cheaper than Saskatoon(I think it was 30,000 cheaper). And I would get paid more. I would like to stay here, but if it means living in a dangerous area of town, having my car broken into or living in a better area of Edmonton and making more it just doesn’t make sense to stay.
It just seems everyone here who is pro Saskatoon uses fear tactics to talk about how Alberta is so expensive, when it’s not, and some how we all owe it to Saskatoon pay double what houses were a year or two, when we know the economy has certainly not doubled, maybe will but have not yet realized all this potential. Sure Alberta’s increases are partially from speculation, but you get paid more and get a cheaper house in a better area in cities that have realized potential, to me that means we’re more over priced than them
May 13th, 2009 at 1:33 pm
I’m in a similar situation as Jedi. My long-term plans don’t involve my spouse and I leaving the Saskatoon area and my career/financial situation has only been improving.
If I can get myself in a home that will sustain our planned family growth then I will be happy. If I require a 40-year mortgage to start with then so be it. If my finances permit, I will do whatever I can to shorten that 40 years.
On a somewhat funny/ironic note, my captcha words for this post were “slump” and “land”
May 13th, 2009 at 1:35 pm
Julia, your mortage sounds like it’s worked quite well for you, but with a 235 K house, congrats. If houses were still worth that much I don’t think this page would have nearly this many people, like me, complaining on it. Our problem is houses are over 100 K more than that. I’ve even been checking the private seller web sites and there are hardly any houses under 300 k.
May 13th, 2009 at 1:36 pm
Conrad,
1) ‘we all owe it to Saskatoon pay double what houses were a year or two, when we know the economy has certainly not doubled’
Edmonton housing prices have also doubled, they just did it over a slightly longer period (I believe 3 years). There economy certainly did not double either. 4 years ago, housing prices in edmonton were not that much higher than Saskatoon.
2) ‘get a cheaper house in a better area in cities that have realized potential’.
To take 1 study, with some high-level average numbers and somehow come up with area by area comparisons is foolish. You can still buy east-side bungalows (60-70’s era, 1000-1100 sqft) in the low to mid 300’s in Saskatoon. With that you get a house that is within 15 minutes driving distance to downtown and about 20 minutes to just about anywhere in Saskatoon. Can you get the same thing for the same price in Edmonton? I don’t think so because those numbers include some pretty far outlying suburbs where your quality of life is diminished.
May 13th, 2009 at 1:37 pm
There’s LOTS of houses MLS under 300K. I find the private seller websites can sometimes be full of houses that are way over priced. People tend to get a little greedy when they are selling their “home” that they’ve put their hearts into for many years. Sometimes I think they could use a decent realtor to help them come to a more realistic price. It’s hard to sell something reasonably when you’re extremely invested in it emotionally. Just my 2 pennies.
May 13th, 2009 at 1:38 pm
Yeah, Edmonton went up a lot in price and now it went down… and is less than Saskatoon. Still don’t know how that justifies Saskatoon being more with lower wages. Sure there is a shortage of houses here. But that can be solved by buying an available house in Edmonton, in a nice suburb and working in the nice suburb’s hospital, accounting offices, business park etc… making your commute even shorter than here, while making more money. e.g. Millwoods
May 13th, 2009 at 1:38 pm
Norm wrote:
“Paying a mortgage on an “upside down” loan doesn’t make you stupid, it makes you honorable.”
I would 100% agree with you (I used the wrong words to describe people’s reasoning for foreclosing), but I’m not in a situation like that (so it’s easy for me to think that way). I hope I never will be (knock on wood).
Jedi wrote:
“Why all the bad press on 40 year mortgages?”
Because they’re one of the worst decisions a person can ever make. On a $400k mortgage @ 5%, going from a 25 year mortgage to a 40 year mortgage reduces your payments by a whopping 17.7%. It also however increases your interest cost by 75%.
For people who think 40 year mortgages are a good thing, why stop there? Why not 60 year mortgages? 100 year?? Where does it go from buying your home from the bank to renting your home from the bank?? If you’re in favor of a 40 year mortgage, would you be in favor of a 100 year mortgage?
If you want to know how ridiculous 40 year mortgages are, let’s apply the same principles to a car loan. The car dealership will sell you a car with $400 payments for 5 years. Or you can make $330 payments for 8 years. Who in their right mind would take the 8 year option?
If someone needs a 40 year mortgage to have “wiggle room” in case of unexpected expenses – they probably can’t afford to buy a house (that may sound mean, but a financial advisor should tell you the same thing). If your salaries are going to increase substantially over the next decade, what’s wrong with waiting a couple years to buy?
May 13th, 2009 at 1:40 pm
If there is not much of difference between a 40 year mortgage and renting, I’d go with the 40 year mortgage for reasons other than just money. I think most first time buyers stretch things out in the beginning, but within a few years with wage increases they usually do ok. The great thing is that you can do many things to pay it off quicker and I think most would have the intentions of doing so later in life.
If we look back 25 years and a house was 50k and a person took a 40 year mortgage then, I’m sure they would have paid it off earlier than the 40 years. I think they would be doing ok right now. If people get a 40 year mortgage for “wiggle room” in the beginning there is nothing wrong with that. I would just advise people to increase their payments when they can in the future.
May 13th, 2009 at 1:40 pm
Warren, funny you should mention that a financial would warn against purchasing a house with a 40 year mortgage. I have a friend that talk to an advisor a couple of years ago, and he was advised not to purchase a house, since the analyst thought the market was going to crumble. He didn’t it purchase a house, and has regretted it ever since. He has been renting ever since, and he will continue to do so. If he would have listened to me and bought a house he would have established a large amount of equity. Truth is financial analyst don’t realy know what the market is going to do.
Your numbers make sense. but are not practicle. Some people like 40 year mortgages to give flexability, and have no intention on taking the full term to pay off the mortgage. Why stop with 40 year mortgages being stupid, why not say 25 year mortgages are stupid too, or perhaps 20 year, 15 year…. you get the point. Every mortgage has a cost, and no matter what term you choose someone will say you are wasting your money for taking such a long term.
how is advising someone to wait a smart decision? Do you know what the future will bring. Nobody knows, we all have guess, but that’s all they are is guesses
May 13th, 2009 at 1:40 pm
Conrad,
I am not saying it justifies anything. I am just saying your statement about housing prices in relation to economic growth isn’t valid as it applies equally to Edmonton. I think you conceded the point.
As for getting a job in a suburb well that is great if you can do it. If that works for you congrats, have fun. However, for a lot of couples it is not possible for both to get good-paying job in a suburb location. So while your point may be valid in your case, I don’t think it constitutes a general rule.
Warren,
Yes if you take your mortgage out over 40 years you will pay more interest. At the same time, if you invest that 17% less you pay, let it compound at 8-10% in the stock market, you will actually have more money at the end of the day. At least that is true while you can get a 5% mortgage rate. If interest rates go back to 7-8% then I would agree with you but for now 40 year mortgages do make a lot of sense.
May 13th, 2009 at 1:42 pm
Important message from all of the above, is you can’t anticipate what houses will be worth in the future, make your decision on what you can afford now. If you can’t afford to lose money, or need your house to make money to get by, you probably should stay out of the market.
May 13th, 2009 at 1:42 pm
Here is a link for comparison of buying and renting.
http://rentingvsbuying.chadstown.com/default.aspx
May 13th, 2009 at 1:44 pm
One thing, in Edmonton or Calgary or Surrey, you can buy a cheap house away from down town but on good public transit, and just sit on the train for half an hour… would be nice if we had that from Warman or something. Dare to dream. Guess we’d need to triple population to get good public transit.
May 13th, 2009 at 1:44 pm
Carl:
I didn’t mention a financial advisor because I think they are prescient – I actually think most are idiots about markets. What they are fairly good at explaining to people though is basic budgeting and financial skills. As easy as a debt service ratio is to calculate, it’s amazing how many people can’t do it. And they would probably also find a nicer way to say it than “you can’t afford to buy a home”.
But you make some good points. The slippery slope argument does go both ways (if a 40 year mortgage is stupid, why not a 25 then). To me, a 25 year mortgage pushes the limits of the upside of home ownership with the downside of borrowing money to do it.
I’m curious though which of my numbers are not practical?? Please explain.
“how is advising someone to wait a smart decision?”
Very easy. There is a saying that in the absence of information, no trade is the best trade. Right now, even the most bullish people will admit that there are some strange signals coming out of the housing market (in Saskatoon, Canada, and the world in general). A lot of conflicting opinions. I don’t think waiting a year or two until you have a better financial cushion to weather any possible downturn is a bad idea. The idea that first time homebuyers will be priced out of the market is the greatest lie ever put forth by the real estate industry. It cannot happen. So it comes down to a simple risk assessment of the current upsides vs current downsides. People should ask questions like
- is it cheaper to rent than buy?
- am I buying because I want a home, or because I expect to make a profit?
- will a recession affect my region?
- will a recession affect me personally?
- etc, etc
Geoff said it very well with:
“If you can’t afford to lose money, or need your house to make money to get by, you probably should stay out of the market.”
That is why I would tell people to wait if they are not in a strong financial situation.
May 13th, 2009 at 1:45 pm
I have read some of the postings and I appreciate people s option, not that I agree with with a lot of them. Saskatoon is a beautiful city to live in regardless on what side you live in. I hope that people that buy on the east side are there because they have a preference to live on the east side, and not to escape crime. If this is the only reason that you are looking to buy east side property, then you are doing it for the wrong reasons. To see new property built in area’s such as Westmount,King George, to name a few is awesome. My hat goes off to these builders, and encourage them to press on. With the continue of new development in these areas we start to see a change take place with peoples outlook for the community. A sense of community becomes restored. People start to take back their communities ,ie streets and parks get cleaned up ,houses and yards get repaired. There’s a transformation that is happening in these communities and it takes the community
to keep the fire going. United we stand ,divided we fall. As far as affordable homes goes , four years ago
people could of bought homes in ,
for approx $120k that were in very good shape,and people still did not buy then. These same
people are now looking at the market and saying that buying a house today is not affordable, that the market has gone wild. Friends, I have to say, that if you do not jump in the water, you will never learn how swim. Saskatchewan is truly the land of milk and honey.We have waited along time to see a turn around in this province and now that it is here we still sit at the side lines watching and wondering what to do with it. This is truly a time of prospertity and overflow and I hope that saskatchewan residents will benefit from it.
We can either be spectators or participants, that I can not decide for you, but I know that I will not wait and allow this hour go by without reaping the rewards. This is only my opinion.. Thanks for reading
May 13th, 2009 at 1:46 pm
Sam said:
“Yes if you take your mortgage out over 40 years you will pay more interest. At the same time, if you invest that 17% less you pay, let it compound at 8-10% in the stock market, you will actually have more money at the end of the day. At least that is true while you can get a 5% mortgage rate”
That’s a wonderful idea — provided the stock market always gives you an 8-10% return. But if it always will, why not just rent and invest the difference between renting and owning?
Seriously, you don’t just pay ‘more’ interest: you pay twice as much interest.
After 20 years, you still owe 75% of your principal. After 25 years, you still owe 63% of the original loan.
That’s a big honking difference for a couple of hundred dollars a month — which is typically what you save.
The ‘virtue’ of a lifetime mortgage is that it allows you to buy a house you’d not qualify for with conventional financing — which allows first-time buyers to keep buying houses even when the houses are out of reach of their income, which allows prices to rise still higher.
The Japanese wound up with 60 year mortgages by the time their bubble burst.
I’ll rent for the next little while, thanks
.
I’d happily buy if the price was close to renting, but it’s not, and it’s only going to get worse.
May 13th, 2009 at 1:48 pm
“Northen Lights” I love your optimism but I feel that while Saskatchewan may be booming, you fail to explain how we are truly benefiting. How much more do you make now than 1.5 years ago (percentage wise, it would be rude to ask what you make)? And when you say “what to do with it” I assume you mean money. At $270,000 for a half duplex in King George, I would argue very few people in the west end can afford to buy into their improved ares, and may be priced out and forced to rent for longer than a similar person 2 years ago, at $120,000 housing, even with decent jobs. Even more renters and increased homelessness helps no one. And even if corporations and the government and investors are making more, it doesn’t seem to benefit low income earners at all. I’d say for them it just sucks because rent is up.
“Saskatchewan is truly the land of milk and honey.We have waited along time to see a turn around in this province and now that it is here we still sit at the side lines watching and wondering what to do with it. This is truly a time of prospertity and overflow and I hope that saskatchewan residents will benefit from it.” I don’t think what we’re waiting for is here yet, I just see a lot of people who can’t afford housing and are back to talking about moving to Alberta to make more.
May 13th, 2009 at 1:48 pm
An april 20th post I just noticed on the March blog, “Saskatoon Real Estate Resource Centre Blog said: The inventory of Saskatoon real estate listings grew again for the sixth consecutive week moving from # April 20, 2008 3:19 PM ”
6 straight weeks of increasing inventory? That has to mean the market here is weakening, either people cashing in and retiring to condos they can now afford in BC, investors leaving at the peak, or just less demand from students settling in more affordable communities, which I think I’ve seen posted on here as well.
May 13th, 2009 at 1:49 pm
northenlights,
Not everybody could afford to buy a house 4 years ago, or even 2 years ago, I was one of them. If I had known what I knew today, I would have bought a house with a minuscule downpayment, because in the end it would have made up for the increased interest payments with equity EASY!
What would you say to the young people trying to buy into our real estate market now on $12/hr jobs? Tough luck? Or… pull out $200K on a 40 year mortgage for a 700 sq ft condo and you’ll be just fine?… What happens when they’re in up to their eyeballs in mortgage and the market drops? Are you going to tell them to doggy paddle faster? How long can they hold their breath underwater?
P.S. Saskatoon’s real estate may have skyrocketed, but the whole prosperity thing isn’t quite here yet. We’re all waiting with bated breath.
Ooh, callum Captcha: recession mint
Kind of like double-mint gum, but ten times the fun!
May 13th, 2009 at 1:51 pm
Gotta agree with Heather on this the only thing scarier than a super expensive condo that is going to eat up half my disposable income for 40 years is in the back of my mind knowing that they’ve never been even close to this expensive and could drop at any moment. If the market drops a lot of us would be pooched. Everyone can say it won’t but that doesn’t mean it won’t and they might not be the one paying mid 200’s for a 2 bedroom condo. Deciding on whether to buy a place has become the toughest decision of my life.
May 13th, 2009 at 1:51 pm
Kenton,
I know exactly how you feel. I don’t want to be stuck with an overpriced shack; yet I don’t want to be screwed out of a house forever.
But I am usually a victim of Murphy’s Law; and in this case, I know that if I buy something now, prices *will* fall and I’ll be stuck with an overpriced home, and stuck with a 40+ year mortgage
May 13th, 2009 at 1:51 pm
Robin,
The idea that you may be “screwed out of a house forever” is probably an impossibility. No real estate market can function over the long term if there are no options for entry level buyers.
May 13th, 2009 at 1:52 pm
Just to add my own story, without trying to add to one side of the argument or not.
My wife and I bought a fixer up in Nutana this past fall after getting completely wiped out during the spring. The worst part was that we had been looking the previous fall, months before the surge, and we decided to wait for the spring for more options. Woops.
When we bought, we went with a 40 year mortgage. Why? Well, when we went to negotiate our mortgage the first time we had been looking at a house considerably more expensive and when we went back to do the paperwork on the house we eventually bought, I never bothered to negotiate a shorter amortization period, which I would have qualified for. First time buyer, nevetherless, Woops again.
We also went without a down payment. Why? well as I mentioned it was a fixer-upper. We used the downpayment we saved to renovate the house. We hope the renovations along with our “sweat equity” have added enough value to the home to see a return on our money. If not, its moot, as my wife and I are both happy in our home. ALthough it may prove to be a little small over the long term.
Why I am not worried about a 40 year mortgage with no down payment. Well I have a very secure decently paying job where I see decent yearly increments in my salary. When I finish my graduate degree in the next couple of months I will see a major increase in salary in addition to my regular ones. Also, since my wife has been at her job less than a year, she is not on the mortgage at all, and she has a humble yet helpful income. FInally, I do contract work outside of my regular work, some of which was taken into account in my negotiations, some of which was not. The portion that was not, is again humble yet contributes to our income. When our term is up in three years, I will negotiate a shorter term, but for am not worried about. We are putting another 200 per month toward our principle, and hopefully more in the future.
Just wanted to tell my story, which in retrospect is slightly short of Tolstoy sized post.
Mike
May 13th, 2009 at 1:53 pm
Just a refresher for all you financial greats out there…a 40 year mortgage is nothing short of a method in which the banks extend credit to a person who doesn’t qualify for a traditional mortgage. The result will be nothing short of the sub-prime mess in the States. Things are good now and maybe if you stretch your bucks you can just qualify with a 40 year, but what happens when ride up stops. The banks are out there for pretty much one reason only, $$$$, if you don’t pay they get their way. I feel sorry for young people out there who are stuck with this mess here in Saskatoon, tough it out, it won’t be like this forever.
Miska
May 13th, 2009 at 1:53 pm
Jrochest,
I really wasn’t trying to give the impression that buying a house in this market was a good idea. I personally own but if I had no equity I don’t know what I would do. I just think that to say a 40 year mortgage is a stupid decision, you’re not looking at the full story.
As far as the actual 40 year mortgage argument, let me break the numbers down. The difference on a 300k mortgage betwen 25 and 40 years at 5% is about $300 per month. If you take that $300 and invest it, have it compound at 8% a year you end up with $285K after 25 years. After 25 years you own less than $200K on the mortgage so you could pay it off and be $85 K ahead of somebody with a 25 year mortgage.
Historically the stock market has returned 9%+ over most 25 year periods and public pension funds use 8% as a target rate of return so I don’t think this is unrealistic.
I think my argument is fairly clear, if not let me know. Otherwise, if you are going to argue with me any more on this, please do me the respect of arguing with the numbers I put forth or some fundamental flaw in the argument.
May 13th, 2009 at 1:55 pm
Norm,
I guess I mean that I don’t want to be one of those entry level buyers who is forced to settle for a grossly overpriced (and small) home, in a less than stellar area–just because the market is overinflated. On top of that, I don’t enjoy the thought of having to pay for that overpriced home for 40+ years. Especially if/when the overpriced home I just bought dips in value.
I’ve said this before, but these prices do not reflect the reality of Saskatoon-living. At least, not yet (and it will be a long time before they do). There is no way in hell that these homes are worth 300+ thousand when we live in the middle of the cold, windy prairies. Sure, commute times are short, and I’m not trying to rag on prairie living per se (and Saskatoon’s river area can be beautiful in the summer), but Saskatoon is an oversized town when it comes to amenities, lifestyle, and other urban options. We are not a large city–not yet. I wish someone could blow the “WHOA!” whistle so we could all come to our senses here.
That’s why comparing prices to other cities in Canada (which are much larger and offer much more in terms of amenities, public transit, etc) is getting so very old. You cannot compare Vancouver (or even Calgary) to Saskatoon. You just can’t. Commute times? Sure–we got ‘em beat on that one maybe. But that’s about it.
There may be some people reading my comments who are thinking “if that’s how you feel, then perhaps you should leave!” Believe me–I’m considering my options. Because if this city does not return to its senses, I may have no choice but to leave. Wages are not catching up to inflation here. If our building does not end up being converted to condos, our rent will probably increase to at least $1,000.00 a month (one bedroom downtown). Where am I living??? It certainly can’t be Saskatoon!
One of the biggest draws to even living on the prairies used to be the lower cost of living. If we don’t have that anymore, well…what DO we have (besides shorter commute times)?
May 13th, 2009 at 2:01 pm
Can someone provide an argument as to why a 40 year mortgage, depending on a person’s situation, is such a bad investment?
It’s easy to throw out these rent vs invest historical comparisons, but ask investors in bre-x, nortel, the tech bubble and and the current correction about this? (granted that is why you diversify and invest long term)
We can also argue that generally housing over time is a good investment but only need to look south to see negative consequences.
Clearly there are risks with both. There can be advantages to both. Our mortgage lets us pay up to 20% per year, up to that total 5 times a year, and can make double payments whenever we like. We opted to have a place and invest (there can be a happy medium). We want 2 solid foundations, and once we have a nice little pot to grow will very aggressively pay off our mortgage.
A couple of other people have also provided how 40 year mortgages are benefitting them. I am not an advocate for them, but if we really want to get into it, why is a 25 yr mortgage good? Ideally no mortgage is the best, and I think as long as people have a plan as to how to get there, that is most important.
Ps. Heather, looks like willowgrove lots draws are coming, money in due May 9. See today’s paper
May 13th, 2009 at 2:01 pm
Jedi,
Thanks, I’ve already filled out the application form! I was distraught to find out they changed the ratio of builder to invididual lots, they said it would be 50/50… now builders get 2 lots to every 1 lot for individuals! That’s the city for you, doing absolutely nothing to help it’s citizens but always scratching the builder’s backs. Looks like the builder’s have the upper hand… again. It’s no wonder why we’re the 3rd most expensive place for new construction in Canada.
Jedi, Robin, Alex, Mike C., etc.
40 year mortgages obviously aren’t ALL bad. Some people, like Alex, go into it with a decent salary, have lower payments, but aren’t scraping by on every penny just to buy groceries etc. Most also plan on making extra payments, and/or renegotiating the duration of the mortgage later on. These are the “smart” ones.
The biggest problem with the 40 year mortgages are people who want to get into the real estate market so bad but should NOT be qualifying for any mortgage. These same people may also have debt on credit cards, cars, school, etc. There are definitely situations where people should be turned down.
Earlier this year a rep from FirstSask Mortgages was on the news saying how 60+ year olds can qualify for a 40 year mortgage… who exactly is that helping?!?! The individual? Absolutely no way!!! Personal real estate should NOT be chosen as a strong investment, it is more like a savings account. The increasing equity is “supposed” to be marginal (with exception to 2007) and with that your estate grows in value. However, studies PROVE that investments in mutual funds, stocks, RRSPs, etc. have a MUCH better rate of return than personal real estate. That’s why it’s NOT a good idea to put ALL your cash into your home. So many people in Canada aren’t even saving for retirement!
May 13th, 2009 at 2:03 pm
Heather,
Except that you can’t live in a mutual fund.
Can you refer to a couple of those studies? I’d really like to read them. Thanks.
May 13th, 2009 at 2:03 pm
Thanks for challenging me Norm! I bet you thought I was just talking out of my a$$. I really do try and stick to the facts – I wouldn’t want my anonymous integrity ruined. ;’)
http://money.cnn.com/galleries/2007/real_estate/0704/gallery.stocks_v_realestate.moneymag/index.html
That’s one article I found rather quickly, but over the past few years I’ve seen various articles regarding which is the better investment. This particular article references a study done by a finance and economics professor in New York, Jack Clark Francis.
Anyhoo, it seems that you might disagree on this subject. As a realtor, do you have some things you’d like to add? (Aside from our bizarre real estate trend that doesn’t follow predicted economics – keep in mind Canada’s real estate boom is now starting to show signs that it’s over, and some corrections are already happening) Do you think personal real estate is a better investment compared to stocks? Of course I realize you can’t live in a mutual fund, but you also can’t sell your only residence and live in limbo with all your gained equity wealth.
May 13th, 2009 at 2:03 pm
“Anyhoo, it seems that you might disagree on this subject.”
No, not at all. All of the money that I have is invested in mutual funds. I don’t really think of my home as an investment. However, all of the people that I know who have bought and held real estate have done very well, often without actually investing a lot of cash. I don’t know enough about it except that all of the other little hassles which are associated with it don’t interest me. It seems like it’s taking a helluva a long time for my egg to grow into something that will support life, after work.
Thank you for the links.
May 13th, 2009 at 2:05 pm
If real estate is a well researched investment, great. But when the market in Saskatoon goes down 5% or whatever, I don’t think anyone will be feeling sorry for the bandwagon jumpers who lost 5% on each of their 3 homes/condos. Especially not those who wanted to buy a condo for living and got priced out.
May 13th, 2009 at 2:05 pm
I certainly won’t! I’m a strong believer in what goes around comes around. And Jim, I believe you meant more like 15%! ;’)