Following a week of softer unit sales, Saskatoon real estate activity picked up the pace and recorded another week of closed deals that ranked among the best we’ve seen in the past eighteen months. A total of ninety-eight homes were reported sold to the Saskatoon MLS system, an increase from seventy-three last week, and up from seventy-six for the same week last year. While condos were the popular choice last week, single-family dwellings took the lion’s share of the unit sales this week claiming seventy-three sales, against just twenty-five condominium sales.
New residential listings continued to show some weakness with just one hundred and seven homes being offered for sale, down from one hundred and twenty last week, and falling below last year’s numbers by more than fifty percent. Two hundred and seventeen Saskatoon homes were listed during the same week last year.
Total active residential listings slid to 1,467 properties by the end of the week, down for 1,495 last week, but remained at higher levels on a year-over-year basis. At the close of the same week last year, there were 1,387 residential properties offered for sale on the Saskatoon MLS system.
Click the image for a larger version of the graph.
Seventy-eight home sellers made a price adjustment this week, while a further twenty-two canceled and relisted their home, most at a new price.
Average sale prices took a bounce back from $254,737 last week to finish this week at $264,749. The six-week average price fell $2,600 from the previous week to record its third consecutive weekly decline, reaching $274,556, well off of the $308,558 recorded during the same week last year when the six-week average reached its highest point for the year. The four-week median moved in the opposite direction, increasing $1,550 over last week and reaching $269,000. During the same week in 2008 the four-week median selling price was $290,000.
Click the image for a larger version of the graph.
Buyers may have been buying but they weren’t exactly taking it easy on Saskatoon home sellers. The average underbid this week grew to $12,770, up from just $9,486 the week before. The average discount that buyer’s received off of the asking price was 4.6 percent, up a full percentage point from last week.
See a Google map displaying the boundaries of Saskatoon real estate “areas” here
Data collection and calculation for our statistical reports
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
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Norm Fisher
Royal LePage Saskatoon Real Estate
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{ 77 comments… read them below or add one }
It certainly now looks like we’re going to avoid that inventory “bubble”, unless something really drastic happens with interest rates or a lot of owners who’ve been sitting on the fence decide now is the time to list (unlikely). This is more or less the peak for sales, though, and unlike last year when there was a rush to lock-in 40-year mortgages, I can’t see anything that might inspire a late-Summer/early-Fall surge in activity.
I think we’re going to see a slow, steady decline in sales from now until the end of the year, and I wouldn’t be surprised if the 6-week average drops down to between $235-$240k by the end of the year (we could see $220-$225k if interest rates spike). I also think that we’ll start to see increased condo sales which will bring the averages down, as well.
Interesting story featured in The Globe and Mail:
‘Irresistible’ rates drive Canada’s recovery
http://tinyurl.com/ljfl2c
The latest news with the River Landing project has to be a positive development for existing high-end developments under construction or nearing completion. “In a report to city council, the city manager recommends setting a deadline of Aug. 17, 2009, for the sale of the parcel of land.” So Lake Placid essentially has 60 days to come up with the $4.55M for the land purchase, or…
“The latest news with the River Landing project has to be a positive development for existing high-end developments under construction”
A major sigh of relief, I would imagine. I think this project was the winner, had it gotten off the ground, but it appears it is the victim of unfortunate timing and circumstances. With any luck it will happen late, instead of not at all.
Indeed. I wish I could be as optimistic, but I think the window to get this started closed last year already.
I’ve heard that Michael Lobsinger is a very determined man, but then, I also heard that financing had been secured for this project.
I’m thinking of going to their sales presentation on the 26th. That is, if it’s still on…
Retail sales slide 4% in province
http://www.thestarphoenix.com/business/fp/Retail+sales+slide+province/1716286/story.html
I have said before River Landing will be the measuring stick on how we will do in this recession. I would rather have it not started at all instead of a quarter completed then stopped. There a hundreds of projects in North America this size or bigger that are monuments to the credit fueled bubble that are sitting idle half finished.
If it does get started, I truly hope it goes to the end and becomes what has been envisioned. It would be great for Saskatoon.
Jason,
I agree that we will start to see decreased sales. Interest rates creeping up and summer is now here ( finally) But we will start to see decreased listings as well. Cliff diving housing starts from the last half year as well as underwater spec sellers will decrease listings.
If the River Landing project and residential developments are as important to the future of the city as everyone seems to make them out to be, then perhaps a price adjustment to pre-bubble prices would help keep some of the remaining momentum in the market. Keep in mind that resale values are making a correction, the same should be happening to new lots as well.
George, agreed; as I said, it’s *unlikely* that we’ll see any surge of new inventory, and unless we see an increase in foreclosures, a lot of new projects completed or a bunch of sellers who’ve been lurking all this time, I think we’ll be looking at lower inventory levels in 2010 than we did in 2009.
Michael, it should, except the cost of servicing lots in this city keep going up every year, regardless of market conditions.
For some time now River Landing has been all talk and no substance. My first doubt was when Remai Developments bowed out way back when, they were probably the most qualified developer anywhere for this type of project in Saskatoon. If the math did’nt work for them that could’nt have be a good sign for the viability for this hotel. The hope and a prayer Star Phoenix article sure did’nt seem to bolster much confidence that a backhoe would be on site any time soon.
Jason, you are right, but when lots are overpriced there is room for correction. The other option is for the city to find ways to reduce their servicing costs like any other industry has to do.
Michael, I agree (and it should), but I just don’t see it happening without either a reduction in services somewhere or a hike in property taxes.
http://www.city.saskatoon.sk.ca/org/finance/reports/2009_operating/prelim_operating_budget_2009.pdf
Jason and George,
“…we will start to see decreased sales.”
Goin’ for a gimme here guys?
Just for fun, I’ll predict that sales over July, August and September (total sales for the three months) will beat last year’s numbers but prices will remain stable at best, probably softening some. Month to date average price for June is at about $269,500, about 10K lower than May. Still a week to go, but I definitely get the sense that prices have softened in spite of brisk sales activity and weaker listings.
“unless we see an increase in foreclosures”
I would think that at some point later this year we’ll start to see some but they’re virtually non-existent right now. I have a tool that will search the listing database and cross reference seller’s names against a whack of lenders who might have a property listed. Scotiabank has one property listed, and that’s it.
Michael,
“when lots are overpriced there is room for correction.”
Makes sense to me, but again, a fairly significant adjustment on the lot does not equal a significant adjustment on the total price. You guys might recall that the city’s 2009 operating budget included $103 million for land development. Wonder how that’s going?
Norm, I’ll see your challenge and raise! I’m going to lean towards sales numbers trending down (I know, big surprise…) for Q3 2009 over Q3 2008, with the 6-week average dropping to around $250k by the end of September.
Yes, $103M for Evergreen, Rosewood and Blairmor. On top of the hundreds of lots in Willowgrove, Stonebridge and Hampton Village. Because of course, this is a record boom year for new housing construction and we’re fast running out of lots…
That seems aggressive to me, but then the average and the median both dropped like a stone over July and August last year. This year, there seems to be too many people willing to say “the worst is over.” I’ll guess $260K, which is the same as my prediction for Q1, a miserable failure. I am starting to feel confident that my guess will be closer than S’toon’s $310,000. Unless, of course, we can sell 110 homes at an average on $415K between now and the end of the month.
World Bank says recession worse than thought
http://www.financialpost.com/news-sectors/story.html?id=1720670
(markets off several hundred points this morning)
Jason,
I am not surprised that the markets are off this morning due to commodities dropping.
Chinese Banks Funding Commodities Speculation, Casting Doubt on Recovery
http://www.nakedcapitalism.com/2009/06/xie-chinese-banks-funding-commodities.html
“The current surge in commodity prices, for example, is being fueled by China’s demand for speculative inventory.”
I won’t be surprised with more layoffs on and off in potash the next couple of years.
If oil comes back down to the 40’s again, I doubt gas prices will reflect it. Damn gougers!
Another real estate developement put onto the back burner close to Saskatoon that is worth over 200 million.
http://www.thestarphoenix.com/news/todays-paper/Canal+project+Wakaw+delayed/1719550/story.html
George, “But Mayor Ed Kidd said he expects the project to be given a green light again “within a few weeks.” Not sure how realistic this is when “The developer, Stylo Developments of Calgary, stopped construction last fall.” That’s 0 for 2 and -$400 million from Calgary developers in the past 72 hours.
One report this morning (this was relayed; no source, sorry) indicated that Alberta is the leading province with mortgages in default, in excess of 3,500 in Calgary that are in arrears by 3 months or more. It was reported that some groups are advising those in default to apply for a loan to make the mortgage payment. Mass foreclosures ahead…? Are we finally headed for a US-style housing crash?
Would not surprise me about bustberta having so many foreclosures. Over 100 billion in investment has either been postponed or cancelled until NG and oil recovers.
Anybody that says there is big money in Alberta, yeah there is but I would also say there is just a bigger ability to go into higher debt. This is from last year.
Alberta mortgage debt reaches $60B http://www2.canada.com/calgaryherald/news/calgarybusiness/story.html?id=ed72ed5e-1ac3-4705-86c9-45bcb8a9642c
Ahh, this could shed some light on the foreclosure situation:
Here’s the latest EI news (April’s numbers):
Alberta and Saskatchewan showed the fastest rate of increase in the number of regular beneficiaries in April
“In Alberta, the number of regular beneficiaries grew by 16.3% to 48,300 in April, bringing the total increase since October 2008 to 164.9% or 30,100. From March to April, the number of regular beneficiaries in Saskatchewan rose 12.2% to 13,200 people, following similar increases in the previous two months.”
5th-lowest weekly average out of 25 data points in 2009, and this despite the fact that SFH made up 75% of the sales (so people can’t even blame low-priced condos).
Ouch. That stings.
Three of the five lowest weekly averages in 2009 occur in the most recent six-week series… so this upcoming week had better have a 290k+ average or the graph will definitely be trending down again.
Norm, stats geek has an observation: I couldn’t figure why the four-week median would go up on such relatively lower prices. I notice in your chart that the median and mean for this week were identical — both at $264,749. That’s possible, but unlikely … any chance that there was a cut-and-paste error somewhere?
Crikey, then you’ll like this one (10 weeks for EI benefits to kick-in)…
Long EI waits leave Albertans struggling: Hundreds turn to welfare system
http://tinyurl.com/ny6qu4
And here’s some foreshadowing for Saskatchewan:
“Currently, laid-off workers in regions with higher employment rates require more hours on the job to qualify for benefits than those living in areas with worse employment prospects.”
Norm, thanks for the ‘tweets’ – this one made me crack up (hope it’s not local!)
“Overheard on an MLS listing: ‘has been professionally cleaned’ You know you’re short on features when you have to say it’s been cleaned.”
Bookrat,
Thanks for the heads up. I did mistakenly use the weekly average for both the average and the median column. The correct figure is not much different though, at $264,450. This error is not at related to the higher four-week median. I’ve double checked those numbers and everything is correct up there.
Crikey,
Just to try to balance the argument a bit, from the same article on EI you can see that we are still one of the better places to be if you want a job:
“While from October to April the rate of increase in the number of regular beneficiaries was the fastest in Alberta, British Columbia and Saskatchewan, the unemployment rates in these provinces remained among the lowest in the country.”
Norm,
As far as the Q3 sales volume I would have to guess that it will beat Q3 08 for the simple reason that interest rates seem to be going up and this should goad buyers into purchasing before their rates jack up.
Thank you for pointing that out, Peter. It is true that our current unemployment rates currently are or are among the lowest in the country. I was just intending to point out that the trend toward quickly increasing claims was worrying.
I also came across this article today, and thought it might interest you: the author makes some very good arguments about why he thinks that as long as the government is able to generate debt, deflation is a highly unlikely outcome, and why the difference between the Japan of the 1980s and the US of today might be a poor one. He argues that when the government reaches the practical limits of debt creation the economy may experience stagflation, rather than significant inflation.
Jason, on the contrary, I don’t like that article at all. The sad thing is that if it’s bad now during the 10 week wait for EI benefits, how bad will it be if/when the EI runs out in 27 weeks?
As far as the prediction game is concerned, I’d say sales volume will be up YOY in July and the first part of August, but will trail to be at par YOY for the latter part of August and all of September.
Man, that crystal ball is cloudy.
Crikey, yes, add to that the growing number of mortgages in arrears and it doesn’t bode well. StatsCan had an interesting EI overlay map.
http://www.statcan.gc.ca/pub/73-002-x/2009001/map-carte/map-carte001-eng.pdf
Am I out to lunch here or is the growing “unemployment” figure in Saskatchewan related more to a growing labour force (people who work, or want to work) than a loss of jobs? I’m looking at the June 5 employment report which seems to indicate that unemployment grew by 24% over the previous month, yet an additional 3,000 people were working in May, compared to April, and an additional 13,000 (8,600 full-time) year-over-year. During the same period, the “employment rate” grew by .3%. Help! It hurts!
Peter,
“this should goad buyers into purchasing before their rates jack up.”
That’s what I’m thinking.
Crikey,
“I’d say sales volume will be up YOY in July and the first part of August, but will trail to be at par YOY for the latter part of August and all of September.”
June appears to be shaping up to trounce last year’s number of 321. We were sitting at 311 at the close of business today. With 1.2 weeks remaining, I’m thinking 400 should be a gimme. July will be a little tougher, as it was reasonably strong last year with 348 units but August and September look easy, especially if all these “green shoots” keep growing. Sheesh. As you say, “the crystal ball is a bit cloudy” and it seems completely possible that the stock market could take another big tumble bringing us back to October of last year.
I’m most interested to see where the inventory is headed. It continued to grow quite steadily through July, August and September last year. Looks like there’s some chance that we could see a small decline in June over May.
Could be that the loss of high end jobs has led the unemployed to seak multiple lower paying part time jobs? 1,600 more unemployed people in Saskatoon cannot be a good thing!
That is more than double last year! 2,700 unemployed in total!
http://www2.canada.com/saskatoonstarphoenix/news/business/story.html?id=9bba3354-3a09-4220-90a0-ad90cdddabc3
Rising unemployment which is still on the way up has to be worrisome for Saskatoon!
One more quick comment, I seem to remember Manitoba having the lowest unemployment rate in Canada recently, with BC/Alta/Sask leading all Canada in the increase in the unemployment rate, it would stand to reason that Manitoba’s unemployment rate is that much lower?
Go Toba!
“I’m most interested to see where the inventory is headed.”
Norm, me too. What’s your impression of the number of people who currently might be holding off selling, waiting for those “green shoots” to start sprouting? If there’s any appreciable number this might have an effect on inventory when things eventually do start to pick up.
Crikey,
I can’t say that I have any sense for that. I have a few sellers who are on hold, but none that are waiting for more favourable market conditions (though I’m sure they’re all hoping).
All I know for sure is that I have a free steak sandwich coming my way if units are closer to 1,425 than 1,245 by June 30.
“All I know for sure is that I have a free steak sandwich coming my way if units are closer to 1,425 than 1,245 by June 30.”
Cool! Enjoy that sandwich, now.
Anon,
“1,600 more unemployed people in Saskatoon cannot be a good thing!’
Hard to disagree with that, but how can 8,600 new full time jobs be a bad thing?
New figures show Saskatchewan’s population is still growing.
There’s a new magazine out called Spaces that has a feature on the King George, including some photos from one of the suites. It looks like Meridian has done a really good job of capturing the history of the building with the theme they’ve gone with.
Crikey,
Excellent, very articulate article. I would agree that some type of stagflation or even hyperinflation (although much less likely) is going to result out of all of this. I do not for one minute think that the end result of quantitative easing, stimulus packages, bank rescues and whatever comes next will in any way actually help the economy.
The only point I have been trying to make is that the government seems hell bent on protecting the status quo. Currently, that means protecting a large number of over leveraged businesses and consumers. In the US they keep making these announcements, these new programs which show there intentions. Banks are being forced to modify mortgage terms for homeowners who can’t make the payment. Troubled assets are somehow moving to the treasuries balance sheet off of the banks. They are giving out huge loans to the likes of AIG, bank of America, Citigroup under terms that no regular creditor would even consider. The govenrment is running a deficit in excess of 13% (last I read) of GDP and paying for it by issuing more bonds. The list goes on and on and on.
Every time they put one of these programs out you can see their intentions like they are screaming it at you, WE WILL NOT LET DEFLATION HAPPEN. We don’t care that the savers of the country are going to be hurt. We don’t care that those who are suffering are the ones who acted the most foolish. We will at any cost prop this system up.
I don’ t know the ins and outs of how it is all going to take place, I just stick to the basics because there are too many combinations to possibly guess at how it will go down. In the end though, as pathetic as it is, I think that the US Government will win yet again and prices will go up. Just as bernanke could barely keep up with the deflation cycle over the past 2 years I really doubt he is going to be able to slow inflation down once it gets going. Prices will probably rise in nominal terms and probably fall in real terms.
Anyways, at the end of the day, all these people who pay their mortgage down, invest in GIC’s, and keep 6 months salary in the bank for rough times they are the ones who will pay for the bailout the most even though they have done everything right. It is their money that the government is using. The ones who will benefit (in a relative fashion) are the overleveraged fools who have never bothered to save. They will see their debt reduced in nominal terms and will come out of this okay.
What I am trying to say is that you can’t possibly beat them so you might as well join them.
You make some fantastic points, Peter, and I even agree with most of them.:)
“The only point I have been trying to make is that the government seems hell bent on protecting the status quo.”
Yes, absolutely they are hell-bent on protecting the status quo. Unfortunately, the current status quo is not sustainable.
The imperative since last October has been that governments were merely controlling the chaos that the financial sector had wrought by throwing it on the backs of the taxpayer. After all, the top 5-10% of the population’s assets and bonuses were at risk, so those in power (and those who fund their campaigns) were (and are) desperate to solve the situation. Unfortunately, the least immediately painful way they’ve found to achieve this goal thus far is by placing more debt on the shoulders of everyone else (the other 90-95%), which is not sustainable either. Yes, it absolutely does appear as if the current system penalizing savers at the expense of the financially reckless. I’m certainly not arguing with your reasoning about possible outcomes, but I’m not sure there would be a short-term solution to this situation that would be less socially destabilizing.
I hear your frustration about this, and believe me, many others share this frustration too. As clueless as the general public often appears to be about the factors leading to the bailout of the financial (and automotive, etc) sectors, many more people are getting it lately, and I’m seeing much more in the MSM regarding this situation that just a few months ago. The theme is much less one of panic, but one of anger and frustration. This, to me, is a positive, because it’s only through realizing the injustice of a situation can one begin setting it right. It is frustrating to watch this go on and think that the situation is out of your control. The fact of the matter is that the only actions you do have direct control over is your own. Getting informed, commiserating with like-minded people, and doing the best that you can to prepare for the future are certainly a big part of this, but hopping on the bandwagon of the financially reckless is not the answer. You’re obviously very articulate and could contribute in much more positive ways to helping turn this thing around.
“Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.” — Winston Churchill
Buyers still want fancy features
http://tinyurl.com/lgz3qz
* “What will tomorrow’s starter condo look like? … It is back to basics. I mean back to a basic affordable model.”
* “But we’re into instant gratification. The trouble is that our salaries aren’t keeping up with instant gratification. So we’re going to have to back off.”
* “Eighty-six per cent of all potential buyers in Canada reported they were more likely to buy because of low interest rates.”
Interesting sight on my way to work this morning… four guys putting up a billboard at Warman and Primrose for … River Landing! Anyone less informed than the readers of this blog would think that it’s full speed ahead and damn the torpedoes for the prime and pristine Hotel/Office/Residential/Commercial space on the banks … what gives with promoting a dead product?
New virtual tour up on their website, too (http://www.lakeplacidsaskatoon.com/). They announced on the radio that they’ve been given a deadline of August 17 to complete the land purchase, but there hasn’t been any followup regarding the discussion that was to have taken place by city council on Monday.
Peter, “…It is their money that the government is using.” Yes. And they’re also using taxpayer’s money (current and future) to guarantee all these 35-40 year loans to the various financial institutions, who have then been given every incentive to artificially inflate the market by flooding it with cheap credit.
“What I am trying to say is that you can’t possibly beat them so you might as well join them.” I’m not sure I’d want to belong to this exclusive club. There will be no similar financial assistance for distressed buyers down the road in the form of mortgage bailout programs (as in the US), because the government has already provided low-interest mortgages with reduced financial requirements. Where do you go from 35 or 40 years? 50? 60…? In addition, the government has given security for all of these mortgages to our banks, so it’s readily apparent who will be the immediate beneficiary of any “bailout” if we see a mortgage/housing collapse.
Here is a good article on inflation/deflation from Mish.
The Big Inflationist Scare http://globaleconomicanalysis.blogspot.com/2009/06/big-inflationist-scare.html
“We have a credit based economy and anyone watching money supply and not watching credit is simply wrong. This is a statement of fact, not idle conjecture. Only those watching and expecting the collapse in credit and understanding the role of gold got things correct. This is a very small group of people.”
“Cash strapped boomers headed into retirement are finding they do not have enough money on which to retire. They are traveling less, spending less, and have too much of their assets tied up in illiquid real estate investments. Moreover, banks will not lend because there are too few qualified borrowers.”
“Peak Credit is in. The Effect of Household Deleveraging on Housing, Consumption and the Stock Market is massive.”
Thanks for that excellent link George, appreciated. Two additional quotes from a related article:
“In U.S. households alone, the losses have been massive: massive: $1.39 trillion in the third and fourth quarters of 2007 … a gigantic $10.89 trillion in 2008 … $1.33 trillion in the first quarter of 2009 … $13.87 trillion in all, by far the worst of all time.”
“Hyperinflation, or even strong inflation predictions in the near term look rather silly in the face of this data unless one is only looking at the printing and not the destruction in credit.”
Norm, I think it’s really noteworthy that 3,000 new people in Saskatchewan is on about the same scale as 88,000 new people across Canada these first couple months. We’re just growing at the same rate as the rest of Canada. No more. No less. No big deal. And real estate prices are more affordable in most of those places than here!
Samson,
It’s actually about 23% better than Canada as a whole, but I get your point.
To my way of thinking, several consecutive quarters of population growth after 20 years of declines is a bit of a big deal. I’m also encouraged by the fact that we are closing in our historical peak population but I can appreciate that this may not be particularly impressive to you. In any case, I was thinking about the population growth in the context of my earlier questions about concurrent employment growth and unemployment growth. I didn’t really intend to put a feather in anyone’s cap.
The email address you used with your comment leads me to believe you’re feeling confused. Please see the “Blog Rules” on the navigation bar below the header. I’m delighted to have contributions representing a wide cross section of opinions provided that my property is treated with some degree of respect. If you used four different names at the reception desk in my office I’d ask you to leave. This is as much my workplace as my office is.
“In U.S. households alone, the losses have been massive: massive: $1.39 trillion in the third and fourth quarters of 2007 … a gigantic $10.89 trillion in 2008 … $1.33 trillion in the first quarter of 2009 … $13.87 trillion in all, by far the worst of all time.”
This relates to the point I was trying to make a few days ago. We have seen these tremendous losses, ‘the worst of all time’ but the actual deflation numbers have been weak. Basically flat in fact. I know, I know it’s all because the government is counteracting it with spending but then that’s really my point. If in the worst losses of all time you don’t get deflation when exactly do you think it’s really going to kick in?
“Yes. And they’re also using taxpayer’s money (current and future) to guarantee all these 35-40 year loans to the various financial institutions, who have then been given every incentive to artificially inflate the market by flooding it with cheap credit.”
I don’t know if this was meant as an argument or not but I would agree with it wholeheartedly. The taxpayers are being asked to shoulder the burden of a problem that someone else created. Obama is just as tight with the bankers as Bush ever was. The verdict is still out in Canada but with the BOCs recent threats of quant easing I am starting to worry.
“There will be no similar financial assistance for distressed buyer..”
Fair enough, but what would you do with your cash given that the government is debasing it? It is one thing to say the government should do this or that but what would you as an investor do to protect your money?
George,
Straight from the horses mouth. Read Mish’s post on the various fed commitments (roughly $13 trillion) and compare them to the numbers posted by Jason. You can see that in fact the US is able to counter the credit loss.
http://globaleconomicanalysis.blogspot.com/2009/06/breakdown-of-feds-139-trillion.html
I meant to post this as well. Basically the Fed announced today that inflation is not a concern. Given their extreme duplicity I view this as another sign that inflation is the current danger.
http://finance.yahoo.com/news/Fed-says-recession-easing-apf-232707420.html?x=0&sec=topStories&pos=main&asset=&ccode=
Peter,
According to Mish, deflation is the contraction of the total supply of money and credit. 13 trillion lost is only to households. The total loss from such things such as business, counties, cities, States, commercial real estate is what? double, triple that. Many of these entities have not only lost revenue from taxes and investments, credit has dried up as well. Many States and counties are now on the verge of bankruptcy, which would fuel the deflation fires.
In order for that 13 trillion the Fed pumped into those programs to cause inflation, it needs to be lent out. Banks are not lending like it is 2005 or 2006.
But lets say I am wrong and inflation is rampant in a few years. Would it be worse than the period from 1998-2008? Even though the CPI was between 2-4% from the lying government numbers. Housing tripled, fuel tripled and depending on what you bought, groceries doubled to quadrupled over that time. Since wages followed the CPI for the most part during that time frame, expansion of credit was the only way for the standard of living to continue. Inflation was probably between 7 to 10% each year.
Now for inflation to become rampant, are we going to see an even bigger expansion of credit and or higher wages. I don’t think that is going to happen. It is true that prices for certain items can and will probably climb higher. But our standard of living will take a big drop when that happens.
One last thing. Many people have said that the States will print money to pay for their debt. What most do not know is that unfunded liabilities such as medicare, medicaid and social security are indexed to inflation.
Enjoy your posts. Keep em coming. I am here to learn and if you can convert me to seeing inflation, I am all for it.
“What most do not know is that unfunded liabilities such as medicare, medicaid and social security are indexed to inflation.”
Too true, George. Not to mention what effects rampant inflation might have on the interest payments on all that consumer and government debt…
“Dr. Suess on the Economy,” courtesy of Mish.
Is Canada’s housing market tanking or taking off?
http://www.financialpost.com/news-sectors/story.html?id=1729034
“The Canadian housing market is beginning to look like a large jumbled puzzle. A week after a report showed the price of an average house had soared to a record high, an alternate report suggested Wednesday prices have in fact declined for five consecutive months.
The price of a Canadian home was down 6.7% in April from a year earlier, the relatively new Teranet–National Bank House Price Index showed Wednesday. It was the fifth consecutive month of yearly decrease and caused the index to be down 8.9% from its peak in August. Home prices in Vancouver were down 10.9% from April last year, while prices dropped 9.8% in Calgary and 7.6% in Toronto. On a positive note, prices were up 2.4% in Montreal, 0.6% in Ottawa and 0.2% in Halifax.
But the data are in strong contrast to Multiple Listing Service figures released by the Canadian Real Estate Association on Monday last week. The MLS figures showed the average national home price for May was up a robust 16.4% from January, setting a record high of $319,757.”
Jason it is good to see your positive posts this week. You have brought some interesting points to both sides of the table this week (not just pessimism). And… no I am not being sarcastic.
Keep up the good work!
Peter, “Fair enough, but what would you do with your cash given that the government is debasing it? It is one thing to say the government should do this or that but what would you as an investor do to protect your money?”
And that’s the $60,000 question, isn’t it…? There was an article this morning in the Financial Post suggesting China should buy more gold to increase its gold reserves (which have shrunk in relation to its foreign exchange reserves). So gold is definitely one possibility at some point. There are also a few energy trusts that are returning decent dividends.
http://www.financialpost.com/news-sectors/trading-desk/mining/story.html?id=1731492
I think this is the kicker with the discrepency in those numbers, Jason:
“The Teranet-National Bank figure is calculated by using the sale prices of homes that have been sold at least once before, a method designed to smooth volatility in the reading. The CREA figure is the average sale price of all homes sold through the MLS. The figure can be skewed by the mix of homes that were sold with the location, size and type of home all impacting price.”
Despite the hubub, I think the CREA was quite clear that the MLS numbers were skewed higher by increased activity in 3 larger, pricier markets. They may not have been clear about some other things, but they were clear about that.
Crikey, yes, that’s definitely the kicker… Did see the disclaimer…
“CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.”
…Although it’s hard to overlook statements like:
Resale housing market continues to recover in April
“The national average price also rose in April, to within short reach of the record levels reached one year ago.”
National resale housing continues to rise in May
“The national MLS® residential average sale price in May 2009 reached the highest monthly level on record.”
Jason,
There was also this, the second sentence of the CREA’s media release: “The rebound in activity is being led by an increase in transactions in some of the most expensive markets in the country, which is skewing the national average price upward.”
Not exactly buried in the fine print.
I won’t even bother to point out that year-over-years averages for all major markets are prominently posted on their website. Oh, sorry, I wasn’t going to point that out.
Norm, I don’t believe it was suggested that it was ‘buried in the fine print’; just not the primary focus of the news release. I thought I was actually going easy on CREA (for a change), by not posting something like, oh… what Garth Turner might have to say in response:
“…the gulf is widening between what most Canadians think is happening to the economy, and actual developments. Cheerleading economists, self-dealing realtors and whoring media outlets have allowed the perception to spread that conditions (as CREA’s release stated), “have returned to pre-recession levels.” -and-
“…It might be in CREA’s own interests to misled the country.” -and-
“…this week CREA’s wonky stats were blown out of the water by another housing survey, the Teranet-National Bank index.” -and-
“Media, the real estate industry and their accomplices in the mortgage biz believe they can influence public opinion enough to alter consumer behavior.” -and-
“…Is somebody going to look out for the naive and the young, now being told the coast is clear? Or do we watch them being mowed down next year? Obviously CREA has made its choice.”
Oops… darn that copy and paste
(captcha = “mass lamppost”)
Jason,
I wasn’t suggesting that you’d suggested that. What I was saying was that CREA positioned that statement very prominently in their release. Garth has also failed to recognize that there were a number of qualifiers, and disclosures which were prominent in this release. His post is far more misleading and deceptive than what CREA put out.
I love how when prices started to fall people would say, “look at those realtors quoting year-over-year numbers when prices are clearly falling. It’s so misleading.” Now the tune has changed to “prices are down year-over-year. How can you tell us that they’re going up?”
I’m not a fan of all the cheerleading the real estate industry engages in but some of the spin that comes from the bear camp is equally repulsive. This particular rush to the realtor bashing is a terrific example.
Norm, “His post is far more misleading and deceptive than what CREA put out.” Respectfully, I would suggest that the media reports did not necessarily touch base on/or highlight any of these qualifiers and disclosures. The media and mortgage industry were also focal points, and while CREA may have bore the brunt of the criticism, more often than not they tend to be front and center for the spotlight, too.
The tale you relay is somewhat indicative of how influential the news media can be. And I agree that sometimes both camps take it a bit to the extreme. Strangely enough, that always seems to be what sells in the media, though…
I’m afraid it would be impossible to convince me that Garth hasn’t read the CREA’s media release from start to finish.
“And I agree that sometimes both camps take it a bit to the extreme.”
I have yet to see them take happiness and optimism to the extreme. The news media makes more money selling fear and peril than happiness. Look no further than your daily dose of Lloyd Robertson that include (but are not limited to) terrorism, swine flu, housing crisis, recession, global warming, nuclear testing, political unrest, murder, kidnappings, delivered with a light mix of success stories and smiles. There is the saying, “sex sells”. Well it should be “Bad news sells”.
Norm, I was referring more to the mainstream media possibly not reporting any of the qualifiers and disclaimers (I have no doubt Garth ready the entire release from start to finish; several times over, probably).
L.oki, I completely agree with you: “Bad news sells” (one reason I discontinued my newspaper subscription).
Completely unrelated… it was announced that Manitoba (all jokes about a total of 4 operating oil rigs aside) has overtaken both Alberta and Saskatchewan as the most attractive province for investment.
http://www.financialpost.com/news-sectors/story.html?id=1728828
Following close behind, the Alberta Government announced today the fifth amendment (in less than 2 years) to oil and gas royalty rules and went on to hint at more changes.
http://www.financialpost.com/news-sectors/story.html?id=1731857
I think this quote sums it up best: “You need a stable regime, and we don’t have a stable fiscal regime. No other regime has changed so often.”
I have been reading these posts for many many months. ( By the way this new link does not have the monthly numbers like the old one did, which I used to graph my own charts). I think there is a deeper issue that many of the blogs don’t mention, but I have seen here occasionally; out of context. I am referring to the retirement problem. The fact is that there are far too many promises for retirement funds than can be reasonably provided. You can look that up as there are many sources. How might try to mitigate that problem without raising taxes now and in the future? Drastically.
Many of the soon to be retired own real estate. It make sense to increase the price on real estate while at the same time increasing the inventory of smaller(condo)dwellings. This would transfer cash into the hands of those that will need it. Thus reducing the future tax burden. Hopefully.
Bubbles are not arbitrary, they are created. I find it difficult to believe that realtors have the power to do this. Granted that they LIKE it but they aren’t responsible. Central banks can do this primarily through interest rates and some media hype. I just cannot believe that the powerful want us doomed. It is against there interests. If a USdollar is worthless than who wins? There isn’t enough gold…
It seems to me like a non tax transferal of money to the aged.
They also tried to make investments out of the new mortgage money to supplement the retirement funds. Derivatives
Do we want 50% taxes in ten years?.
Now this is how you kick-start an economy out of recession…
Sask. Party considering 10 per cent flat income tax
http://tinyurl.com/nwvuzw
biberkopf,
Thanks for the comment. Everything from the old site was transferred to this one, so what you’re looking for is here somewhere. We just need to help you find it. If you scroll right to the bottom of this page you’ll find our post “tags.” One of them is “monthly statistics.” Clicking that will bring up all of the posts that focus on monthly numbers including SRAR’s media releases and the “closer look” that I write.
I also have a monthly MLS stats page at http://www.mysaskatoonhome.com/MLS__Stats/page_1723681.html which I have occasionally referenced on this site.
I hope that helps you find what you’re after.
Heard today that rent on apartment blocks built in the eighties are increasing from $795.00 to $825.00 for a 1 bedroom and $895.00 to $945.00 for a 2 bedroom, if this doesn’t price them out of the market I don’t know what will. There seems to be quite a confused divergent in the rental market, some are discounting while others are raising rents. The price differance between something perhaps very decent and something marginal is narrrowing.
To buy a home let’s say for $280k with 5% down would create a staggering $266k mortgage, it’s so large because people who buy a home at this price point are not super high income earners, typically there average wage earners with average jobs. often with none or little job security. The banks are really the ones who are hard to understand, perhaps because their mortgages are insured by the feds their not worried. Obviously there are a lot of people who do not agree with me and there are a lot of people that do, the bottom line is I would never buy at these prices. Something seems extrordinarily strange when you can live cheaper in Honolulu Hawaii then Saskatoon Saskatchewan. My guess is we will see much cheaper prices in ‘09-’10 and still cheaper in 2010-’11. A lot of these mortgages are going to be underwater and people are just going to walk away for better work elsewhere. Foreclosure will be a forefront topic on this blog in time to come.
Rick,
“A lot of these mortgages are going to be underwater and people are just going to walk away for better work elsewhere”
You can’t walk away in Canada like in the States from a house. There is no such thing as jingle mail like in the 80’s. And for the people who try to walk away from a second house bought from a HELOC, the bank will come after the first one. Ouch!
George,
In Saskatchewan, you can walk away from a house and mortgage and it only effects your credit rating. This applies to first mortgages only. If a second mortgage or re-finance can’t be covered by the house you walk away from, the bank can come after you for that. But a first mortgage, walk free….’
Norm,
Like the new blog layout very nicely done.
Crikey and George and Norm,
Got a question for u since u all seem on the wealthy side or comfortably wealthy anyways should i takes all that i earn from the stock market and try to make myself debt free now or should i keep plugging all the cash into the tsx index…or should i just leave it in my wife and i’s TFSA’s so many questions and i dont like asking bankers. About my situation i recently had eye surgery for glucoma so lost a little bit of income in recovery but my wife got a new job which boosted our income to the median income now or probably higher . Ill await ur guys answer and others can chime in as well strangely this blog has given great advice not just for real estate but other stuff as well so i just want to tap into that again since i can see now.
Mark,
Obviously, anyone in this sticky situation should consult a lawyer who specializes in this kind of thing but I believe that the protections you refer to require that the mortgagor be a natural person, occupying the property as a primary residence, who used the mortgage proceeds to pay the purchase price of a property. Also, I don’t think that guarantors enjoy the same protections. There are probably many instances in which a lender could chase someone who defaults.
I would think though that the majority of these issues, if and when they occur will be high ratio mortgages which are insured by the tax payers of Canada. Since it’s your money being used to pay to shortfall, nobody will be too excited about chasing it down.
Hi Armoth,
Thank you, and congratulations on your surgery. I bet it’s great to be able to see clearly again.
I’m definitely not wealthy but I can say that I have a fair bit more discretionary income since I made a commitment to eliminate consumer debt. It’s amazing how quickly monthly interest charges can add up and eat into your budget. Paying these debts off also seems to have given me a different, and perhaps more healthy attitude towards money.
As far as investments are concerned, I did okay following the initial crash and managed to make some money back. However, I was pretty much all in cash when the market started to surge forward and I’ve completely missed the boat on the 30% increase that we’ve seen over the past few months. I’m thinking we’re likely to see another slide but clearly I would have been far better off had I stuck to my earlier plan and stayed in for the ride up. I’m starting to understand that I’m not much of an “investor” so it’s probably best that I not give you money advice.
Armoth I think paying off debt is always a good idea, and save for a rainy day too!
Probably a better idea to talk to a financial planners, preferably one older than 25 starting out at TD because of college drop out and with some formal education, rather than solicit a blog for help.
‘A lot can go wrong’: Condo conversion horror story
http://tinyurl.com/kobcqp
“The ceiling of Reid Towsley’s apartment-style condominium was leaking, water dripping down steadily onto the floor. It turns out a vapour barrier was never installed beneath the roof, which Towsley believes was missed after repairs were done following a fire in the unit two years ago. The last six months have been a nightmare scenario for Towsley and Cadman, with the contractor responsible for the conversion refusing to take the blame or pay to repair the damage, he says.”
“The balcony windows weren’t sealed, leaving golf ball-sized bulges in the paint from rain leaking in. When they moved in the heat, hot water, or phone lines weren’t hooked up, they say. The bathtub drain was blocked, among a shopping list of other complaints Halter and Seitz list.”
“Two of the basement units in the building have recently been gutted after the sewage pipes backed up, leaving the owner to rebuild them from scratch.”
Sad story, but I’m quite surprised that we haven’t heard of more of this. So far, there’s this one and the one on Arlington Avenue. Anyone know of any other conversion horror stories?
Hey Armoth,
It’s good to hear from you again, and I hope you and your family are doing well.
The only advice I can give you with any certainty is that this is a very good time to be paying off consumer debt. If you have a good credit rating but you carry any credit card debt, I’d highly recommend moving any high-interest credit card balances you have to a LOC (you can still get very low rates) and pay it down as aggressively as you can. Much more of your cash will be going toward paying sown the principal in this way.
As far as investments go, I’m not sure how much is just unadulterated luck. I managed to get out of pretty much all investments before the crash and got back in (in a small but as diversified way as I could muster) in March. In retrospect I wish I had invested a little more, but there you go. I’m not believing this is a new bull market by any means, but there’s ways of making money (or at least not losing it) in almost any market, I suppose. How are you hedging yourself now?
Crikey,
Well I pulled all of my money out a week ago but did some risky stuff on friday buying a leveraged etf for bull oil HOU.TO and this monday i sold it for a nice gain because nigeria seems to have control over the worlds oil lol. Other than that i switched to all cash and probably gonna do the debt sadly we are not debt free anymore we bought a new washer and dryer and this surgery set us back because i wasnt working for 2 weeks but i think the debt thing is a good idea im trying to get my credit rating over 800 its only in the 750 range. So yea not sure the next move but i think the debt thing is good idea and safe.
Samson,
I find the advice given by some of the people on this blog superior to financial planners or bankers for that matter usually im pushed to put my money into gic’s and loaded mutual funds which only one person wins and it aint me.