The Saskatoon real estate market saw stronger than normal activity this week breaking the one hundred-unit sales mark for the first time this year. There were one hundred and thirteen properties sold, up from eighty-two last week, and ahead of last year’s number, also eighty-two. Reaching their highest level since the final week of April 2008 when one hundred and seventeen Saskatoon homes traded hands, sales of houses and condos were up one a year-over-year basis for the third consecutive week. For the first time in as long as I can remember home sales in areas one through three actually came in higher than new listings.
New listings of single-family detached homes and condominiums came in at one hundred and twenty-seven properties, down eleven from last week, and off by fifty-eight homes when compared to the same week last year. Ninety-five houses and thirty-two condominiums were listed for sale over the course of the week. Overall, stronger unit sales and weaker listing activity pushed total active residential listings down by twenty-five properties compared to last week, to 1,502, but they remained up from the same week last year when 1,154 properties were showing an active status on the Saskatoon MLS. As of this morning, there are nine hundred and ten single-family detached houses and five hundred condominiums for sale in the city.
Click the image for a larger version of the graph.
After falling off of a cliff last week for lack of sales in the over $400,000 price ranges, the average selling price of a Saskatoon home bounced back to $289,265 and reached its highest level since late February. This week, there were seventeen houses and condos sold for $400,000 or more. The six-week average pushed forward nearly five thousand dollars over last week to reach $281,148; still almost sixteen thousand dollars lower than you might have paid last year at this time. The weekly median sale price jumped more than $30,000 from last week to reach $277,000 but the four-week median managed to hold steady at $270,000 for the fourth week in a row, and settled $9,500 lower than it was during the same week last year.
Click the image for a larger version of the graph.
Average underbids came in slightly lower than the previous week at $11,411 which represents an average discount of 3.8%. The percentage of sellers who managed to firm up a deal within $10,000 of the asking price declined slightly from seventy-five percent to seventy-two percent and the $10,001 to $15,000 category also saw a decline of three percentage points, while sixteen percent of Saskatoon home buyers settled their negotiation with a discount greater than $15,000.
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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As always Norm, thanks for your excellent updates. A lot of interesting data, certainly indicative of at least a short-term run on housing. Are we really seeing that much of a population influx, or are we simply converting renters to owners on a larger scale? I’m not sure that we can sustain the current level of demand, but as this is one of the main factors in keeping inventory levels in-check, it won’t take much of a reduction to result in higher inventory levels (especially if some homeowners take this rare opportunity to capitalize on what they missed out on last year.
There have been some developments with oil and the CDN dollar this week that I think will eventually have broader effects, but I’ll let those more knowledgeable and versed in these comment.
Enjoy the party bulls; it’s going to be quite the tab…
Jason,
Oil prices going up will indeed have an impact on Saskatchewan, helping to revive the job market and stuffing the provincial coffers. The impact of the increased canadian dollar is vastly overstated. Even at .91 it is still well below the peak of above parity it hit a couple years ago. It was at that time that Saskatchewan was showing it’s greatest gains in home prices. Keep digging Jason but for now let’s just say that you have been wrong about Sask housing. I am not sure why anyone should listen to your advice given your track record.
Sales are now reaching their peak across the country. The spring selling season starts to abate every year starting in mid-June (see Norm’s graph). Shopping for real estate wanes once the kids are out of school, folks start taking vacations and the long awaited summer weather arrives. Another reason for declining sales is that many families want to be in their new home by mid-August so that they are ready for the start of the school season.
Another thing that may dampen the party is fixed interest rates. Mortgage rates climbed significantly this week in the US due to the dramatic runup in 5 to 30 year treasury yields. Government of Canada bond rates also advanced and some non-bank Canadian lenders raised their mortgage rates late in the week.
Once sales start declining, as they do every summer, the media will be reporting this as “news” just like they did when sales got better every month during the typical spring season. What effect will this and other economic news have on consumers and potential house buyers?? Only time will tell…
Peter, when you eventually figure out that oil is in $USD, perhaps you’ll realize then why a high Canadian dollar translates into less (and not more) oil revenues for this province. In addition, it absolutely impacts manufacturing and exports (and we do manufacturer and export goods in this province). I’m not sure the worst recession (depression?) in almost a century qualifies as a good comparison to when the last time the dollar was on par (during a time when we were enjoying economic prosperity). Last, with a dollar close to par, and all sorts of consumer and investment opportunities in the US – where do you think smart people are going to spend their money on goods and services, holidays and even real estate?
I stand by my assertion of late Fall 2009 to early 2010 for the best buying opportunities, but this could very well extend through 2010 and into 2011. If you or anyone else feel that now is a great time to invest in real estate, by all means, debt away. I’ve mentioned it before and I’ll mention it again: mine is but one bearish opinion, and should be balanced with opposing views.
Jason,
Oil bottomed out around $32 US a barrel and the Canadian dollar bottoms out at about .76. So oil has been as low as $42 CAD per barrel. At present prices it is more like $74 per parrel. So yep, Saskatchewan is benefitting from the increase in oil prices as the price has doubled while the canadian dollar has lost 15 ot 16% from it’s peak. You do the math but really DO THE MATH before you start throwing out wild ass assertions about how doomed we are.
Again, kind of circular here but Canadian dollar peaked out around $1.09 2 years ago, was booming, continued to boom and housing prices shot up during that period. The dollar is still over 20% weaker than at that time so I don’t think it’s the end of the world. If things do start to deteriorate BOC is commited to selling our dollars to weaken the currency.
Peter, “… wild a** assertions about how doomed we are.” I’m not sure how stating that a higher dollar is bad for the economy is apocalyptic in nature. And if you review my post again, you’ll note that I never disputed the fact that we may be receiving more oil revenues due to higher prices. I merely stated that a high Canadian dollar can actually offset a lot of these gains, and that it’s not good for our economy (investment tends to go where it can get a better rate of return). In the middle of an attempted economic recovery – particularly one where manufacturing and exports have been brutalized – this certainly doesn’t help things.
But while we’re on the subject of oil, we don’t know at what level of production we’re currently operating compared to previous levels during the ‘oil boom’, or if we’re also storing a lot of what’s produced due to lack of demand (in the same manner that we have a rather large stockpile of Potash). Nor do we know how much was sold in short or long-term contracts, and at what prices. There are a lot of factors to take into consideration — not just the current price of oil.
You’re drawing a lot of economic assumptions, specifically the one where you assume the BoC will always find foreign investors for our debt. Perhaps, but not at current interest rates, as the US has recently witnessed firsthand (interest rates there are increasing because bondholders are flat out refusing to buy any US debt at those levels). Do you honestly believe that if the US is forced to raise rates on their debt offerings in order to continue to attract foreign investment, that Canada will not eventually have to follow suit?
I am very surprised the market appears stronger ( more sales) than last year in the last month. One could only imagine if the interest rates of this year were in 07 or 08.
Jason,
I think you may be interested in this site. Some interesting charts, I have not read the book
http://www.moremortgagemeltdown.com/charts/index.html
As for oil, in my opinion, it is set to crash again unless they can keep stockpiling it in more and more oil tankers and anything bigger than a coffee cup. http://www.philstockworld.com/2009/05/29/friday-the-good-the-bad-and-the-gdp/
Jason,
Well I’m not quite certain that they would like to be referred to as the last pigs to the trough, with that being said I think the last ones may have arrived at the trough last spring/early summer.
It appears that buyers are looking at this simplistically, can I afford this purchase? The low interest rate enviroment has everything to do with the robust activity we are seeing right now.
The government is intervening in so many ways, trying to avoid the hard consequences that a to high for to long standard of living-that just can no longer be supported by the private sector alone. We should never forget that the main source of income for the government is the power of taxation, like the law of gravity, no matter how high the government throws the financial ball sooner or later it must come back down. When the government hits the financial wall is when the jig is up. Nobody likes to bite the bullet, nobody likes short term pain for long term gain, but sooner or later nobody has any choice. I think we are in a deferral stage rather then avoidance of some tough medicine, the government is certainly giving it the good fight, but the government can’t borrow its way out of debt forever, or continue to print money with no productivity behind it, even children know you can’t buy anything at Walmart with Monopoly Money, unless of course you back it up with your credit card, but sooner or later we hit our limit, it’s just that some have a higher limit then others, of course they also have more to pay back later after no more purchase authorizations are allowed.
Jason,
I have read your posts before, I know your game. Any economic news is always twisted to look negative. Somehow you even try to twist high oil prices as bad news for housing. I am not one to say that things are rosy and housing is sure to rise but I am at least willing to admit that there is a range of possibilities, stability or price increases being included.
The fact is high oil prices, despite your objections will lead to increased revenue if sustained. If you were to say that high oil prices themselves are unsustainable well that’s a valid argument but not the original one that was made and not the one that I was arguing against.
As far as interest rates are concerned, I think you are off there as well. If the US were to raise rates (they won’t in this environment but let’s just say if) that would attract money to the US and weaken our currency again so the Canadian government wouldn’t even have to interfere. If foreign governments stopped buying Canadian debt that would do exactly what BOC wants and again weaken our currency. If our exports tank and the economy falls off the cliff, again that will weaken our currency and help our exporters.
While we are on the topic of interest rates, another thing that would happen if buyers choked on Canadian debt is you could see increases in interest rates and corresponding inflation. In fact, many investment greats including Warren Buffet site inflation as one of the main end games of all the financial shenanigans. If inflation happens you may see a temporary drop in house prices, but then you won’t be able to take advantage of it because interest rates will be higher. Then housing prices are going to increase. Maybe not in lock step but inflation will lead to higher house prices, has in the past and will do so in the future. High inflation would also wipe out much of the debt built up by over the past generation. I see it as a very viable alternative and one of your best ways to protect yourself is to buy property.
Peter,
You mention an inflationary scenario, and then you describe how this will lead to an increase in the price of “hard assets”, which is fair enough. Don’t forget that the cost of everything else (such as food and energy) will increase as well. Inflation may lessen the pain of already-incurred debt, but unless there is also corresponding wage inflation to go with that asset inflation, increased costs for necessities might not make inflation such a viable alternative for most. I also have to point out that the government may try to control the cost and availability of money and credit in the economy, but it doesn’t “set” interest rates. As far as I’m aware he bond market does. Right now the US Fed is finding out that buying vast sums of treasuries with billions of dollars in printed money is not having quite the effect on the market they would have hoped.
Just wondering: how do the averages this month (ie weekly overall, 6 week, 4 week) compare to those in May 2007? Or are those stats available?
Thanks,
Jon
Hi Jon,
The muted lines on each graph represent 2008.
Norm, no worries. George, thanks for the links (found both interesting reads!)
Peter, I won’t disagree that I have a different perspective, though I’m not sure that I would want to attempt a convincing argument that royalties and tax revenues from higher oil prices offset the negative economic impact to consumers and businesses.
Rick and Roger have both made some good observations on interest rates, debt and leverage, and I agree with much of what they have to say. Crikey is very astute to aptly point out that foreign bondholders are the determining factor in where interest rates will go. George posted an article earlier this week on the effect of this on mortgages in the US (which I highly recommend).
The only recourse for governments is quantitative easing, which is not necessarily working out for the US as intended, currently having devastating financial consequences for the UK and led to the lost decade in Japan. There are other alternatives to deficits, such as drastically reduced government spending and higher taxes, but I don’t think we’re there yet.
Is it conceivable that we’ve already experienced a degree hyperinflation in housing? If so, and we enter a period of sustained inflation where wages do not keep pace with the increased cost of living, could this not lead to higher defaults on mortgages, increase the supply of houses and further depress prices?
I’m not sure there’s an easy, straightforward and obvious answer to all of this, especially considering that we’ve never before experienced this unique set of economic conditions anywhere in history. But I’m not convinced that we extricate ourselves from our current predicament by pushing ourselves deeper into debt.
Inflation how? through higher wages? Since 1998, the averge wage has increased just over 3% every year. And these were pretty good times. So we won’t see inflation in wages.
Inflation through credit? Well, we just passed the point of peak credit so no not there.
With with government printing billions remember that the wealth lost by Canadians over the last year with housing dropping and the stock crash is over a trillion dollars.
Banks would need to lend like it is 06 07 again, but they are not.
Deflation kinda like Japan is the worry. Low rates for quite some time.
Hi Norm,
Yeah, sorry, I was just wondering if the numbers for 2007 around the same time are available to see how the 2 year pattern looks. While we’re down from 2008 numbers, I was interested in seeing if it’s down from 2007 as well, or up.
Jon,
Sorry, the “2007″ got by me.
Here are the stats for the week of May 20-25 2007.
99 sales averaging $252,517
Six week average – $233,098
Four-week median – $222,900
First of all I would not say that I am guaranteeing there is going to be inflation, I just see that as the most likely scenario. I will admit that Japanese style deflation could also happen, in fact it absolutely will happen if the governments approach is half-hearted. However, the US doesn’t generally do things on a moderated basis, maybe people have noticed that before. That is why these comparisons to Japan are asinine. Completely different culture and different philosophy. The fact is, Helicopter Ben as he is known, prefers inflation to deflation (there is quite a bit of evidence behind this but I leave that to you to reference), Obama’s spending policies indicate he would prefer inflation. You don’t run a multi-trillion dollar deficit unless that is what you are going for. The US has debt to GDP ratio of over 350%, how else do you dig yourself out of the hole?
As for their ability to generate inflation, don’t underestimate the US Government. The debt is denominated in US dollars and they can print US dollars. Deflation is destruction in credit and inflation is an increase in credit. As long as the US government can print faster than everyone else pulls in then you will end up with inflation. Even the worse case scenarios I have seen are calling for 4-5 trillion in various bad debt, this is nothing. The US can just eat that. At some point their spending is going to eclipse the deflationary forces and then watch out. If the green shoots theory is correct we have already reached that point. If not they will get there is a year or three. With high unemployment, a weak recovery and still depressed home prices they are just not going to want to pull in their horns and that is how inflation gets started. Once it is in the public’s mind, very hard to stuff out.
Everything else people have said is about what is right and what is wrong. What is good for the economy in the long-term and such. What the US is doing is wrong, it is selfish, it will lead to trouble for everyone but it is reality. I don’t think it is right and it’s not at all what I would do but it’s what I see happening.
Long story short, there is a range of possibilities with inflation and increased hard asset prices being one of them. This logic that home prices have risen above their long-term median and hence MUST come down is only half-true, the outcome is unpredictable and it’s important that buyers realize that.
Good article on Time.com on high oil prices. Highlights: “…investors and oil-producing countries hoard supplies”, “…OPEC’s decisions on Thursday could help push oil prices even higher”, “…2.6 billion barrels are currently stored in commercial tankers around the world” and “There is some risk we will run out of storage space in the next four to six weeks”.
http://www.time.com/time/world/article/0,8599,1901446,00.html
Peter, I used to think that inflation was a likely scenario, too – but I’ve since been led over to the deflation camp (George has made some fairly compelling arguments). I agree with most of your points about the US, particularly the ‘horns’ analogy; I’m not sure I agree with your assessment that they have the flexibility to simply print money, and the reaction of bondholders this week is something to consider.
George, what would you define as ‘low rates’ in your “Low rates for quite some time” comment? I would consider current rates to be very low or even unusually low. To me, 4-5% still falls in the “low” range, 6-8% the “mid” range and anything about 8% “high”. Is it possible that we’ll only experience a small interest rate increase to keep us in the 4-5% range for mortgages?
Peter good job keeping this bear camp under fire.
Economy Shrinks Less than Feared (2 bull, 2 bear quotes). Important BoC decision on Thursday on the target for the overnight rate.
“The Canadian economy shrank 5.4% on an annualized basis in the first quarter, Statistics Canada reported Monday. It was a steep fall but not the record contraction many analysts had expected.”
“There is a large and growing body of evidence that conditions have improved immensely since the first quarter, suggesting that the GDP decline in the second quarter will be much, much less severe.”
“The first-quarter plummet, which was led by a sharp drop in business investment, officially puts Canada in a recession, as the country has recorded two consecutive quarters of contraction”
“However, the rapid ascent of the Canadian dollar — to above 92 U.S. cents on Monday morning — has emerged as a wildcard that could affect this country’s recovery. The Bank of Canada is scheduled to address its short-term outlook for the economy when it delivers its next decision on interest rates, on Thursday”
http://www.financialpost.com/news-sectors/story.html?id=1650868
Jason,
up to 6% would be considered low. There is so much debt that high rates would bankrupt too many people and companies continuing the deflationary spiral. Post 90’s Japan is what I see for us. But there is one big difference in that they are savers and we are spenders. I believe we are in for deflation but not for 19+ years like Japan. It will be a shorter time period.
But maybe I am wrong and inflation will take hold. But to think that inflation will solve our debt problems, not gonna happen. It is controlled spending and living with your means. 06 and 07 are long gone.
Just look at the 70’s and 80’s for Canada’s deficit
http://www.debtclock.ca/index.php?option=com_content&view=article&id=45&Itemid=42
Well, it was bound to happen. New trend? I guess we’ll see…
RBC Royal Bank increases residential mortgage rates
http://tinyurl.com/mzpjpv
George,
I’m a little confused by your characterization of Japan as a nation of ’savers’. I’ve never heard that before once. I’ve never been there myself, but the folks I know who have lived there described it fairly consumer driven.
That’s how they seem to be portrayed in the media here as well, so I’m just wondering where you source your info.
Laura,
I first heard that Japan was a nation of saver’s from Peter Schiff’s book “Bull Moves in Bear Markets” in 07
I have read where in the late 80s till 95 or so the national savings rate for Japan was just over 10% per year. Better than any other developed country at the time. Definitely better than Canada and US where we are at a minus saving rate the last few years.
I believe the savings rate has dropped quite a bit since then for Japan. I am sure an aging population something to do with this.
Hope this helps.