Monday, June 16, 2014

Saskatoon housing: a tale of two markets

The Saskatchewan real estate market is expected to stagnate somewhat in 2014 and 2015, The Canadian Real Estate Association (CREA) said Monday in a forecast.

After 13,535 sales in 2013, CREA predicts essentially the same number in 2014 and a tiny increase to 13,580 in 2015. Prices are also expected to rise slightly, to $297,300 in 2014 and $299,600 in 2015 from $288,698 in 2013.

The provincial numbers do not entirely reflect the Saskatoon story, however. In this city, the only thing keeping a relative lid on what might have been a completely crazy spring market is the huge number of listings, many of them new builds.

As of May, year-to-date listings were up 15 percent while sales were up 10 percent, with an average price of just over $353,000, up three percent from last year. Those are the numbers from the Saskatoon Region Association of Realtors (SRAR).

If you drive around the older parts of Area 2, including such neighbourhoods as Buena Vista, Nutana, Exhibition and Avalon, there are more sold signs than for sale signs. This does not include properties that are either falling down or seriously overpriced. If it’s a good house at a good price, or on a big lot, it’s gone.

In the week of June 8 to 14, for instance, 32 houses sold in Area 2: seven at list, four above list, and 21 below list at an average reduction of about $7,200 (Norm Fisher’s website statistics.)

SRAR also points out that 679 properties sold in May, by far the most in the last five years. Meanwhile, there were 1,453 properties listed. That has got to be a record.

Prices are not leaping because of the high amount of new home inventory. Canada Mortgage and Housing Corp. (CMHC), in its spring outlook, said that the inventory of complete and unabsorbed (as in, unsold) units was up 40 percent over the same time in 2013.

It’s a bit of a tale of two markets. Resale home sales are better than steady, while a large number of relatively expensive (over $450,000) new homes are not selling nearly as quickly. Of course, that entirely makes market sense. The busiest part of the market is always under $450,000, or even under $400,000, simply because of affordability.

However, it’s a very positive sign that the less expensive homes are getting snapped up. It shows confidence in the Saskatoon market, and provides a good base of future buyers for move-up properties.

It’s less terrific for home builders, who are waiting for their homes to sell. Perhaps they were a bit optimistic about the Saskatoon economy and market: it’s hard to blame them considering all the talk about boom times in our region. But the boom is slowing, and while in-migration remains strong, it has slowed down. Potash prices are down, uranium is facing a troubled market, and farmers are still struggling to get a bumper crop to market. The economic scene is not dire, but it’s not hot, either – apart from the oil and gas sector.

Furthermore, building houses is what builders do. They can’t really just stop. But CMHC says they will slow down, and build fewer units in 2014 and 2015, bringing a bit more balance to the market.

Meanwhile, they are not really messing things up for resale home owners. Resale is doing just fine, overall, and it’s also likely to remain so, at least until interest rates rise. They are unlikely to start soaring for many years. Bank of Canada governor Stephen Poloz predicts that interest rates will remain historically low for some time, in part because big jumps after years of low rates will destabilize the economy.

Expect prices to moderate and sales to remain fairly strong over the next two years, barring any significant economic shock.







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