Housing affordability in Saskatoon shows modest year-over-year improvement

I can’t imagine that it would come as much of a surprise to anyone that the cost of home ownership in Saskatoon has skyrocketed in recent years. According to the recently released “6th Annual Demographia International Housing Affordability Survey” owning a Saskatoon home priced at the median in Q3/2009 would have cost about 4.4 times the median household income, a sharp increase from 2.6 times median income we enjoyed in Q3/2006. Saskatoon saw one of the steepest declines in affordability between 2006 and 2008 placing us among the ranks of the “seriously unaffordable,” according to Demographia’s ranking system. On the brighter side, our city saw some small improvements from Q3/2008 when 4.6 years of income was required to buy that home.

The following chart shows the changes in affordability levels in some of Canada’s most active real estate markets over the past five surveys. Click the image for a larger view.

I was a bit surprised to see that affordability at a national level really hasn’t changed significantly in the past five years. Canada’s “median multiple” comes in at 3.7 years, up from the lows of 3.1 in Q3/2007 but just slightly higher than the 3.6 years in Q3/2005.

Vancouver “wins the gold medal” as the most severely unaffordable housing market in the world requiring 9.3 times to median household income, an increase of almost a year in just twelve months time.

See the entire Demographia survey for 2010 and past reports for 2009, 2008, 2007, 2006.

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.

Real estate geeks can follow our daily updates on Twitter @norm_fisher.

Our Saskatoon home search tool offers MLS listings represented by all real estate brands, presented with more detail than you’ll find anywhere else. Check it out here.

Norm Fisher
Royal LePage Saskatoon Real Estate

Greater risk in Canadian housing markets remaining hot than cooling down: TD

TD Bank Financial Group released a “Resale Housing Outlook” yesterday that provides some insights into the potential consequences of the quick recovery that the Canadian housing market experienced over the past year. It’s a pretty interesting, “where we’ve been, where we may be headed” report. Some of the ideas that caught my attention from the report are outlined below. The full five-page report can be found here.

While in the thick of a recession, the strongest countervailing force that set the stage for the mother of all rebounds, apart from lower prices, was lower interest rates.

All said, the housing market has gone beyond retracing its steps and fully recovering from the end of 2007 – which had marked the peak of a half-decade long boom, concentrated in Western Canada…As of October, both sales and the average price stood 5% higher than their respective 2007 peak…But now that home values are already past their previous peak in such short order, we estimate that the typical home remains overvalued by 12% at the national level. Unfortunately, sheer momentum suggests that this overvaluation is likely to increase over the course of the next few quarters, peaking at 13-15% in H1/2010.

The misalignment of home prices with their fundamental drivers, such as demographics and income, cannot last. That much is known…Because a necessary realignment has been erased so quickly without support from income growth, another adjustment must take place – although it could take many forms. As of our writing this note, early signs of market cooling are emerging and our analysis still suggests the most likely outcome is a soft landing and relative stagnation of home values in real-terms along with a resumption of stronger income growth over the 2011-13 time frame.

As the central bank begins to hint at a tightening monetary policy cycle in the second half of next year, sales could well see a last gasp of strength. Moreover, by that time, the availability of units on the supply side should provide a relief valve helping to cool price growth. And, by 2011, while the overall economy will have improved significantly, housing markets will be losing momentum.

While current price levels are above what we estimate to be long run fundamental values, they do not appear so dramatically out of line as to warrant a sharp correction in the near-term…As for price momentum, it is more clearly unsustainable…Recall that every price increase that is not matched by a commensurate income gain increases the overvaluation gap. Second, more supply should come online in the first half of 2010 in the form of new home and condo completions.

The current market tightness, as measured by the sales-to-listings ratio (limited inventory), while expected to ease gradually over the course of 2010, will not turn on a dime. As a consequence, it will be supportive of price growth in 2010 that is stronger than fundamentals can support over the long haul. After climbing by an estimated 4-5% on an annual basis this year, the average existing home price is expected to gain another 9-10% in 2010 as sales climb to 475K.

In closing, we note that the most important downside risk to our near-term forecast is not that the market cools more than we anticipate. While this risk certainly exists, it would not cause significant market disruptions, and it would ensure that affordability does not continue to erode at the current pace. The risk is rather that the market remains as hot as it currently is for too long, eventually running head-on into monetary policy tightening (and longer term bond yields rising). There is more than adequate time for the housing market to cool before then, but history suggests that if it fails to do so, the ensuing adjustment would be a rude awakening.

Thanks to Larry Yatkowsky of Vancouver’s Yatter Matters for the heads up on this report. See Larry’s overview, “Green Chair Talks.

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.

Real estate geeks can follow our daily updates on Twitter @norm_fisher.

Our Saskatoon home search tool offers MLS listings represented by all real estate brands, presented with more detail than you’ll find anywhere else. Check it out here.

Norm Fisher
Royal LePage Saskatoon Real Estate

Trend towards improved housing affordability reverses in Q3-2009: RBC

From RBC’s November 2009 Housing Trends and Affordability Study

The string of significant improvements in housing affordability in Canada finally came to an end in the third quarter. RBC’s affordability measures rose at the national level for the first time in six quarters for all housing types.

All provinces and major metro markets shared in the deterioration in affordability in the third quarter. British Columbia, especially Vancouver, posted the biggest increases by far in the RBC measures. Toronto and Calgary also recorded notable increases for some housing types, while the rise in the cost of home ownership in the rest of the country has generally been modest.

After steadily improving for more than a year, housing affordability in Saskatchewan deteriorated modestly in the third quarter, with RBC’s affordability measures climbing between 0.5 and 1.0-percentage points. This reflected higher mortgage payments that have resulted from the small increase in mortgage rates as well as stronger property values in many areas of the province. While the cost of home ownership declined substantially in the past year, it remains historically high in the province, as it has only partly reversed the unprecedented increase registered during the boom from late-2006 to early-2008. However, levels that prevailed prior to the boom might have been depressed by previously unfavourable migration flows, which have since reversed. Overall, resale activity in Saskatchewan continues to carry tremendous momentum, being especially vigorous in the past few months with levels close to the records set in late-2007 and early-2008.

Read the full RBC report here.

Thanks to Jen for the heads up on the release of this report.

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.

Real estate geeks can follow our daily updates on Twitter @norm_fisher.

Our Saskatoon home search tool offers MLS listings represented by all real estate brands, presented with more detail than you’ll find anywhere else. Check it out here.

Norm Fisher
Royal LePage Saskatoon Real Estate

Saskatchewan shows considerable housing affordability improvement: RBC

RBC Economics just released their fall Housing Trends and Affordability study that shows house prices having returned to “pre-boom” levels nationally with Saskatchewan showing considerable affordability improvements, but remaining above long-term historical averages. At the same time, the graph on page eight of the report suggests that affordability improvements may level off as Saskatoon seems to be trending back towards “seller’s market” territory.

Housing affordability improved in Canada for the fifth consecutive quarter during the second quarter…At the national level, affordability has now been restored to pre-housing boom levels (that is, those prevailing in late 2005-early 2006)… However, this restorative phase of the affordability cycle is likely running out of steam. The two major contributors to the significant improvement during the past year or so — the decline in mortgage rates and the drift down in prices — appear to have reached turning points.

Homeownership continued to become more accessible in Saskatchewan in the second quarter with RBC’s affordability measures falling between 0.4 and 1.4 percentage points. The measures have retreated considerably since their peaks early last year. However, they are still some distance above long-term averages, although these averages might have been depressed by previously unfavourable migration flows that have since been reversed. Certainly, the current levels of affordability do not appear to have been an obstacle to buyers taking the plunge in recent months. Sales of existing homes in the province have rebounded smartly, up by more than 50% since their low in March. If sustained, this will eventually heat up property prices, which are still trending modestly, lower.

This graph shows the recent affordability trend for the four Saskatoon housing types that RBC tracks and reports on, in comparison to the historical norm for the area. The figures shown on the graph represent the “proportion of median pre-tax household income required to service the cost of mortgage payments (principal and interest), property taxes and utilities” on the various housing types. So, of course, the lower the figure, the more affordable the homes are.

Saskatoon housing affordability trend compared to long-term historical norm

Saskatoon housing affordability trend compared to long-term historical norm.

Read the full RBC report here.

Thanks for the heads up to my friend Larry Yatkowsky who runs Yatter Matters where he blogs about the Vancouver real estate market.

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.

Real estate geeks can follow our daily updates on Twitter @Norm_Fisher.

Our Saskatoon home search tool offers MLS listings represented by all real estate brands, presented with more detail than you’ll find anywhere else. Check it out here.

Affordable housing assistance from city may be on its way

According to the Saskatoon Star Phoenix, “Saskatoon city council’s executive committee approved a new mortgage support program on Tuesday to help low- and moderate-income people get into the housing market.

“Under the program, which will replace the home start affordable housing initiative, people with a household income of $52,000 or less will be given a five per cent downpayment toward a mortgage on a new affordable housing development, if they’re approved.”

The story is 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 @Norm_Fisher.

Norm Fisher
Royal LePage Saskatoon Real Estate