Real Estate Market Reflects Health of Economy

July 15, 2009

As goes the economy so goes real estate. At the half way point in 2009, the real estate market in Saskatchewan provides a decent snapshot of the status of the provincial economy.

There are few benchmarks more indicative of upswings and downswings or which mirror the fundamentals more quickly than does the real estate market.

The Canadian Residential Market:

The “average selling price” trend lines across the country as at May of 2009 vs. May 2008 provide a partial snapshot of the economy in each region. As a caution, ‘average housing price” is no more than an approximate measure. An influx of high end homes will drive the average up and conversely an influx of sales of lower end homes pushes the average selling price down.

That being stated, the following is how each province and territory weighed in on the “average selling price” scale according to the Canadian Real Estate Association:

Province Jun-09 Jun-08 % Change

B.C. $465,139 $477,448 - 2.6%

AB $339,296 $360,284 - 5.8%

SK $242,829 $233,340 4.1%

MB $204,276 $203,671 0.3%

ON $322,059 $316,103 1.9%

QE $227,293 $219,410 3.6%

NB $166,672 $152,823 9.1%

PEI $149,475 $126,661 18.0%

NS $207,135 $202,569 2.3%

NL $200,649 $170,999 17.3%

YK $303,039 $304,871 - 0.6%

NT $337,577 $331,939 1.7%

Canada $319,757 $318,391 0.4%

It may be somewhat surprising at first glance, when looking only at the percentage change column, to see that a couple regions where the economy is not exactly steaming ahead leading the pack in average price escalation. Conversely, three western jurisdictions, namely B.C., Alberta and the Yukon, are the only ones that showed a drop in average selling price. Such is the nature of statistical comparison. It is also noteworthy that B.C., Alberta and Yukon have among the highest average selling prices in Canada. Meanwhile, some of the Maritime provinces which experienced a price spike are among the lower average price regions in the country.

Even though unit sales fell during 2008 from the record level of the prior year, 2008 remained above the five year average. As well, despite the decline in the number of residential units that changed hands, the average selling price throughout the province continued to climb through to the end of 2008.

The Saskatoon Residential Market:

The pattern in Saskatoon was similar to that of the province overall. Unit sales hit their peak during 2007 during a buying frenzy.

During 2008, after falling back from the activity level of the prior year, unit sales activity was on par with the five year average. Prices, however, continued to advance.

The unit sales decline in 2008 appeared not to impact on the average selling price in Saskatoon. That did not occur until the spring of 2009 when inventory levels that had risen continually over the course of a couple years finally brought the average price back toward, but still notably above, the five year average selling price.

While recent fluctuations in average selling prices have become a conversation piece, this more historical five-year look at the residential real estate market in Saskatoon and across Saskatchewan provides a superior vantage point for trend analysis.

To date in 2009, average residential prices have been running in a range that is about 10% under their peak level. To some people, that suggests a market in decline. Looking at longer term patterns, however, it is more likely the market is taking a breather, given that current unit sales and pricing levels remain at or above the five year average.

An External Perspective:

Several national real estate organizations and franchises recently weighed in with their own market projections. Here’s what they had to say, in chronological order, illustrating how the forecasts are beginning to trend back upward:

Canada Mortgage and Housing Corporation, (May 19, 2009):

“Existing home sales, as measured by the Multiple Listing Service (MLS 2009 from 433,990 in 2008, but increase to 386,100 units in 2010. The average MLS

Canadian Real Estate Association (May 2009 as CREA adjusted its 2009 forecast in the face of activity levels that were proving to be higher than originally anticipated):

2009 Saskatchewan Unit Sales: 14.7% reduction from 2008

2010 Saskatchewan Unit Sales: 4.6% increase over 2009

2009 Saskatchewan Average Price: $220,900

2010 Saskatchewan Average Price: $218,400”

Royal LePage, (July 7, 2009): “Canada’s resale housing market recovered lost ground in the second quarter and is poised to stabilize for the remainder of 2009, after a very slow start to the year, according to the Royal LePage Market Survey Forecast and House Price Survey released today. As the economy begins to stabilize and consumer confidence improves, house prices are expected to appreciate slightly in much of eastern and central Canada.

Greater than national average price declines are predicted for the western cities that saw the greatest price inflation earlier in the decade, including Edmonton, Calgary and Vancouver.”

RE/MAX,

Canada’s largest markets, Toronto and Vancouver, led the charge—with June sales among the highest in history for both local real estate boards. Close to 11,000 properties changed hands in Toronto, up 27 per cent over one year ago, setting a new record for sales in the month of June. Residential sales in Greater Vancouver increased 75.6 per cent over one year ago, to 4,259 units.

Overall, major markets began to recover in March, posting escalating sales in April, May and June. The impetus is expected to continue throughout the remainder of 2009, with most centres now forecasting year-end sales on par or ahead of 2008 levels.”

Source - Dwight Percy - Percy on Business

The Saskatchewan Residential Market:

Much is made of short term deviations in residential average selling prices and units sold. As always, comparisons on a month over month basis do produce some fairly wild gyrations. That, in turn, produces some great headlines but limited understanding of market trends.

The better comparative is derived from a multi-year time frame for all Saskatchewan sales through MLS. First up are unit residential sales which peaked during 2007.

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City		Property Style
Neighborhood		Price Range