JOSH BUCHANAN
May 3, 2024
Once in a while, I create a question and answer post addressing the current state of the market.
Here are my current thoughts on the market in response to common questions:
For starters, if you don’t understand any of the terminology or ratios used here, go back and read my other 302 posts and learn the basics. I don’t like re-explaining every single concept in every single post.
What does it mean that the market is the most competitive since 2007?
By competitive, I mean many buyers with few homes available. It’s like the Bachelor or Bachelorette show (not that I ever watch them) where you have like 25 people competing for one person. There’s 25 units of demand and one unit of supply; it’s highly competitive. That’s what our housing market is like right now. The ratio of prospective buyers to sellers is super high and therefore, super competitive.
April had a months-of-inventory ratio of 1.63 months in Saskatoon. We saw 522 sales in the month with just 850 units on the market. This is the lowest ratio I have seen for a given month since 2007.
Why is it so competitive?
Because Saskatchewan’s population is growing at an insane rate and there isn’t enough building of new homes to accommodate the growth.
Are interest rates going to fall?
I don’t know. I don’t expect them to move very significantly in either direction in 2024. I wouldn’t count on 5-year fixed mortgage rates to go back to 1.59% any time soon – or ever again. I also don’t expect them to rise to 20% like they did in the 1980s.
Are interest rate increases going to impact the market moving forward?
Yes. I believe many people have already been impacted by rising rates, particularly those who had variable rate mortgages. However, 2020 and 2021 saw unusually high sales in Saskatoon and a 5-year fixed mortgage term was the most popular at the time. This means that in 2025 and 2026, many people who got sub-2% mortgage rates in those years are going to be renewing at rates that are likely going to be more than double the original rate. This is going to create a lot of financial stress for a large portion of the population.
How long has the market been like this?
The market has been under-supplied since late 2020. All the government lock downs, restrictions, and central banker interest rate cuts in early 2020 threw the real estate market for a twist that resulted in a major upward shift in demand. Ultimately, this increase in demand resulted in the absorption of supply and quickly put the market in an under-supplied state that has persisted and worsened since.
When will the market conditions become balanced?
Don’t hold your breath. The real estate market is generally very very slow to adjust. Because the biggest issue is lack of homes and homes take a long time to build, this problem likely won’t be resolved anytime soon. The only thing that can make a market shift quickly is some kind of shock to the system like another pandemic scenario, a quick string of interest rate increases, a financial collapse, a massive change to immigration policy, etc.
Is it a good time to sell a home?
It’s an easy time to sell a home. It’s probably a good time to hold as home values are expected to rise, though. The challenge with selling is where do you go afterwards? As long as you price your home appropriately, it will likely sell very easily. However, you either have to rent or buy something else which is really tough in this market. If you want to get out while the market is high and move to Mexico or Thailand or something, that’s not a bad idea.
Is it a good time to buy a home?
It’s a good time to buy in the sense that housing is scarce and scarce resources that are in demand end up rising in value. It’s a bad time to buy in the sense that it’s really stressful and there aren’t many options. If you are going to buy, get a real estate agent who is extremely responsive to put you on an emailing list so you get instant notifications of new properties being listed. Also, get pre-approved for a mortgage, get a real estate lawyer lined up, a home inspector, and ask your boss for a month off work so that you can go view new properties immediately after they are posted. If you need a connection to anyone of those professions, please reach out to my email at the bottom of the post.
Is the whole market under-supplied or just certain types of properties?
Every type of property in every price range is currently under-supplied in Saskatoon. The worst category is the townhouse (row house) market and the best is the luxury detached house market. However, even those detached houses going for over $600,000 are under-supplied.
I’ve tried buying but I always get out-bid, what should I do?
You might have to be more aggressive with your offers, unfortunately. What the seller is asking may not be adequate as an offer price in many cases. If you’re ready to give up, at least focus on better preparing yourself for the future. Maximize your FHSA and RRSP HBP if you haven’t already and you’re eligible. If you don’t know what those are, then you’re clearly not optimizing your position to purchase a home.
Feel free to ask additional questions in the comment section below.
—
Please support the blog by subscribing, sharing, commenting, sending an email or donation to jcb8485@gmail.com.
-SASKATOON REAL ESTATE ECONOMICS BLOG- 