House prices jump 45%

Market expected to climb, after record-breaking 2007

The past 12 months have been record-breaking for residential Realtors in Saskatoon, with 4,446 homes sold, an average price 45 per cent higher than 2006 and a total dollar volume topping $1 billion.

According to year-end figures released Thursday by the Saskatoon Region Association of Realtors, $1,034,826,425 in residential property was sold in the city, a total residential dollar volume 88 per cent higher than 2006's total of just over $550 million. The average price of a home in the city reached $232,754, up 45 per cent from 2006's average of $160,586.

It has been a landmark year for real estate in Saskatoon, said the association's executive officer Harry Janzen. With a rolling six-month average home price of $250,428, Janzen said the past 12 months have been a whirlwind for the industry.

It was a year of numerous milestones, he said.
"If we look at the month of August, it was the first (time) that we surpassed $1 billion in total MLS dollar volume, which represented a 97 per cent increase from the previous year. But the other milestone was accomplished in December as we passed the $1-billion mark in residential dollar volume," he said. "Those are actually quite incredible numbers for our marketplace, and certainly that translates into the average selling price which has been consistent over the past six months."

In December, the average price of a home reached $255,271, up 46 per cent from December 2006 when the average price was $175,301. December was the second month in 2007, along with October, that the average price topped $255,000.

A high average at the end of the year indicates a strong market for the next 12 months, said Janzen. Driven by in-migration and a strong economy, 2007 home prices also reflected a market correction. Prices are expected to continue to rise this year, though not with the intensity of 2007 increases.

"We're very stable around that $250,000 mark, but will those prices go up? I certainly believe they will, because demand dictates price. We have indicators from every area that there's a strong confidence in the Saskatoon market -- there's exceptional optimism, probably more than I've ever seen," he said.

Homes in the $300,000 to $400,000 range were the best-sellers of the year, Janzen said, but that didn't stop prices from rising on smaller, starter homes. With people priced out of the market and investors capitalizing on a strong economy by raising rents or converting apartments into condos, the rough side of a gleaming real estate market quickly came to light. The executive officer said other Canadian cities, such as Calgary and Winnipeg, that have recently dealt with the question of affordable housing, act as benchmarks for Saskatoon.

"There's no question that an active real estate market has some inherent issues, and certainly housing affordability is on the front burner," he said. "One thing I can say with 100 per cent confidence is our province, and most importantly our city, have been very proactive in trying to prepare for the issue of affordable housing. These issues are not unique to Saskatoon, they are inherent with any active real estate market."

Although the banner year for residential real estate wasn't universally positive, Janzen said Saskatonians can expect more of the same in 2008.

"I guess it might be said that anyone who's out there thinking, 'I'm going to wait to purchase a property because prices are going to come down,' we should encourage them to not think that way."

Now is the time to try and buy, said Kent Bittner, mortgage broker and owner of Dominion Lending Centres on Saskatoon's Wall Street. People trying to enter the market for the first time are concerned they will be left out in the rush, he said, and their worries are valid.

"We do see people, call them first-time homebuyers, caught in the market where they know what's going on, they've heard that prices have been increasing. They're fearful that they will be left out in the dark if they don't get into the market soon," Bittner said. "Somebody that's looking right now is best to look seriously in the next couple months rather than waiting for the spring months, because last year people could have easily paid 30 per cent more just waiting a couple months."

Higher prices are making it more difficult to qualify for loans, he said, saying a $150,000 starter home 18 months ago likely retails for closer to $250,000 today. Bittner added the price barrier is too much for some to compete with, but lending institutions are offering products that make getting into a home for the first time a little easier.

"There's definitely some people who are not able to afford what they would consider adequate housing, but, as a side note, there have been extended amortization and debt service ratios which have come into our market in the last couple of years which have kind of coincided with increased pricing. So prices have made it tougher to qualify, but yet we've had products out there that do make it easier on that end, too," he explained.

With home prices expected to rise through 2008, the broker suggests people thinking about buying a home move forward with their plans.

"With what's happened in Saskatchewan here, in Saskatoon $250,000 used to be a fairly big number; $500,000 isn't even a big number any more," he said. "I think people who are renting, the longer they are renting the less chance they have of purchasing."