JOSH BUCHANAN

January 25, 2020

Last weekend, I made post #211 which assessed the current state of Saskatoon’s residential real estate market based on the supply and demand ratios. This weekend, I decided to make a post doing the same kind of assessment for Regina.

I’m going to keep this post for Regina shorter since Regina isn’t the focus of my blog. If you want a little more context then read the previous post, as well as post #207 for the lastest breakdown on what has happened with prices in Regina.

To briefly summarize: the reason prices have been falling is because the market has been oversupplied and by looking at certain ratios, we can determine how oversupplied the market is and from there determine what should be happening with prices now and in the future.

Below are two tables looking at the most important ratios of supply and demand.

I would usually include the past 30 days as one sample size for these ratios but decided to cut them from this post because the past 30 days are a very unusual time of year in terms of real estate activity due to the holidays and the numbers would not properly reflect the state of the market.

Here’s a look at where ratios stand for Regina as of January 24th, 2020:

sales-to-listings ratios:

This ratio tells us where we are heading in terms of housing supply. When the ratio is 0.50 or less, it means downward pressure on prices is on the horizon. When it is 0.51 or greater, it means prices will stay flat or rise depending on how far the ratio deviates from 0.51.

Based on the table above, the only categories of condos that are safe are the ones with bold text. Those are condos in the $251,000 – $400,000 range for the past 90 days of activity and all townhouses for the past 180 days of activity. Otherwise, every category of condo is still oversupplied.

Until all of the ratios for each time period are well above 0.51, I wouldn’t expect to see a turnaround in prices.

For houses, almost all ratios are safe regardless of the price range. The ratios are high enough that we shouldn’t expect to see price declines in 2020 but they aren’t high enough to see significant price increases either. When the ratio sits in the low-to-mid 50s, that usually results in flat prices or very small increases.

Remember, this ratio measures the current flow which eventually affects the inventory levels which then affect market values so their impact is felt in the future, not the present day.

months-of-inventory ratios:

This ratio tells us the current state of the market for housing supply which dictates what is currently happening with prices. Most analysts will say that a ratio of 4-6 months is balanced but in my observation in the history of Saskatoon, ratios need to be under the 4-month mark in order to see any kind of upward pressure on prices which is very evident if you look at historical ratios and corresponding market price behaviour.

When looking at these ratios, every category of condo is very much oversupplied right now. Even the best category has a months-of-inventory ratio of 7.74 which will certainly lead to price declines. It also looks like things have gotten worse in the past 6 months compared to the 6 months before that.

For houses, the same trend seems to be happening where the past 6 months have not been very strong compared to the 6 months before that. However, overall the market is not doing too bad for detached houses especially when looking at a 1-year timeframe for midrange houses ($251,000 – $400,000).

One interesting point here is that pretty much across the board, Regina has been getting worse in recent months, both in terms of housing supply ratios and also unemployment rates. Saskatoon is making clear signs of recovery but Regina appears to be moving slightly in the opposite direction.

So what does this mean?

If you’re considering buying in Regina, the only category of home I could say is reasonably safe from market devaluation in the near future are detached homes, especially in the price range of $200,000 – $500,000. However, every other type of properties like apartments and townhouses are still very much oversupplied and will continue to see price declines in the near future. I would avoid buying these types of properties for the time being if you don’t want to see devaluation.

If you’re selling or considering selling, having an apartment or townhouse might make for a difficult sale and will most likely result in a significant price loss especially if you bought in the past 8 years. For detached houses, selling shouldn’t be too difficult right now if your property is well-presented and priced competitively. However, it’s still likely that you’ll have to sell for less than what you paid for if you bought within the past 8 years.

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