JOSH BUCHANAN

July 1st, 2016

We are now halfway through 2016 and it appears as though the local residential real estate market is getting worse, not better. Every month so far this year has seen a decline in the number of sales compared to the same months last year and June was no exception. In fact, this June saw a huge fall of 71 sales compared to June of 2015 along with a decrease of over $7,000 for the average sale price. June has historically been the strongest month of the year for sales but this year it failed to outperform May.

The one positive note for June was that listings were down 83 units from last June. However, the huge fall in sales still created a sales-to-listings ratio of 0.42, noticeably worse than last year where it came in at 0.45.

Compared to the 5-year average, sales numbers were down and listings were up significantly as per usual for 2016. The sales-to-listings fell from 0.56 to 0.42.

When looking at the YTD comparison after 6 months, total sales are down 160 units and listings are down 131 units which equates to a sales-to-listings ratio of 0.37, down from 0.39 for last year. We are seeing a slight reduction in listings which should prevent inventory levels from getting too out of control even though they are already seeing all-time highs and came just short of reaching 2,200 units in late June. With only 1,891 sales so far this year, we are off to the slowest start in sales since 2010 despite large population growth since that time.

When it comes to prices, we are seeing consistent softening of the average sales price compared to 2015. So far this year, 5 out of the 6 months have shown lower average sales prices than the same months last year and the cumulative total for 2016 is now down over $8,000 from last year.

Because of the 1-year delay in reaction of prices to sales-to-listings ratios, the seller’s market ratio in 2013 led to small growth in prices in 2014, a perfectly balanced ratio in 2014 led to flat prices in 2015, now, the buyer’s market ratio in 2015 is finally having an impact on prices in 2016 and putting downward pressure on the average sales price. For the second half of 2016, we should even see more downward pressure on the average sales price and I would expect that the average price for the second half of the year will be noticeably lower than that of the first half. Unfortunately, because the sales-to-listings ratio in 2016 is falling even lower than 2015, it means that this will not be a quick correction but rather the fall in prices will continue into 2017 at an accelerating rate.

Conclusion:

The same lack of foresight by housing developers in 2005-2006 that created a shortage in houses and resulted in a sharp increase in the average sales price in 2007 is still alive and well in Saskatoon. This time, however, it is going to have the opposite effect on the market. The lack of foresight by developers has led to excess inventory and a very imbalanced market with no obvious signs of balancing in the near future. Assuming no major shocks to the market, you can expect the average sales price to continue its fall through the remainder of 2016 and into 2017.

The views represented are solely those of Josh Buchanan and are independent from any professional organization.