As we all know the long term house price growth fundamentals such as incomes, employment, wages, inflation, rents were not the main drivers of house price appreciation in Saskatoon during 2006-08 in which the average house price in Saskatoon grew almost 100% in less than 24 months. If house prices had followed the long term growth fundamentals of employment, inflation and wages the average house price in May 2008 would have been near $175,000, not $310,000.
The main driver was the abundance of credit and emotions that launched house prices in that time period. And when the average house price fell 14% in 2008-2009, it was the lack of credit and confidence. Let's take a quick peak the average house price in Saskatoon from June 2008 to May 2009.
Average weekly wage.
The population grew by about 5000 people from June 2008 to March 2009 while the average house price dropped over 14%.
While I do not have monthly stats on rents, I do have yearly stats and they show that rents increased by 8% from 2008 to 2009.
Now, I am not suggesting another 2008 financial crisis is around the corner, but if the foundation of house prices in this city is based on credit and not on the long term fundamentals, then there could be some sorry highly leveraged buyers down the road if outstanding mortgage credit growth decelerates from double digits in this province.