Saskatoon New Housing Price Indexes. What is bubblier? Land or Homes?

New home prices in this city have skyrocketed in the last half decade.  Check out the next graph.

But if we break down the house and land components, we see this:

Land cost increases definitely trump house costs. As municipalties continue to add more expenses and levies to the cost of newly developed land, land prices are skyrocketing ahead of construction costs. This is done for many reasons, but for me, two stand out. First, this brings in more revenue for municipalities and secondly, property tax increases can be kept low.   This is why in the spring of 2005, lots in Warman were starting at just over $30,000. Now, they start at over $84,000. In the spring of 2005, you could buy an average lot in Willowgrove for $50,000. Now,that same lot just down the road in Evergreen is now over $110,000.  So municipalites are a significant part of the affordability problem in this city and across the country.

No worries though, introduce a free downpayment for marginal buyers and pat self on back.
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Canadian Household Mortgage Credit Growth Still Growing By 7%; Consumer Credit Under 3%

Just a quick chart of mortgage and consumer credit growth for Canadian households from Jan 2009 to July 2012.

How do these two compare over the last 20 years?

At 7%, mortgage credit growth is neither at the top or the bottom, while consumer credit growth has not been this slow for twenty years.

Now for those looking for a soft landing or for real estate prices to stay even for, let's say a decade, the 90's is a great example to review.

From 1990 to about 2000, the average house price in Canada stayed about level ( save Toronto and area which busted) but this was at a time when interest rates actually fell by a big margin.

At less than 3% for a 5 year fixed rate, I doubt interest rates will fall much to cushion some bubblicious markets in Canada ( falling interest rates failed to save Toronto's epic bubble in 1990)

While mortgage growth at 7% and consumer credit growth at 2.8% year over year does not seem like much, it was enough for the Government to further tighten credit conditions.  While they have not fully come into play, heading forward they will have a dampening effect not only on house prices, but retail spending, GDP and the labor market.  It should be interesting how the new mortgage rules play out. 

Saskatoon Construction Industry Firing On All Burners. Average Weekly Wage, Not So Much

First off, it has been some time since my last post.  2 months in fact.  The crazy thing is that traffic has not petered out much.  Traffic has slowed, but searches on this "dead blog" for "saskatoon housing bubble" "new mortgage rules" canada housing bubble" and "calgary housing bubble" have increased more than when this blog was alive..  So tonight I resurrect it.  I like this blog, it's my baby.  I just can't guarantee daily posts, but I will try for 1-2 posts a week.

Tonight, let's take a quick look at Saskatoon's construction industry.  Activity in Saskatoon's construction industry is firing on all burners.  And residential building permit value is leading the charge.  2012 will break records for permit values.

And the construction labor force?

As of July 2012, 11.3% of the labor force is employed in construction. Oh, and the number of employed is at a all time high, so it is not like overall employment is down and skewing the construction % higher. The long term average for Saskatoon and area going back to 1987 is just a tad under 6%.  As of July 2012, the percentage of the Canadian labor force employed in construction is at 7.3%.  Long term average is 6% for Canada.

 

The 11.3% number is reinforcing the fact that the labor pressures are being felt mostly in the construction and related industries.  Eventually, those labor pressures will ease, because EVERY building boom ends.  And when that happens, will other industries pick up the slack so the unemployment rate does not edge up higher?

While there are definitely some parts of Saskatoon's economy booming, not all parts are, otherwise there would be labor pressure on all industries and we would not see 11.3% of the labor force employed in construction but somewhere near 5 or 6%.  But that is clearly not the case when one looks at the numbers.  But as I have said before, I'm still waiting for the wage boom in this city.

While this above chart might be outdated,( I will update it) here is the average weekly wage for Saskatoon in 2012.  (As of June 2012, Regina is at $961 for an average weekly wage.)
Jan $850
Feb $848
March $856
April $851
May $844
June $856

I might be waiting a long, long time for a wage boom here.