The 2017 Saskatoon real estate market had a slower market overall compared to 2016 making it the third year, in a row, of sales activity declines. As a result, the average number of days a listing sat on the market in Saskatoon was 61, as of December 2017 — a substantial increase from 51 days in December of 2016. Not surprisingly, if we study Saskatoon’s market throughout 2017, we see a lower number of transactions, on a year-to-year basis.
Yet, the news isn’t totally bleak. Despite the decreased activity, there was an 11% increase in Saskatoon’s home sales in December 2017 compared to December of 2016.
Why the notable increase in sales during December?
The most likely reason for the increase in activity towards the end of the year is due to new mortgage rules that came into effect on January 1, 2018. The Office of the Superintendent of Financial Institutions (OFSI) has set a new minimum qualifying rate, or so-called “stress test” for all prospective home buyers, even for those with a down payment of over 20%. Under this new mortgage stress test, home buyers need to qualify for a mortgage at a rate greater than two indicators: either 200 basis points (2%) higher than the mortgage rate they qualified for, or the Bank of Canada’s five-year benchmark rate. Before the new rules, home buyers had to qualify at the rate offered by the lender. With the new rules, mortgage payment will be paid at the negotiated rate, but that higher calculation is used for qualifying purposes.
This increase in last-minute sales in Saskatchewan, in both Saskatoon and Regina, is similar to the national trend of home buyers rushing to buy before the new rules came into effect. However, unlike most markets in Canada, new listings have come down by 18% in December 2017 compared to December of 2016. There could be many reasons for this unusual trend. According to Jason Yochim, CEO, Saskatoon Region Association of REALTORS (SRAR), “this decrease in listing activity could be the result of seller’s fatigue from having been on the market for an extended time period without securing an offer. This increase in December sales and decline in new listings is a positive for decreasing high inventory levels.”
What can we expect from 2018?
It’s difficult to predict how the housing market will behave in 2018. Saskatchewan is in a buyer’s market, and sellers will have to price their homes competitively if they want to sell. Getting a mortgage will be more difficult, and home buyers will have to either buy a cheaper home or wait longer until they can afford a larger down payment. On the other hand, there is already an extensive, unsold inventory available and a downward trend in prices, which eventually trigger homebuyers into braving the newer difficulties of the market. Time will tell what the long-term effects those mortgage changes will have.