Housing Market Outlook Saskatchewan

Housing starts in Saskatchewan are expected to increase 8.3 per cent to 6,400 units in 2011, with a slight moderation to 6,000 units in 2012.

Economic conditions continue to support Saskatchewan's housing sector. Saskatchewan's economy is expected to rise by 3.6 per cent in 2011 followed by growth of 3.4 per cent in 2012. Further stimulating housing will be employment in 2012, which is expected to grow at 1.5 per cent. Labour market conditions will continue to draw people to Saskatchewan, especially from outside of the country. Net migration is expected to remain elevated over the next two years, further supporting the housing sector.

In Detail

Single Starts: The economic expansion, along with persistently low mortgage rates, will help maintain demand for single-detached homes across Saskatchewan. Provincial homebuilders have increased construction of single-detached homes, building upon last year's performance. Anchored by a strong first half, single-detached starts are projected to rise by almost six per cent in 2011 to 4,050 units. In 2012, provincial homebuilders will maintain the strong performance of the last two years by starting 4,000 units.

Multiple Starts: Following a two-fold increase to 2,077 units in 2010, multifamily starts are expected to remain elevated as provincial builders initiate 2,350 units in 2011. Increased rental apartment construction, particularly in the province's major centres, contributed to the gains last year and will help maintain elevated production of multi-unit homes over the forecast period.

Resales: Low mortgage rates, job and wage growth, and increased household formation will support heightened demand for resale homes over the next two years. Resale transactions in Saskatchewan will increase by about six per cent this year, rising to 11,500 units. Increased job and wage growth, along with more muted price gains will maintain elevated levels of resale activity in 2012 with sales reaching 11,700 units.

Prices: While buyers still have considerable choice of homes, the increase in sales in 2011 will fuel an estimated 5.7 per cent increase in the average price of a resale home to $256,000. Next year, resale price growth will moderate, constrained by the combination of elevated new and existing home supply. Expect prices to rise by about two per cent to $261,000.

Source: Canada Mortgage and Housing Corporation (CMHC) 

Fixed Mortgage Rates vs. Variable Mortgage Rates

Fixed Rate
A fixed rate means that your interest rate remains the same (fixed) for the entire term (duration) of the loan. Generally, this means the percentage of interest will be a little higher since the lending institution may be losing money in the future if the interest rates rise. A fixed rate loan provides the buyer with the serenity of knowing the cost of their interest will stay the same over time. This means your payment and the amount that goes towards reducing the principal (original loan amount) will remain the same over time as well.

Variable Rate
A variable rate means the percentage of interest that you are repaying will vary based on the changes in the interest rate(s) of the overall market. Typically, fluctuations in your interest rate will not alter your monthly payment, but will vary the amount of your monthly payment that goes towards reducing your principal (original loan amount). This means if overall interest rates go down you will actually be paying off your loan more quickly. On the other hand, if interest rates increase, you will be paying off your loan more slowly. Accepting a variable rate does involve a certain amount of risk but can work to the advantage of the buyer over time.

Open Mortgage vs Closed Mortgage (mortgage types)

Open Mortgage
An open mortgage means that the loan can be paid back partially or in full without incurring any penalties. The mortgage can also be renegotiated if market conditions or your financial situation shift. Although an open mortgage provides more options and opportunities for life adjustments, this comes at a cost, as the interest rates for this type of loan tend to be higher. For those able to make larger payments or who plan on selling their home within a short period of time; however, an open mortgage can be a solid choice.

Closed Mortgage
The advantage of a closed mortgage is that the interest rates tend to be lower, but options are limited. Typically a homeowner may make extra payments or larger payments as long as the sum of the payments does not exceed a set amount determined in the loan agreement. Payments exceeding the agreed upon amount; however, would incur penalties.

Although most buyers will elect to choose a closed mortgage, there are advantages to choosing the open mortgage. For instance, if market conditions are expected to change, the type of mortgage should be balanced against the type of interest rate so that as the buyer your needs are .

Best Mortgage Rates Saskatchewan

No matter which province or territory you reside in, finding the best mortgage ratecan save you thousands of dollars. Obviously, there are not many people who can purchase property without taking out a home loan. Taking out a home loan lets you buy, live in and/or use a home without needing to come up with the full dollar amount at the time of purchase. Usually the amount of the loan is equal to the majority of the home’s worth, but the downfall of this is that you will be required to pay interest on the loan. Most lenders insist on a down payment, i.e., a payment equal to a portion of the property’s worth. For instance, if a home is worth $200,000 and the buyer would need to make a down payment of 10%. This would equal a $20,000 down payment ($200,000 x 10%). To make up the balance, the lender would loan you $180,000 ($200,000 minus the $20,000 down payment).

When you are dealing with interest rates on large amounts of money even a variance in interest rates as small as an eight of a percent can make a significant difference in the amount you will be required to repay. Typically the interest is also calculated over long periods of time, which puts even more emphasis on securing the best rate possible. To make things more complicated there are also different rate and mortgage rates. This can make it difficult to determine whether you are comparing apples to apples or apples to oranges.

Interest rates can vary widely even from day to day so locking in on the best rate is extremely important. One of the easiest ways to do this is to enlist the help of a mortgage broker who can act as an entry way to a variety of lending institutions – banks, credit unions, etc. Mortgage Rate Comparison website like Ratesheet.ca could help you get the best mortgage rates and save you thousands of dollars. Its is advised that you compare mortgage rates before you lock in with any lender.

A potential buyer also needs to understand how much is a reasonable amount to borrow as well as the implications of payment frequency.