Winnipeg’s Housing Market: Out of balance, nice and tight, or vulnerable to rate shocks?

If you’re looking for a home or even thinking about buying, a recent report by the Edward Jones investment firm might have caught your eye. It contained some jarring news: that Canada is starting to show some of the signs of being in a housing bubble.

Other reports, however, might have helped put you at ease. For example, Edmonton Journal business columnist Gary Lamphier wrote on Tuesday that the fears of a housing bubble — in which home prices soar into the stratosphere, seemingly disconnected from reality — are really only valid for three overheated markets: Vancouver, Victoria and Toronto.

Discouraged by the fact that houses in Elmwood are now selling at what would have been considered River Heights prices 10 years ago? This might be more in your price range: $89 plus shipping!

Discouraged by the fact that houses in Elmwood are now selling at what would have been considered River Heights prices 10 years ago? This might be more in your price range: $89 plus shipping!

What about Winnipeg, where even houses on the tough streets of Winnipeg’s North End are now selling for $100,000 or more?

Here’s what three observers from outside of Winnipeg had to say:

  • The most cautionary note comes from Tsur Somerville and Kitson Swann of the Sauder School of Business at the University of British Columbia. Their 2008 analysis, based on how much the average house price would have to change to bring the rent/price ratio into line with a ratio that would be indicative of a balanced housing market, suggested that Winnipeg was a “very unbalanced” market. In their view, the average house price in Winnipeg would have to drop by 25 percent in order to restore equilibrium. Interestingly (or perversely) enough, Winnipeg was seen as being more unbalanced than Calgary, Edmonton or Vancouver; and Toronto was considered a balanced market.

 

  • TD Economics offered a somewhat more positive take on the Winnipeg market in an October 2009 report. Their analysis concluded that Winnipeg was one of the more tightly balanced markets in Canada, and thus “in a position to outperform most other markets in terms of resale home price performance”. While TD Economics did not forecast a drop in housing prices, they did expect that prices would increase by only six percent in 2010 (versus double-digit gains in previous years) followed by a modest 1.8-percent rise in 2011 due to increased slack in the market and higher interest rates.

 

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

9 Responses to Winnipeg’s Housing Market: Out of balance, nice and tight, or vulnerable to rate shocks?

  1. Brian says:

    Nice to see I’m not the only one watching the market in horror. It would be quite the irony if our self-righteous economic leaders woke up tomorrow to find our market had cratered just as the US market did, only a year or so later.

    Is anyone, anywhere, from any political stripe in a Canadian government doing anything to prepare for the possibility of a rapid slowdown in realty? When there are dozens of sources suggesting there’s a bubble ready to burst, at what point does someone wake up and act on the warning?

  2. GMO says:

    The market does seem crazy in Winnipeg. But…a lot of people got in when it was dirt cheap to buy in this city. If you were in the market 10 or 15 years ago, you’re probably sitting on a ton of equity now. In 2000 you could buy a modest River Heights house for $89,900. Now that house is worth $200,000…which you can put down on a $350,000 house…and so it goes, until interest rates go up significantly.

  3. Ron says:

    A housing bubble is the last thing we need. The tax incentives have now been reduced so lets see if house prices continue to climb.

  4. Christine T. says:

    I was visiting in Winnipeg in 07 and at that time I saw the bubble growing… I am now back in Winnpeg July 2010 and the bubble has GROWN massive.

    There is over building going on all over the place.

    My old house that I paid 60,000 brand new in 1983 is now selling for 220,000. A home I owned in Eagle mere now sells for 400,000 ( ROFLMAO) I paid 136,000 for that home in 1997.
    Salaries have remained flat the historical three times home price versus income has been thrown out the window.
    First time starter homes are selling for 200,000, that is ridiculous. Homes in Transcona and Elmwood which normally would offer starter homes in the 50,000 range are all gone now and you need to spend three times that much.
    I am now living in S. Florida where I am closing on a home that sold at the peak of the bubble for 800,000 I just picked it up for 215,000.
    Trust me when I say, Winnipeg has a slow moving freight train heading your way.
    When the USA sneezes Canada catches a cold.
    This is going to be more like a deadly pneumonia strain.

    Anyone with smarts will sell now and get a rental and hunker down like I did in 07 in Florida.
    I am now paying pre bubble pricing on a dream home.
    Best of luck to you all when Canada raises the interest rates, to curb inflation, no one will be able to afford their mortgage payments on their massive loans when they need to re amortize.

  5. Corry Gehring says:

    All I want is a modest two bedroom home for my family. I have an invisible disability and work part-time as an Educational Assistant. My fiance works in a machine shop and makes a modest income as well. My fiance has two children from a previous relationship. His two boys are 6 and 8 and live mostly with their mom. The boys stay at our place every other weekend and visit twice a week for dinner. Right now we are living in a one bedroom apartment that costs only $470 per month. When the boys stay over we are very cramped. The two boys sleep in the bedroom while I sleep on the couch and my fiance sleeps on a single mattress that we have in the living room. The point is this: I’ve been watching the msl listings and I fear that buying a home that will suit our needs is going to be extremely difficult. We want to stay in Fort Rouge where we live now but many of the houses are too small. You can’t get your furniture in these houses. Some of the houses don’t have basements and many have no eating space for a family of four or the house is in a high crime area. As well, we can’t afford more than a $145 000 mortgage. We’re doomed. We’re saving our money as best we can but buying a home in this market at these unreasonable prices just isn’t fair. It’s a disgrace!

  6. Greg says:

    You crazy Winnipegers need to cool your heals; it is just BS that only unconditional offers above asking are accepted! Stop. stop the madness, it’s time to start bargaining and demanding a bloddy home inspection, etc, etc.

  7. KingBubbles says:

    I have owned property in a couple other Canadian provinces and I have not bought a house yet here after two years. The fundamentals do not support the prices asked for homes in Winnipeg. I think a correction is coming for sure to bring home prices back in line with the value. Winnipeg home prices should not be close to prices in the Greater Toronto Area !

  8. SJM says:

    It’s now close to a year since the above article was written, and house prices are still ridiculous even for this town. There are signs of it slowing, but the low vacancy rate in rentals seems to be keeping the demand up, for now.
    Have been watching the market for several years since I bought my starter home in Winnipeg , (Fort Rouge area) in 1994. Yes, I have a nice chunk of equity in it now, but can’t afford to upgrade to something more spacious. The prices just keep going up.
    Where it’s really not fair is for the next generation coming up. But I’d say, take heart; the smarter younger ones who stayed within their means renting and didn’t take on huge mortgages and other debt could win out down the road when there is a correction and prices come back to a sane level. Even in Winnipeg, where supposedly we don’t have the “big highs and lows” of other cities is due for this correction, I hope!

  9. Maryann Clark says:

    I recently started looking for a modest 2 bedroom home in Winnipeg and was appalled at what is going on in real estate here! One hundred year-old shacks are selling for over $200K! You can’t offer the asking price…you have to go over about $30-40K! You can’t have ANY conditions on your offer! There are muiltiple offers and the bidding wars ensue…I still haven’t bought a house. Every time I find one within my price range the vultures swoop in and take it for thousands over asking price. I am quite frustrated and disgusted at the way houses are going. All I wanted to do was move closer to my daughter and grand-daughters. I will keep looking, however, as I am not giving up! There might be something that has been sitting on the market for longer than a few days that will be negotiable in price.

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