Saskatchewan: more than just wheat

Saskatchewan is often seen as the low-profile Western province, but its recent housing boom - the one that peaked in spring 2008 and saw house prices shoot up by close to 50 per cent - persuaded more people to take notice. While RBC Economics declared the boom "officially over" in April, its positive effects have, fortunately, stuck around.

"The boom really put a shot in the arm for us in terms of property values in the province," says Pam Gaunt, a broker with The Mortgage Centre in Saskatoon. "We've always been seen as the 'can't do' province and now we're a 'can do' province - we've got some respect now."

The respect is well-earned. After years of being lumped in with (and overshadowed by) Alberta, Saskatchewan has emerged as an industry powerhouse and is predicted to be the only province to see a surplus in 2009. Along with being the second-largest oil producer in the country, Saskatchewan's potash (fertilizer) and uranium industries have become solid revenue producers, not to mention its unemployment rate of 3.9 per cent (as of June) is well below Canada's overall rate of 8.6 per cent.

"We're starting to see people understand that we're more than just wheat and oil, and I think that's helping us come out from the shadows of Alberta," says Bill Madder, executive vice-president of the Association of Saskatchewan Realtors, adding that house prices in Saskatchewan have continued to rise this year despite a drop in overall sales.

All this economic activity has contributed to a growing number of licensed mortgage brokers in the province (more than 200 according to the Saskatchewan Financial Services Commission) and new broker legislation is in the works to raise professional standards. Madder says there is a growing awareness of mortgage professionals in the province, especially among first-time homebuyers.

Housing correction
While Saskatchewan's record-setting housing boom was short-lived - or, as Gaunt puts it, a "flash in the pan" - it nonetheless boosted housing starts to a 25-year high last year and evened out the province's house prices, which were considered notably low by many mortgage lenders.

"The boom was recognition that our market was a very good one and a lot of people wanted to get in on it," says Madder. "It became very hectic in most of the centres with unprecedented price increases and multiple offers."

Home sales have since slowed, but Saskatchewan's residential prices have remained strong, with the provincial average price sitting at $234,569 between January and June 2009, a 4.5 per cent increase compared to the same period last year. Certain areas are also continuing to grow. Madder points to Yorkton, a small city in the eastern part of the province near the Manitoba border, which is heavily rumoured to be the site of a new potash mine. Regina has also remained relatively strong, with the average price of homes in the city increasing to $263,424 in May.

"We still say we're booming here and business is still good," says Carrie Cardinal, a Verico broker based in the Saskatchewan capital. "But we're not seeing houses that are coming in with multiple offers or over list price and other crazy things that we saw in early 2008."

Since the market peaked around April of last year, Cardinal says she has seen the mid-range housing market in Regina soften and has noticed "a ton" of higher-end houses (in the $400,000 to $500,000 range) on the market. Even with the economic downturn, she points out overall prices have increased substantially since she started as a broker in 2006 and mortgage business in smaller communities like Estevan and Swift Current have picked up with the oil and potash boom.

In Saskatoon, where average house prices are approximately $30,000 higher than in Regina, Gaunt says the new housing market has seen more action than the resale market, in large part because sellers are holding onto boom-time prices.

"People still have that high dollar value from the peak of the boom in mind and they're a bit loathe to reduce it down to more current pricing," she says. "The new housing market is more popular because builders really want to move product with competitive pricing."

The lending landscape
Although Saskatchewan has maintained a relatively strong economy and housing market, it came under the shadows of its neighbouring province once again when the recession began to hit. As Alberta saw job losses, house foreclosures and dropping home values, Gaunt says lenders in Saskatchewan - as in the rest of the country - eliminated or restricted product offerings that mortgage brokers were accustomed to using.

"We've definitely been affected by the pull back of lending products due to housing drops in other provinces - a lot of lenders have cooled their jets," Gaunt says, giving the examples of Genworth's recently revamped rules, like higher credit score requirements for self-employed borrowers. "We've gone back to pre-boom time rules and it's much harder for clients to qualify."

But, Gaunt adds, the lending situation has improved from Saskatchewan's pre-boom times, when many lenders only offered low LTVs and made it difficult for borrowers because of the significantly low house prices. More good news is that lenders are continuing to move into the province. Street Capital, for example, rolled out its prime insured lending program there at the beginning of June.

Another notable change in Saskatchewan mortgage lending in recent years has been the diminishing role of credit unions in the broker channel. Following changes like the August 2007 merger between Affinity, FirstSask and Nokomis credit unions (now under Affinity), there has been a move for credit unions to generate mortgages internally.

For example, Cardinal says Conexus - the largest credit union in Saskatchewan, which has a partnership with Centum Canada Mortgage Direct - only works with a few Regina brokers (she's one of them) and most other credit unions are very select in their broker business ties.

"Credit unions have a small town thinking and a member-driven type of philosophy," she says. "They're slow and steady and you have to build up trust with them."

Revamped rules
With the population of mortgage professionals increasing in Saskatchewan, the province's Financial Services Commission has been retooling its Mortgage Brokers' Act. The commission already has a first draft completed, which is currently being reviewed by various industry players before being passed through the legislature.

While nothing is finalized yet, the SFCS's Cory Peters says the new legislation is focusing on compliance rules for brokerages, such as errors and omissions insurance, and implementing a model that ranks brokers (similar to the agent versus broker differentiation in Ontario). There will also be more explicit rules around consumer disclosure, licensing and education. The current legislation doesn't specify education programs for broker license applicants, but evaluates them on a case-by-case basis, looking at factors like past work experience. Most applicants are required to work under a more experienced broker (who they seek out) until that broker decides they are fit to be licensed.

"Right now, we take a very wide approach and tell applicants to present it all and let us know why they're in a position to make sure that the first consumer they serve is properly helped," says Peters, adding that performance measures for brokers are reported on publicly.

Another change in the updated act is that it won't include mortgage lenders, which are regulated under another piece of legislation called the Trust and Loans Corporations Act (1997).

Both Cardinal and Gaunt say they're happy to hear the new legislation is moving forward, even if the rules are not likely to be in place until 2010.

"As our market boomed in the last two years, we've had so many new brokers come aboard and there hasn't been a high level of screening," says Cardinal. "That can give a bad name to people who conduct good business and who have been in the financial industry for a long time."

Saskatchewan's short-lived boom may be over and the economic downturn may be taking its toll - for example, potash revenues are expected to be down due to farmers cutting back on purchases - but the province's inhabitants can still boast a relatively positive outlook.

Despite a recent decline in jobs, CMHC reports that the year-to-date average still points to a year-over-year employment growth of 2.8 per cent, and RBC predicts the province's GDP will grow by 0.7 per cent (compared to economic contractions in most other parts of the country). Combine that with a strong spring housing market - year-over-year home sales increased 25.2 per cent in June - and it's obvious why Saskatchewan is continuing to distinguish itself from its higher-profile neighbour.

"People are starting to recognize us more, and even though Alberta has dropped off a bit, they're not going to paint Saskatchewan with the same brush - they're looking at us individually," says Cardinal. "I'm confident we'll continue to stay strong for years to come."