Here's why there are fewer houses on the market in Saskatoon

Real estate under pressure WATCH: Saskatoon’s real estate market is under pressure, according to one expert.

Saskatoon benchmark home prices hit an all-time high of $384,200 in July, indicating high demand and low supply.

One expert explains the market is under pressure by the three Is: interest, inflation and inventory.

“We are definitely seeing a lot of pressure on the inventory side of things, and that obviously exists in both the resale market as well as the new home market,” said Nicole Burgess, CEO of the Saskatoon & Region Home Builders' Association.

With Bank of Canada interest rates high, home builders are being extra cautious not to overbuild and carry too much debt.

“What they’re doing is building very close to demand,” Burgess told CTV News. “So to stay competitive with the resale market and keep prices as affordable as possible, they’re just simply not overbuilding as they did in the past.”

Burgess refers to around 2014 when supply outpaced demand.

“There was quite an overbuild that happened in Saskatoon, and as a result, there was a lot of inventory that kind of flooded the market,” she said. “What that did was drive the prices down. So builders are being very cautious right now on that front.”

With inflation driving up the price of everything, even though the price of materials has come down since the pandemic, the cost of construction is still high.

“We’re seeing a rough increase of about 35 per cent since late 2019, still remarkably high, and that can be attributed to labour,“ said Burgess. “Labour is more costly, and there’s great shortages.”

“Talk to any electrician, any plumber, any framer, anybody, all of them are looking for more workers because they’re just behind on every single project,” said Saskatoon mortgage broker Conrad Neufeldt.

Another stressor on the market is that families aren’t upgrading like they used to.

“There’s all these first-time home buyers that in another setting, in another environment, would have already moved up, creating more inventory for new buyers to enter the market,” said Neufeldt.

Burgess says a building frenzy isn’t the solution.

“If the builders just go crazy and start building and carrying these high borrowing costs, that’s just going to add to the purchase price of a new home, and you’ve negated the benefit of more inventory,” she said, adding it might take government collaboration.

“So I think it’s going to require a much more dynamic approach that’s likely going to be across multiple levels of government.”