Friday, November 1, 2013

BC Foreclosure Update

Over on Vancouver Condo Info, Ham Solo shares the data from BC Foreclosure filings for Oct. 31, 2013 and month to date totals. From Ham:
At the end of the first month of daily data. Vancouver stayed running at a fairly steady pace of six filings per working day. So big picture, what is going on with British Columbia foreclosures? First, I think one needs to understand the data. Courts aren’t located in every municipality, so “New Westminster” foreclosures probably include Port Moody or Coquitlam, while “Nanaimo” might include Qualicum Beach etc. That being said we can get a pretty good look at what is going on regionally.

The basic situation is that the periphery is doing worse than the big city. If I annualize the data by population, the Lower Mainland as a whole is running at about 0.7 annual foreclosures per 1000 population. That compares to Vancouver Island with a run-rate of 1.3 foreclosures/1000 pop; Okanagan at 1.8 foreclosures/1000 pop; and Kootenays and North maybe running 2-3 foreclosures/1000 pop with those last two regions most susceptible to problems in counting and defining the right regional population number.

Turning to lenders, I think the basic model of all the banks, roughly in proportion to retail market share, is to write any old mortgage at any old level to someone that can be covered by CMHC/Genworth wrappers. There is no bank that seems to be extra careful … Royal’s share this month is a bit lower than I would have expected, CIBC’s a little higher. The specialty mortgage co’s are active across the province and must be punching much higher than their weight in terms of foreclosure volumes to mortgage assets. Credit unions, whom I thought might be the loosest lenders of the bunch, seem to be there in about expected market share.

We clearly are not in a meltdown. I’d be interested if other readers have the data on what the foreclosure numbers per 1000 pop got to in various US states. However, we have a good sense of the base. This data series will probably spike at some point, maybe beginning next month, maybe beginning in 3 years, I can’t say. Like others, I’ve been surprised at how well prices have held up and how few foreclosures have occurred to this point. However, I suspect that 20-40% of current “homeowners” would be in serious trouble at either in a 5% interest rate environment or in a material recession regardless of the rate picture.

As there is a little repetition in the daily numbers, going forward I will share the data weekly.
A big thanks to Ham for his efforts.


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  1. there is no inflation?

  2. Agree, surprised how well home owners with large debt, no substantial income increase, survived at this point.

    One of the reason, my guess, is loose re-financing policy in Canadian banks.
    Often a classic tricks used by Mortgage brokes, now popular among regular retail bank staffs, mortgagee can keep re-financing large debt, to somewhat manageable payment levels.

    For instance, if you started 30Y amortization 5 years ago, and your term is up for renewal.
    You can re-finance your remaining mortgage balance to the whole amortization of 30Y (still available at banks who has good credit history), and current lower rates, voila, magically you can afford your mortgage payment although your expenses on property is much higher than 5Y ago, with your salary staggnate.

    This is easily attinable with Home Credit Lines with fixed term options.

    People don't see the debt amount, but buying affordable "monthly payment" options.
    This is very bad for long term economy for this country.

  3. If people are having a hard time now at record low levels of mortgage interest, wait until the interest rates rise. :((

    1. You will be waiting a long time for interest rates to rise. We are in a defacto depression and rates will not rise again in our lifetimes.

    2. How sure are you of this? Economic factors will eventually take over and interest rates will rise.

    3. That's a bold statement. Not to say you're wrong, but I wonder where you get the data to support this? If the governments are printing money and spending it, doesn't it mean as the money supply go up, the currency go down. Doesn't this lead to inflation and thus interest rate increase?

      Just Seeking Knowledge...

  4. At the peak for foreclosures in Phoenix, AZ (March 2010) it was 1.2 per 1000 population.

    In September of this year it was .16 per 1000 population.

    Of course, because of the bargain prices (e.g. $ 100K US for a home that will rent for $ 1000 minimum a month) there are large number of homes scooped up by investors, many of which were billion dollar residential REITs.

    This in itself has created what some are referring to another RE bubble. Sale prices are up as much as 40-45% since late 2010.

  5. Foolish mistakes will ruin you – Bankruptcy will take care of the rest...

  6. Following the blog for over 2 years, the writing and comments empasize the negative and the downside of the real estate market. Valid statistics are presented which often indicate the perilous nature of real estate as an investment.
    In early 2012 I wrote a critique of the MacLean's article showing the house and skyscraper on fire on the front cover. By that time, prices for sure in Richmond were aready down by more than they have declined since.

    Sure we may have a problem and an even greater policy problem with vacant real estate being held by offshore owners, but the reality is that for the most part, depending of course on specific neighbourhoods, pricing has not "tanked".

    Financing is tougher to obtain for investors as oppposed to those seeking to live in the property than it was a couple of years back. However, from my own experience as a Realtor, doing business in Vancouver and Richmond, demand is still quite strong for well maintained properties. In early 2011 one could have put anything on the market and it would have sold. Now with better balance in the market, the good product will move quickly and will still often attract multiple offers at prices not too far off the previous highs.

    With about 49% of your mortgage payment going towards your principal at current rates and at a 25 year amortization period one would have to forecast a price decline of in excess of around 8-10% to justify renting over home ownership for the next 5 years.
    Buying is not for everyone and trends are changing. However, it does not represent the risks it does for speculators and vacant property owners as the buyer is the tenant and is paying down his own loan.

    Our market is diverse here and each product is different. It is hard to paint specific neighbourhoods and housing product with the broad brush of a general economic blog. Certainly, those who are regular readers have given themselves better tools to become educated as to the risks of entering the market. But in the end, to minimize the risks a buyer still needs to have an initmate knowledge of the product he is buying, keep the emotional parts out of the equation and seek the best possible professional advice before committing to a purchase for his own use.


  8. Arnold Shuchat

    >With about 49% of your mortgage payment going towards your principal at current rates and at a 25 year amortization

    Could you show me your calculation how to come out with 49%?