Mortgage crisis spreads beyond sub-prime

Condohype just sent in this link to the main story in todays New York Times: Mortgage crisis spreads beyond sub-prime. This story will be of interest to anyone who believes that our local economy is affected by the US, our largest trading partner.

As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.

Chip posted this link to a government of canada site in the previous thread which I believe neatly ties into why US economy stories relate to Vancouver real estate prices:

Canada’s economy is less than a tenth of the US economy and it is highly dependent on the US economy. Eighty-five percent of Canadian exports are destined for the US and about fifty-nine percent of its imports come from the US.

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67 Responses to “Mortgage crisis spreads beyond sub-prime”

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1
Tony Danza Says:
February 12th, 2008 at 9:36 am
Anyone here reading from NJ or NY?
2
gah Says:
February 12th, 2008 at 11:17 am
“Subprime was a symptom of the problem,” said James F. Keegan, a bond portfolio manager at American Century Investments, a mutual fund company. “The problem was we had a debt or credit bubble.”

Hmm, I wonder what all the talking heads who say there is no subprime in Canada would think of this quote.
3
patriotz Says:
February 12th, 2008 at 11:52 am
I sure the talking heads have been well aware what the real problem in the US is. All it takes is one look at that Credit Suisse graph. They will no doubt come up with more rationalizations as to why we are “different”.
4
Snark Says:
February 12th, 2008 at 11:59 am
I wonder what all the talking heads who say there is no subprime in Canada would think of this quote.

Think? No sir, they don’t do that here. Isn’t it something like 90% of first time buyers in vancouver are going for a 40 year mortgage term? If that isnt unusual I don’t know what is. It won’t take much to put a lot of recent buyers underwater here.
5
jesse Says:
February 12th, 2008 at 12:18 pm
from the NYT article: “At the end of September, nearly 4 percent of prime mortgages were past due or in foreclosure”

September was over 4 months ago. Prime mortgages in trouble with similar price run-ups as Vancouver. I’m running out of excuses for this market.
6
Anonymous Says:
February 12th, 2008 at 12:32 pm
I see the bush administration has just announced a plan to give foreclosures an extra 30 days:

http://www.msnbc.msn.com/id/23118645/

Is this really going to help? You’ve got someone who hasn’t payed in 90 days and can’t afford their mortgage and you’re going to give them another 30 days while lenders try to figure out ways to ‘make it more affordable’ for them? Geez the whole ‘making it affordable’ excuse is why they have subprime, zero down 40 year mortgages in the first place. that worked well!
7
coco Says:
February 12th, 2008 at 1:30 pm
Canadians are juggling record debt loads averaging $80,000 per household, says the author of a new report who warns job losses would push many families over a fiscal cliff.

http://tinyurl.com/33uvqu
8
Bob Rennie Jr. Says:
February 12th, 2008 at 1:30 pm
Sorry, but nothing remotely similar can happen here. We have: Olympics, No More Land, Rich Foreign Investors, Great Economy, and everyone wants to move here.

Buy Now Or Be Priced Out Forever
9
Anonymous Says:
February 12th, 2008 at 1:39 pm
Good link coco! please keep posting them here, especially if rob goes all paid subscriber model. Keep the blogs free!

Record levels of personal debt sure doesn’t put us in a much better situation than in the US.
10
scullboy Says:
February 12th, 2008 at 1:44 pm
Hey Tony, my bf just moved here from NYC (well across bridge in Teaneck NJ). Why do you ask?
11
Bizznitch Says:
February 12th, 2008 at 2:29 pm
The root of the problem is easy credit. Everyone wants the big fancy house, new car, boat, six kids etc, right now. The banks have created this problem, and the consumers have lapped it up, and I don’t blame them. They’re a bunch of sheep in the end. However, it is unsustainable. I have no clue how people afford these overpriced and over hyped condos. How many jobs pay $100k/yr plus?
12
blueskies Says:
February 12th, 2008 at 2:57 pm
Rennie Marketing is flogging units at
“1212 Howe”

this is an older building being refurbished
on the corner of Davie and Howe in the Fitness World complex….. starting high $300,000
No GST!
13
btk Says:
February 12th, 2008 at 4:00 pm
Does anyone here have any articles written by people who thought the tech market was going to go up forever even when it started to become obvious that it wasn’t going to?

I am not claiming I knew it wouldn’t. I just remember talking to some very bright, high paid, younger guys who had the same enthusiasm then about the market and said things like
“I’m saving $1,000 a month, I’ll be retired in five years!” “the internet is here to stay” “It is going to go up forever!” and when questioned would say “forget the old timers and their coca cola stock… what do you think the internet is a fad or something??!”

It’s all the same, the internet didn’t go away and neither will the condos. But the stock price of Nortel is still 1/10 of what it was at it’s peak?
14
jesse Says:
February 12th, 2008 at 4:00 pm
$400K at 6.5% 40 year is $2300. Life would really suck but it’s possible to carry with $70K/yr. And of course future promotions will ease the pain. Sucky if you lose your job of course and really sucky if you had to move and the market dropped.
15
gah Says:
February 12th, 2008 at 4:04 pm
Holy crap. Here’s an interesting stat from the US - 30% of people who bought in the last 2 years are underwater.

http://tinyurl.com/38pect
16
jesse Says:
February 12th, 2008 at 4:04 pm
The internet left us with increased productivity and innovation, including this blog. Condos do not increase productivity.
17
Digi Says:
February 12th, 2008 at 4:16 pm
Jesse, condos don’t increase productivity, but they do increase use of land. To me the condo boom kind of puts to bed the notion that we’re running out of land. I’ve seen the land of two single family homes turned into 64 ‘dwelling units’, even if those houses had basement and atic suites thats still a more than 10x increase in the number of homes on that land.
18
Digi Says:
February 12th, 2008 at 4:20 pm
Gah, nice to see a story that focuses on that. I’m not suprised that 30% of the US buyers from the last two years are underwater though. When prices drop here we’re going to see the same thing. I remember a few front page articles here in the early nineties about people who were underwater on their mortgages. Just wait till we come off the peak of this boom!
19
crabman Says:
February 12th, 2008 at 5:06 pm
Homes in Bubble Regions Remain Wildly Overvalued

Next year this can be re-written. Just replace California with BC.
20
blueskies Says:
February 12th, 2008 at 6:17 pm
here’s how it is done!

just ask satv/k

http://tinyurl.com/yvgyfr

They don’t like to tell you, but we see kids come in who are in their early 30s with a nice home and no mortgage,
21
freako Says:
February 12th, 2008 at 7:43 pm
But the stock price of Nortel is still 1/10 of what it was at it’s peak?

Try 1/100.
22
freako Says:
February 12th, 2008 at 7:49 pm
Jesse, condos don’t increase productivity, but they do increase use of land.

Semantics. The land is more productive. For some interesting glimpse of what the future may bring, google “contour crafter”. This thing essentially “prints” a house with concrete, much like a bubble jet printer prints on paper. In theory, it could build a floor a day, at a far lower price. To date, construction technology has improved, but the inflation adjusted cost per square foot has not gone down. If that changes, the whole equation will be altered.
23
patriotz Says:
February 12th, 2008 at 7:54 pm
That’s just the mortgage. Add condo fees, taxes and insurance and you’re up to $2700 easily.

Oh and don’t forget those pesky special assessments.
24
krrish1 Says:
February 12th, 2008 at 7:58 pm
Gah,
Subprime Mortgage and Mortgage is different that’s what makes Canada free of mess.
25
patriotz Says:
February 12th, 2008 at 7:58 pm
Did the guiding lights at the WSJ tell us that house prices were overvalued, wildly or not, before they started falling?
26
krrish1 Says:
February 12th, 2008 at 8:01 pm
Because he wants to check his ‘NL’ might have had bed bug bites that’s what you get in NJ,NY Cheer Up BEDBUGS……that’s what he mean to ask.

BTW where is 23 year old underware friend disappears and that recent one from Toronto, why I am asking is because I like to move it move it.
27
crabman Says:
February 12th, 2008 at 8:10 pm
Probably not, but the Economist did.
28
pricedoutfornow Says:
February 12th, 2008 at 8:30 pm
Mom, Dad, where’s my condo? ;p

I’m sure there aren’t THAT many people in that situation. I have a friend whose parents are in their fifties. Their mortgage (on a house in Surrey) is $400k. They tried to sell last year for $800k. It didn’t go, despite being on the market for almost a year. Their rational for having such a big mortgage? “It cost us $400k to build, we’ll be able to sell for at least $600k.” Hope to God I’m not 50 years old with such a huge mortgage!
29
jesse Says:
February 12th, 2008 at 8:35 pm
Yeah life would really suck.
30
krrish1 Says:
February 12th, 2008 at 9:03 pm
Bluskies,

Thanks for the link but it’s very difficult for me to disscuss on this issue because of people from different culture and their life style.

I just like to say this is a responsibility of the parents toward child to provide them ‘three essential eliments’ of economy those are food,shelter,and education depend on income and family size that help is vary.

My parents were renting to raise our family,when we got job every single member of my family own a home for each,we never have to borrow loan for education.
only this much from my family tree and all of us are connected with each other for freequent visit and family get together. help can come and go with exchange of C$,USA$ and UK # Sterling.
31
Drachen Says:
February 12th, 2008 at 10:26 pm
BTK

“Does anyone here have any articles written by people who thought the tech market was going to go up forever even when it started to become obvious that it wasn’t going to?”

How about a book, “Irrational Exuberance” 1st edition. 2nd edition focuses on real estate.

By the way do you know your handle is also the nickname for a serial killer? I hope that isn’t why you picked it.

His full nickname was “Bondage Torture Kill” for his M.O. but he was usually just referred to as BTK.
32
patriot1 Says:
February 13th, 2008 at 4:22 am
They probably view the house as their retirement plan and are not putting anything into RRSP’s. They missed the chance to sell at the top and will probably hold on to the property all the way down. They will face retirement with big house payments and minimal equity, and may well end up being forced to sell.

This is yet another red flag - people who are effectively speculating on their own residences. They buy the very biggest house they can, with maximum financing, in the hopes of cashing out and downsizing into another property with minimal debt. Works fine if you get in and out at the right time, but not if you don’t.

Very, very common in the US. It represents additional pent-up supply that is missed by the statistics.
33
blueskies Says:
February 13th, 2008 at 7:21 am
Heads up!
cash is king!

http://tinyurl.com/2gj32h

Based on the interpretations and implications
from this chart, after the Aug/07 credit crisis
the US Fed opted to protect the dollar and
let hard assets deflate.
They basically flipped the bird to the big banks
and started draining liquidity from the system.
The way they are handling the systemic risk is
to remove the punch bowl and drain the swimming pool.

Cash is king, hard assets (incl RE) are deflationary toast.
Leveraged RE bulls just took one in the shorts!

Sunshine and blueskies this AM with a touch of fog.

also posted this on chipmans site:
34
Tony Danza Says:
February 13th, 2008 at 9:35 am
Actually I’m moving out to NYC (or thereabouts) to start a new job in a few months and was looking for some info on reputable RE/Rental agents. Yep I’m gonna join the ranks of the homeowner class, I’m just hoping I can pay the Vancouver rate for a condo in Jersey City or somewhere in the vicinity of Manhattan.
35
crabman Says:
February 13th, 2008 at 9:38 am
Properties in San Diego foreclosure auctions last month sold for 63% of peak prices. 37% down in 2 years and still falling! Looking at it another way, this wiped out a 59% gain! (37/63 = 59%)

Link

Of course we have great weather, the ocean, olympics, blah blah blah.
36
Tony Danza Says:
February 13th, 2008 at 9:38 am
According to a recent article in the G&M (”The Bank of Ma and Pa”) an early 20’s sales rep and a forklift driver in Vancouver make 170k/year between the two of them!

Too bad I went to B school and put the SO through Pharmacy, we don’t make nearly that much after slogging it for 5 years in Vancouver.
37
coco Says:
February 13th, 2008 at 9:45 am
The U.S. foreclosure crisis is worsening and the number of foreclosures will become even higher over the next few years amidst growing economic uncertainty. Housing Predictor extends its foreclosure forecast into 2011 nearly doubling its original prediction.

http://tinyurl.com/22wcwb
38
jesse Says:
February 13th, 2008 at 9:48 am
Tax laws in the US have it that you can defer capital gains as long as you buy an asset of equal or greater value within a certain timeframe. Thus the continuous push up the property ladder.
39
Digi Says:
February 13th, 2008 at 9:49 am
Ouch! I remember a couple of years ago reading about the San Diego boom - it sounded like they were using all the hype excuses about why prices would never go down that you hear around Vancouver. Is it different here?
40
coco Says:
February 13th, 2008 at 10:03 am
Anatomy Of An Intentional U.S. Foreclosure
(there is a video on the left hand side you can watch)

http://tinyurl.com/2xcewv
41
coco Says:
February 13th, 2008 at 10:23 am
Canadians getting less upbeat on economy

http://tinyurl.com/34fxx5
42
scullboy Says:
February 13th, 2008 at 10:33 am
Sweet Jesus krrish I hope you’re representative of the Vancouver homeowner class, it certainly would explain a lot.

The 23 year old underwear friend IS my boyfriend who is from NJ, you drooling idiot. Do your parents let you out of the house without a helmet?

Tony:
I can check with him for you. If I have any info I’ll pass my contact info on to you. The bf’s ex just bought a place in NYC so I may in fact have userful information for you.

And frankly I just got back from there. You can’t believe how nice the places are just a mile from the bridge (George Washington, I think). You can buy a beautiful three story brick place in a nice neighborhood for the same price you’d pay for a 500 sq. f. sh*tbox in Yaletown. I’m neither kidding nor exaggerating.

You can now buy a condo in Manhattan for about the same price as a condo in Yaletown or Cole Harbour.

As soon as the bf graduates I may be leaving as well. While I love the surroundings in Van, the prevailing attitudes about homeowning are getting to be just too much.
43
scullboy Says:
February 13th, 2008 at 10:35 am
Yeah Canada is free of the mess, except, I don’t know… CIBC who had to drop their share price in a desperate attempt to cover their losses…..

Dolt.
44
krrish1 Says:
February 13th, 2008 at 11:32 am
except, I don’t know
yep SOFIA you don’t know why right?

a desperate attempt to cover their losses?

yes from subprime mess in the usa.
45
jesse Says:
February 13th, 2008 at 11:43 am
A relative of mine was trying to rent a condo downtown and received applications from construction workers claiming to earn six figures. It didn’t make sense but maybe we’re just in the wrong business.
46
Tony Danza Says:
February 13th, 2008 at 11:43 am
Krishh STFU, please.
47
Tony Danza Says:
February 13th, 2008 at 11:46 am
My brother in law is a crane operator on a major condo project in town, he grossed just over six figures last year, but he also worked 65+ hours/week. However, I’m sure that people never lie on their rental applications.
48
patriotz Says:
February 13th, 2008 at 12:09 pm
That used to be the law, but it was changed a few years ago to make gains tax free if the property was owned for 2 years, without further conditions. This is regarded as one of the facilitators of the current bubble on HBB and elsewhere.
49
krrish1 Says:
February 13th, 2008 at 12:13 pm
TONY,
Is that related to housing sector?why don’t you post your opinion regarding the topics even your first comment was not making any sense on this board are you alright?.

I was driving by broadway and cambie I saw road block and a seen of recent explosion at 686 WB some matterial from above residential units were down under to commercial units of Starbucks and Taco time here is the story:
http://www.cbc.ca/canada/british-columb … blast.html
50
krrish1 Says:
February 13th, 2008 at 12:14 pm
most recently I had respond to BTK about California here is full video which cover some problem and the rest, I will provide some link to recycling water from Glycol Recovery in California,this recent documentary cover the problem of water and industrial green house gas emission.
Ok here we got some thing to WATCH http://www.cbc.ca/national/blog/video/i … dry_1.html

Crabman,btk,sofia and to whom else it may concern………

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Mortgage crisis spreads beyond sub-prime

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