Bankruptcy rate growing in BC

From an Article in the Vancouver Sun:

VANCOUVER – Dropping real-estate values are sending more British Columbians into financial crisis and causing a spike in personal bankruptcies, according to professional debt counsellors.

Federal Industry Ministry data show that B.C. consumer bankruptcy filings for August were up more than 10 per cent over the same period last year.

August also saw a 16.3-per-cent increase in proposal filings, an alternative to bankruptcy.

And that was an improvement over July, when B.C. consumer bankruptcy filings were up 14 per cent over the same period last year and proposal filings were up 20 per cent.

“It’s a big jump,” said B.C. Association of Insolvency and Restructuring Professionals director Lana Gilbertson. “We don’t know if it will continue upwards, but during the recessions of 1981 and 1990-91 there were rapid increases in insolvency rates.

“Our professional community is seeing more and more individuals who can’t sell their property for what they thought it was worth and who can’t refinance or borrow more money against their property. They’re stuck,” she said.

For several years, Canadians have suffered from high levels of household debt, low rates of personal savings and feelings of stress about their finances, said Gilbertson.

“But a strong real estate market  in B.C. kept many afloat as homeowners were able to use a growing equity in their property to offset their consumer debt,” she said.

Funny how the answer to consumer debt was house debt, even after we saw how well that worked out in the US.  Meanwhile at least one economist is saying get ready for deflation:

Japan was mired in a nearly decade-long bout of deflation, which is defined as a sustained fall in asset prices. Economic theory indicates the solution to falling demand for prices is stimulus – either from the central bank, or by the fiscal authority to increase demand and borrow at interest rates that are below those available to private entities.

Rosenberg was one of the few economists on Wall Street who rang alarm bells about the housing bubble, and warned that the fallout from the bust on credit markets and the underlying economy would be huge. He now forecasts the worst consumer-led U. S. recession since the 1970s.

Other economists have also warned of a deflationary-like scenario, not just in North America but also Britain.

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Mike
Mike
11 years ago

We need to work hard, produce more, resolve debt and save. Canada needs to get competitive and compete with other nations. The government needs to get out of the markets, stop funding, stop bailing out and let the workers and business men of this country shape the economy. The rise in housing costs is due to our out of control fractional banking system. There is not enough capital in this country to cover the dollars they are supposed to represent. This is not simply a housing issue, but a monetary one. Housing prices never should have risen to the level they were at. Artificially low interest rates allowed more and more Canadians to borrow fiat dollars, which drove up demand in that particular market. How can a country as wealthy as Canada have the majority of its workers, who create… Read more »

SurreyJoe
SurreyJoe
11 years ago

Article on the Globe and Mail site which starts out "Merrill Lynch & Co. economists are becoming more “alarmed” about the Canadian housing market every day as their data suggest it is tracking the United States with a two-year lag."

Full article:

http://www.reportonbusiness.com/servlet/story/RTG

Jack
Jack
11 years ago

Power X5: Thanks for your thoughts. Let's get you a gig on talk radio… A couple of corrections – I'm not talkin any sort of peak land theory. I believe we're in for a significant correction in Vancouver real estate (35%-45% is a given). Second, Hubbert's Peak theory is all about supply and demand. It proposes that the world is reaching the limits of its ability to continue to grow oil production, that this peak is reached at the point where we have consumed half the recoverable oil endowment, and that this peak follows oil discovery peak with a lag. The oil supply curve is inelastic in both the short and long term. Demand has to adapt – including through continuous demand destruction as supplies declines year to year. short story – while there will be demand destruction, demand will… Read more »

no-lympics
no-lympics
11 years ago

The one indicator to watch is the Olympic/Millenium Village. Peter Ladner said that Vancouver may now has to dip into its contingency fund(whatever that means)to asssit the project . The project has to complete before the Olympics. Fortress got propped up a bit, but for how long? So is Ladner implying an iceberg on the horizon? If this project starts to collapse, in an already glutted market, what next Fire Sale? or hold out? Vancouver taxpayers will revolt if they end up being the "bank of last resort"to complete the project (ie tax increases). Fire Sale means low tide for all ships, ie set a new "below sea level" benchmark price. Some choice. Toss a coin? Or bet they'll Fire Sale them ! Other developers will be pissed, having to compete against a sinking Gov't backed enterprise with politicians trying… Read more »

Power X5
Power X5
11 years ago

The old Power X5 is dead (bankrupt) I bought his X5 off of him for pennies on the dollar, long live the new Power X5!

Anonymous
Anonymous
11 years ago

Is this the same grow op running power X5 from real estate talks?

Power X5
Power X5
11 years ago

In the meantime, oil prices begin to spike back up – i believe oil is oversold…believer in Hubbert’s Peak. I also believe it’s too late to prepare for a peak oil world, so once oil prices resume their climb, we have to go back to dealing (again) with rising transportation/trade/energy and general cost of living costs. Oil is subject to the laws of supply and demand like any other commodity. Hubbert's peak does not impact the price of oil, supply and demand does. We're not making anymore land in Vancouver (peak land?) but that won't prop up real estate prices as long as there is more supply than demand. One other point, who do you expect to pay higher prices for oil when the there is a global recession? What are they going to use the oil for? If you… Read more »

T-1000
T-1000
11 years ago

Replying to Purp's question on judicial sales:

I was involved on bidding for some residential & commercial assets last year. Here's what I gathered to the best of my recollection:

1) Court appointed Receiver uses a Broker, who lists the property at market.

2) Broker collects all bids (if none, will keep dropping listed price, until bids come in)

3) Broker delivers all bids to court (6 weeks after 1st bid comes in)

4) Court will usually (but not always) select highest bid.

5) Winning bid must pay in full. No subject period.

If you're the only bidder at court, you get it. I think you can submit bids right up until court time. If there's a tie, the Judge has discretion to ask bidders to re-submit higher bids.

Hope that makes sense.

Jack
Jack
11 years ago

I've been reading comments on this site for a few months now. A couple of observations….first, hats off to the many Vancouver real estate bears. Second, I've noticed that in recent days (either on this site or others similarly focussed), comments that indicate people are raising the prospect of a bottom approaching in the equity markets. Let me be clear, few are actually calling a bottom in the equity market, but I think it's worth noting when people start to discuss a bottom because it may signal a turn. Also, I don't in any way suggest I or anyone else is remotely ready call a bottom in Vancouver real estate, where the rout has just begun (even if equity markets stablize and signal a shallow or at most difficult but not calamitous recession). I do think there is a possibility… Read more »

Gadwin
Gadwin
11 years ago

Consumers in the U.S. are cutting back their spending. The lowest consumer confidence was just recorded ever on record:

http://biz.yahoo.com/ap/081028/financial_meltdown

If American consumer confidence and consumer spending remain extremely low, it will have a large impact on the Canadian economy. If the Canadian economy takes a beating, the real estate market here will just decline that much more.

observer
observer
11 years ago

The bottom will be a p/e ratio below 5 unless leaders provide some moral guidance on what is acceptable economic behavior. The economy only works because we have confidence that right effort will be valued and rewarded and no one is making obscene amounts of money through parasitic endeavors.

no-lympics
no-lympics
11 years ago

Chase the market down ?

The seller should offer a bigger discount than the current average. Face reality, and minimize the loss, which is more like avoid being stubborn grabbing every penny.

This may piss off the other sellers, but it is every seller for themselves as there is no honour amongst speculators.

Alexcanuck
Alexcanuck
11 years ago

Sorry about that incomplete double post. My bad.

Alexcanuck
Alexcanuck
11 years ago

Did anyone use that nice TSX rally to take some money of the table? Because I'm sitting tight with my HXD. Not sitting comfortably, I'm way out of my comfort zone, but it seems to be working. Oil has got to be approaching a low, I've started trimming my HOD. Anyone out there know the bond market well? Is there a way to gain off a LARGE increase in corporate bond defaults? That is the next "nobody saw this coming" I really hate this, I'm stupidly exposed out there. I'm currently about 75% net worth in HOD , HFD and HXD! (Not the house money or hers, just mine.) Mind you, I entered these positions in August, I can miss the very bottom a bit and feel OK. For those with short memories, oil was in high 130's, TSX over… Read more »

Anonymous
Anonymous
11 years ago

Did anyone use that nice rally to take some money of the table? Because I'm sitting tight with my HXD. Not sitting comfortably, I'm way out of my comfort zone, but it seems to be working.

Oil has got to be approaching a low, I've started trimming my HOD.

Anyone out there know the bond market well? Is there a way to gain off a LARGE increase in corporate bond defaults?

This is just crazy out there. The worst nightmares of the gloomiest bearblithest bull are all coming true, with no bottom in sight. What is supposed to catch this market and hold under the momentum? Not just a falling knife, but an entire falling china and knife shop, all sharp edges flashing and spinning. I'm not getting under that mess!

cdn dollar
cdn dollar
11 years ago

put the canadian loonie and a u.s.d. on a table side by side then below each respective country then list their national debts, how many banks have failed in their country, unemployment, annual deficit, their natural resources, interest rates, then ask whomever sees this to grab the currency they feel most comfortable with…Got canadian$$..?? all the best to american citizens your government is giving it to u up the … Time will show Harper will cost us all….. cdn$$+silver and gold.:)

vanboy
vanboy
11 years ago

high inventory, low sales, and a dropping currency. Looks like all the factors for a housing market crash are here.

bcubbins
bcubbins
11 years ago

That Flagship owner is continuing to chase the market down. Just a few months ago, he/she was hoping for an $11,000 profit. Now asking $49k for the $120k deposit, OBO. Of course, it remains a "great investment…for anyone just looking to buy and sell quickly to make a profit" (not withstanding the current owner's experience to the contrary).

http://vancouver.en.craigslist.ca/reo/895506101.h

john
john
11 years ago

Thankfully I'm literally bankrupt proof thanks to the large collection of investments I have around Vancouver. The many many SUVs and condos which I own will protect me forever.

Anonymous
Anonymous
11 years ago

our insurers could be in trouble. wasn't it just a few days ago they were supposed to be in the running to buy bits of aig?

Vancouver Real Estat
Vancouver Real Estat
11 years ago

Vanman in the comment section

Vanman Mon, Oct 27, 08 at 08:08 AM

Vancouver real estate will not drop anymore, interest rates are on the free fall, the US dollar will buy more property here, the Yanks are already buying up here. Panick will get you know where.

patriotz
patriotz
11 years ago

If a mortgage is insured, the lender cannot allow a short sale without the approval of the insurer, and I don't think CMHC allows short sales. But maybe that will change.

As for tax sales, don't hold your breath. No mortgage lender will allow a property to go to a tax sale – they will pay the taxes to preserve their lien on the property. I think those tax sales that do happen involve owners whose reasoning is impaired to such an extent that they won't just sell the property. During the Great Depression tax sales (or forfeitures to the city) happened when property because almost worthless – this happened to Champlain Heights. But it's not going to happen this time.

Purp
Purp
11 years ago

Sorry, I meant..

Do Canadian LENDERS accept short sales to avoid foreclosure?

Purp
Purp
11 years ago

Do Canadian borrowers accept short sales to avoid foreclosure?

Purp
Purp
11 years ago

The courts don’t determine market value, the market does. Foreclosed houses are put on the market and sold just like any other house.

Ok, I think I get it now, it's explained pretty well here:

http://www.foreclosures.ca/realtors/foreclosure_p

It sounds like borrowers are given a fair amount of time (6 months) to sell the property to redeem the mortgage.