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:
RSS 2.0 comments feed. Both comments and pings are currently closed.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.
November 5th, 2008 at 9:17 pm
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 its capital, in debt to those who simply hold the promissory bank notes that represent it?
People need to look beyond what they see, a basic and fundamental idea to economics. The British North American act does not permit the Bank of Canada to exist, it is illegal. It is the federal governments job to create money in this country, not a private bank. We’re all being robbed of our money through a steady decrease in purchasing power of the Canadian dollar, through high taxation, and now through the devaluation of equity in our homes. It’s just the start. Educate yourselves and demand change from your local representatives!
October 28th, 2008 at 6:44 pm
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.co.....iness/home
October 28th, 2008 at 2:38 pm
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 be constantly bumping up against supply
October 28th, 2008 at 12:47 pm
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 to save their own bacon.
October 28th, 2008 at 12:14 pm
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!
October 28th, 2008 at 12:10 pm
Is this the same grow op running power X5 from real estate talks?
October 28th, 2008 at 11:40 am
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 haven’t already you may want to pick up an Econ 100 text and look up “supply and demand”.
October 28th, 2008 at 11:36 am
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.
October 28th, 2008 at 11:22 am
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 of a very hard economic landing, but I’m not convinced we’re locked into that path yet. If the swaps market (CDS) splinters, then that is the next leg to drop and I think the economy then could be in for a very bad fall. The CDS market has taken some losses, is frozen, but relatively intact thus far (based on my conversations with participants; intact meaning it’s a cluster#@%# but it hasn’t blown everyone to bits, yet). Here’s the scenario I’d like anyone to comment on: difficult and/or shallow and/or stagnant economic growth worldwide for a period of years(developed countries suffer more than developing, but of those in the latter category it will depend on their current account deficit levels and ability to self finance growth – China will be ok, India ok). We continue like this for some years. 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. That’s when the shit hits the fan – increasing cost of living, credit continues to contract (25 yr credit growth cycle is over, at least in the West.
Bringing it back to Vancovuer real estate – I believe the above scenario would mean we go through a period of falling prices, then at best stagnant recovery (inflation fueled, so perhaps no real returns).
Appreciate any comments from the peanut gallery
October 28th, 2008 at 10:39 am
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.....tdown.html
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.
October 28th, 2008 at 9:34 am
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.