Alberta leads the way on delinquincies

Huh. Even with high oil prices and rock bottom rates homeowners in Alberta don’t seem to all be paying their bills on time:

Homeowners in the province are nearly twice as likely to fall behind than those in the rest of Canada. And the proportion struggling to make mortgage payments is the highest it has been since at least 1990, according to fresh data from the Canadian Bankers Association.

The rising rate of delinquency comes as economists warn that Canadians are under increasing pressure when it comes to servicing their debts.

As interest rates move higher in the coming months, many could find it even harder to make their monthly payments.

The main problem for the province has been Calgary’s housing market, which has struggled since a boom at the start of the decade caused massive price gains in a short period. In 2005, prices were up 10 per cent. The following year, home prices surged another 50 per cent.

The gains came to a halt five years ago, when the market began to weaken. Then, when the recession hit in 2008, panicked homeowners rushed to sell in near-record numbers, flooding the market with inventory and putting renewed pressure on prices.

This issue also seems to be negatively affecting Genworth.

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vreaa
Member

From last thread:

Van MD, regarding the poll you cited:

Can you clarify, please… this is of which group of buyers, buying where?

Much appreciated (if it concerns Vanc RE, it makes a great 'group anecdote', with n=160, and we'd like to archive it once you clarify… thanks…)

reminder of link:

http://forum.iask.ca/poll.php?do=showresults&…

patriotz
Member
Active Member
Delinquencies have only one cause and that's falling prices. Alberta leads the country in delinquencies simply because it's the only province where prices are lower today than in 2007, its market peak. The cause of the falling RE prices was simply exhaustion of demand, i.e. not enough new buyers. It wasn't the state of the Alberta economy – oil prices continued to rise for another year until they started falling in 2008. "Then, when the recession hit in 2008, panicked homeowners rushed to sell in near-record numbers". Well first of all I think they mean investors not owner-occupiers. The latter rarely sell in anticipation of price declines. And again this is typical of all RE busts – prices start falling, THEN investors catch on and start selling, and THEN you start getting delinquencies as underwater owners give up paying. Note… Read more »
pricedoutfornow
Guest
pricedoutfornow
I was thinking about delinquencies yesterday, as another one of our clients has approached us about possibly going bankrupt (the second in as many months). This is not in Vancouver, where people still seem to be on some kind of happy-financial drug, but elsewhere in the province, where RE prices are not skyrocketing. One distant relative has already gone bankrupt, after buying some condo in the Fraser Valley and being unable to make the payments, along with car payments, daycare etc. As they say, a bubble starts to explode at the periphery, and I can clearly see this. My business partner and I are aware of several clients who are on our "list"-those we expect to declare bankruptcy in a few years time (lest a miracle happens). They wait until they've maxed out the very last credit card, drained every… Read more »
Van MD
Guest
Van MD

@vreaa:

Hey vreaa, the poll did not have any restrictions on where the forum members reside. Some are still in China (immigration in progress), majority would be greater Toronto area and greater Vancouver area.

The poll was anonymous so there is no way to find out where they are from.

Anonymous
Guest
Anonymous

@pricedoutfornow: The tap will be turned off on a great number of people with the changes to HELOC's. The tide will really turn if/when prices begin to recede in Vancouver. It's easy to get out of a financial pickle by selling your house in a rising market. Not so much when prices are falling.

jesse
Member
G&M: Home Capital ramps up uninsured mortgage lending, but not for everyone: Home Capital Group (HCG-T58.811.853.25%) made a strong return to uninsured mortgage lending in the first quarter, after scaling back considerably over the last year to avoid excessive losses from risky loans. Uninsured loans – offered to those who don’t meet the more stringent requirements of the big banks such as the self-employed and recent immigrants – accounted for 58 per cent of the Toronto-based company’s $1.3-billion in new loans in the first quarter. … He said the company is being cautious when considering loans that will go toward properties in Vancouver or downtown Toronto, because the markets are showing signs of overheating. The company would rather lend in a stable market, than one that is posting swings in either direction. Now why would they do that? Maybe… the… Read more »
Maverick
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Maverick

@patriotz:

Well said. Delinquencies will spike once people are rendered insolvent by lower prices. Then you short the banks.

Anonymous
Guest
Anonymous

@Maverick: But it's the taxpayer that is going to be left holding the bag.

Maverick
Guest
Maverick

@Anonymous:

Unfortunately yes. Ain't the CMHC grand? Thanks to our "conservative" government lifting that price ceiling off. What a bunch of fucking idiots.

Anonymous
Guest
Anonymous

@Maverick: Agree 100%. Lifting the ceiling was one of the worst decisions ever made. Offering MI for a FTB buying a condo is one thing but allowing it for purchases of $1M+ homes is completely another. Foolish.

WFT?
Guest
WFT?

@Maverick:

"Then you short the banks."

The banks will be made whole by the taxpayer through CMHC. If massive claims agianst CMHC materialize, the thing to do is short the Canadian Dollar, isn't it?

Best place on meth
Member
Best place on meth

High oil prices you say?

What an epic smackdown of commodities taking place.

http://quotes.ino.com/chart/?s=NYBOT_DX

rp1
Guest
rp1

#9 @Maverick: Actually the price ceiling was lifted early in the last decade. It would have been under Paul Martin. Can someone confirm the timeline? I believe it was 5% down (from 25%) in 1999, removal of price ceiling, 35 year amortization (from 25 year), 0% down and 40 year amortization (under new Conservative government in 2006).

jesse
Member

@WFT?: "short the Canadian dollar"

CBC: Loonie loses nearly a cent, oil below $100 due to NDP majority government

5 year bond below 2.5% today. Good luck shorting currencies, though!

patriotz
Member
Active Member

@rp1:

Bank in the 80's you needed 25% down for an uninsured mortgage, so the requirement for a CMHC-insured mortgage must have been less.

As for the CAD, it's all about oil and commodities, I don't think it would be affected by a Canadian RE bust at all. Why would it? It wouldn't affect demand for our exports.

Anonymous
Guest
Anonymous

Off topic: How come we are not seeing postings about the great investments in gold and silver? Gold is now trading in the US$1,475 to US$1,4780 range.

Anonymous
Guest
Anonymous

That's US$1,478 not $US$14,780

registered
Member
registered

15 patriotz Says: "As for the CAD… I don’t think it would be affected by a Canadian RE bust at all. Why would it? It wouldn’t affect demand for our exports."

It arguably has a strong negative impact on our demand for imports, an effect beneficial for the dollar.

VanRant
Member
VanRant

Housing Bubble 101

Lets review why houses prices went up 300% in the last few years

– Carney drop interest rates to 1%

– CMHC relaxed lending standard for home buyers

– Conservative increased CMHC lending limits to 600 Billions

– Removal of ceilings for loans from CMHC

– CMHC increased amortization up to 40 years

– CMHC decrease of down payments to 5%

– Liberal immigration policies & increases in immigration

– News network shows realtors in helicopters flying over WR and speculators lining up for day to buy presales

Results: Houses Price going through the moon!

registered
Member
registered

@19 VanRant:

– CMHC absorbs risk from mortgage lenders, encouraging a flood of available liquidity for real etstae

WFT?
Guest
WFT?

@patriotz:

"Why would it?"

IF CMHC is bleeding cash, the Government has to bail it out. To do that, it has to sell bonds to the BOC who will print money to buy them.

Anonymous
Guest
Anonymous
@rp1: These are notes from my own research back when I was looking at affordability considering rates, wages and maxing out whatever juice CMHC was offering. I have references for these, but don't want the post to look too spammish. I'm not 100% sure of all items, as some came from news articles, others directly from CMHC, etc. Corrections are absolutely welcomed. Sept 2003: removed upper price cap for cmhc insurance. Mar 2006: mort amort changed 25 yr to 30 yr. Aug 2006: mort amort changed 30 yr to 35 yr. add 10-year interest only option. 12/15/2006: allow 40 year amort, 100% ltv early 2007: changed mortgage insurance req. from 25% to 20% 10/15/2008: max amort changed from 40 to 35. Min down changed from 0 to 5% down. 04/19/2010: qualifying for <=5yr now based on greater of 5 yr… Read more »
chinaren
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chinaren

Richmond's SFH YOY April sales/list is down, and inventory is up; Burnaby's SFH inventory is down. Examples:

Richmond – South Arms: old detached with lot size of 7000-8000 sqft sold as high as $1M-$1.1M. In recent days, the sold prices have dropped to around $850k.

source: worldjournal

chinaren
Guest
chinaren

Burnaby: sales volume hasn't dropped in the past 3-4 months; instead house prices have gone up, from $850k to $910k.

Vancouver East: in April, sales volume dropped; but around Main St nearer to the westside, SFH average price has gone up from $790k to $810k.

Anonymouse
Guest
Anonymouse

Almost a year since the C.U.L.T was introduced – yet with only a couple of weeks to go until its anniversary it stands at about half of what it was a year ago.

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