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jesse
Member

It should be obvious bank balance sheets will be impaired to some degree if housing prices fall, but it will be nothing compared to what homeowners will suffer. Banks, on a relative basis, are well protected.

Anonymous
Guest
Anonymous

well, take their rating with a grain of salt. remember how they rated their own?

boogeybear
Guest
boogeybear

If the amount of sub prime loans the Americans made were half – would that mean that the crash would have been half as bad?

If you answered yes, then you also understand the concept of being a little bit pregnant.

The number one reason why are market will not be affected to the same level as the Americans is that we’re not as pregnant with sub-prime mortgages as the USA.

boogeybear
Guest
boogeybear

It appears that a lot of people on this blog, do believe you can be a little bit pregnant.

rp1
Guest
rp1

#1 @jesse: “Banks, on a relative basis, are well protected.”

And credit unions, at least where I am, seem to have drank the kool-aid.

Anonymous
Guest
Anonymous

@jesse: “It should be obvious bank balance sheets will be impaired to some degree if housing prices fall, but it will be nothing compared to what homeowners will suffer. Banks, on a relative basis, are well protected.”

That is a pretty silly comment. On a relative basis crack cocaine is safe compared to heroine.

jesse
Member

@Anonymous: “On a relative basis crack cocaine is safe compared to heroin”

Actually the opposite, but this is simply not a good comparison regardless. Borrowers are in first loss position and the vast majority are not hedged. Lenders are next in line and usually have hedging in place.

Not that banks won’t get hit by a housing downturn, not least because their revenues take a plunge due to a drop in mortgage applications, and banks may need to raise additional capital (likely at a premium) — read their credit is impaired) but that’s not the same as saying they will go bankrupt, which is the fate awaiting some homeowners if TSHTF.

patriotz
Member

“The six banks have a combined $730-billion in mortgage exposure and an additional $182-billion in home equity loan exposure”

Well no they don’t, because the taxpayers have guaranteed the high ratio lending (which is what matters) from the time of issue.

As I’ve said, I think the banks are most worried about their consumer loan exposure which would be collateral damage from a housing bust.

The federal government is now pretending to be concerned about the taxpayers’ exposure, but IMHO if they really cared, they would never have allowed it get anywhere near that big in the first place.

Turkey
Guest
Turkey

‘Morning, all.

A couple of $100k reductions in my East ‘Van neighbourhood:

This bunker just went from $989k to $899k. And, this geriatric monster went from $1.18M to $1.08M last week.

I keep a fairly close eye on Strathcona, which is a pretty small region with relatively few listings compared to the rest of East Van. I don’t remember seeing this many dots on the map since 2008-2009. You don’t have to like these listings, or the neighbourhood, to recognize that $100k reductions are new and significant.

Strathcona also has a couple of weirdly condo-ized properties that must be bleeding heavily, and are either listed and gathering dust (“Strathcona Edge”, “Strathcona Gateway”) or have been pulled and rented pending a miracle (The “before” picture, thankfully). There are plenty of shoes just waiting to drop.

RE Lurker
Guest
RE Lurker


#5 @rp1:
#1 @jesse: “Banks, on a relative basis, are well protected.”

And credit unions, at least where I am, seem to have drank the kool-aid.

So… does that mean I should withdraw all my deposits that are in credit unions soon? (or are deposits guaranteed by the government…).

Anonymous
Guest
Anonymous

@RE Lurker:
http://www.cudicbc.ca/
http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/96141_00
All BC credit unions are insured. Furthermore, unlike CDIC, there isn’t a $100,000 limit.

Troll
Guest
Troll

US ratings agencies are pretty credible. Not.

That said, it’s startling how many groups in the past few months are trying to CYA and get in front of a potential housing correction. “Told ya so”. At least Realtors will have someone to blame if the market goes south.

Bank Safely
Guest
Bank Safely

@RE Lurker: Nope. Your deposits in a credit union in BC are actually better insured than in a bank. Each member bank of the CDIC has a $100k per account deposit insurance. (don’t keep more than $100k in each account).

Credit unions in BC are insured through the CUDIC and have unlimited deposit insurance.

http://www.central1.com/creditunionsystem/deposit_insurance_BC.html

jesse
Member
@RE Lurker: “does that mean I should withdraw all my deposits that are in credit unions soon” Yes CUs have deposit guarantee, but have heavy regional risk exposure to residential mortgages. The analogy I use is looking at regional US banks and how many were destroyed when the markets they were exposed to hit the fan. But I think many US regionals were exposed to construction loans as well, and I’m not sure how much CUs have in terms of that exposure. Vancouver has nowhere near the level of overbuilding seen in some of the US markets last decade. I haven’t seen CU books for 2012 but nothing jumped out at me. They have additional tiered capital reserves to account for their regional risk concentration, but we don’t know how heavily deposits will be affected if Vancouver housing hits the… Read more »
jesse
Member

@Turkey: A relative of mine had his house for sale in East Van, just pulled the listing after virtually zero interest for 3 months. It is old and probably not much more than a teardown but they claimed that prices of comparables had moved about 15% lower over the past 6 months but the data were sparse. Nobody seems to know how to price the stuff that isn’t moving. It’s a long way down…

Boombust
Guest
Boombust

Ben Jones at his Housing Bubble blog is giving a lot of mention to the Canadian RE market today…

Anonymous
Guest
Anonymous

@jesse:

Nobody seems to know how to price the stuff that isn’t moving.

It all seems do simple…obviously price it lower than they were previously asking.

Bank Safely
Guest
Bank Safely

@jesse: I though Van East was where SFH was still moving? Is that market running out of steam as well?

suspectum
Guest
suspectum
A little off-topic but I wondered what you guys would make of the rental market. We have been looking to rent for a few weeks now and have seen mostly tower and new condo units (1BR and 2BR) for $1100 to $1450. Most landlords seemed pretty eager, were willing to offer at least $100 off and almost hounded us when we didn’t call back.I can still see the same units on craigslist that were offered 3 weeks ago, indicating an oversupply of rental units (or a price mismatch). Is there an actual excess of housing in BC or do I just happen to look at an unattractive market slice? Do you guys think rents are going to go up (more and more people who assume the crash will happen are waiting to buy, therefore increasing demand for rentals) or down… Read more »
jesse
Member

@Bank Safely: ” I though Van East was where SFH was still moving?”

Not for my relative. There are parts of Van East that are moving but I don’t think it’s ubiquitous. I’m not reading much into it, but there were few offers — a few lowballs with long completion terms — and it could easily be agent laziness/incompetence, or just as likely an unrealistic price floor by my relative. That is, the expected sales price communicated to the Realtor basically said they weren’t that serious about selling and the Realtor put as much time into the listing as it warranted, namely almost nothing.

registered
Member
registered

8 patriotz Says: “As I’ve said, I think the banks are most worried about their consumer loan exposure which would be collateral damage from a housing bust.”

A safe bet, banks already made public pronouncements on the risk posed by housing debt to their other credit products. It’s a startling indicator of just how far out of wack the CMHC’s manipulation of the market became when its beneficiaries start complaining.

Anonymous
Guest
Anonymous

@jesse: The only hot part of Van East is around 49th and Inverness *wink*

Best place on meth
Member
Best place on meth

Banks may have their mortgages insured by CMHC, but they no longer have HELOC’s insured and those have ballooned over the past few years.

On a side note I got the oddest wrong number call at work today:

“Hi, I missed your call – did you call me about renting a condo?”

WTF?

bum
Guest
bum

two close friends of mine got 50k helocks each within the last year. they are at their max right now.

Makaya
Member
Makaya
And here comes the needle… Mortgage brokers warn about new refinancing rules Canada’s mortgage brokers are warning the banking regulator that its proposed mortgage underwriting rules could result in people losing their homes. The brokers are concerned about a number of the potential rules, but the one that worries them most outlines what banks would have to do when a consumer wants to renew or refinance their mortgage. The proposed rules suggest that banks recheck areas such as employment status, current income and the current value of the home for renewals and refinancings. “This would be a significant, significant change,” Jim Murphy, the head of the Canadian Association of Accredited Mortgage Professionals (CAAMP). [you bet!] Currently, when mortgages come up for renewal, banks tend to focus on the borrower’s payment history. They rarely appraise the property again and not all… Read more »
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