We love debt even more than Americans

Canadian consumer debt.  It’s not just growing, it’s growing faster.

Transunion has released their latest quarterly analysis and it shows Canadian household debt loads increasing 400% percent faster than inflation.

Statistics Canada pegs Canadian household market debt at an astounding 163% of disposable income.

For comparisons sake, the US housing bubble saw household debt peak in 2007 at 128% of disposable income.  By 2011 the US rate was down to 112%.

The good news? Credit card debt is actually down year over year and delinquencies across all types of debt remain low.

Transunion puts the average household non-mortgage debt at $26,768.  Do you owe more or less than that?

Higgins said the increase stands in stark contrast to encouraging signs from relatively stagnant debt growth in the prior three quarters.

He also points out that in the past five years, debt loads have increased 400 per cent more than the rate of inflation — with inflation as measured by the Consumer Price Index up nine per cent and consumer debt jumping more than 37 per cent.

“Debt’s outpacing us and continues to outpace us, so at some point in time there’s going to be a reconciliation,” Higgins said.

“Hopefully it’s not drastic and hopefully it doesn’t hit everybody, but there’s going to be a correction somehow along the way.”

Read the full article over at the CBC.

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patriotz
Member
Davidoff warns that could quickly change if there is a significant dip in housing prices. “If prices fall 20 or 30 per cent, this could absolutely happen, some people think it’s in process already in Toronto and Vancouver, and if prices were to fall in the 20 to 30 percent range, these debt levels become difficult to sustain, because you don’t have the asset wealth to pay off what you owe.” Davidoff’s reasoning is faulty. Households in aggregate cannot pay off their debts with their housing, because they simply sell it to each other. In other words, if Joe decides to sell his house to pay off his debts, he does so by selling it to John, who borrows to pay Joe. Households in aggregate can only service their debts from income. When house prices fall, it doesn’t change the… Read more »
rp1
Guest
rp1

@patriotz: Your asset wealth is my liability if I am obligated to buy from you. Or it might be my liability anyways if you default and leave the government on the hook.

Anonymous
Guest
Anonymous

Yesterday was a big sales day. Anyone care to put forward any explanations for yesterday’s big sales day. An aberation? People trying to get in under the wire of OSFI changes (haven’t those all kicked in yet?)? Knife catching? More HAM from China? The bubble is continuing to inflate because it really is different here? There were 121 sales yesterday according to paulb.

Extend and Pretend
Guest
Extend and Pretend

@Anonymous: Sales Explanations.

While knowing the reason for a high or low sales day is interesting for gaining insight on future sales turns up or down, the only thing that matters now is a flat or increasing MoI trajectory while sale prices continue to decline or remain flat.

In fact, I think it is worse if buyers all clue in at once and sales drop off to nothing. What is needed is steady erosion of wealth month after month with plenty of sales at each lower price so that the various price indexes like Teranet and HPI have no mathematical choices, except down.

Tick tock, drip drip…

Slow erosion of wealth while credit card debts keep climbing…

http://www.youtube.com/watch?v=kIbEj1CIpuU

Loon
Guest
Loon

@Anonymous:
It was sunny. Next.

specialfx3000
Member
specialfx3000

We all know that sales processed on a particular day are not sales that finalized that day. They are likely 10-20 days ago that are getting processed.

If I’m not mistaken, Paulb’s sales numbers include attached; so could lots of these be for sales from the recent Station Square and other Bull$hit sell-out projects that are officially getting on the books?

(Or do presales even count toward sales numbers?)

I also agree that steady sales with steady price declines is a good thing. Unless a sale takes place, numbers remain unchanged.

Imagine all sellers don’t budge and no one buys, then price index will always remain high.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

In yesterday’s thread I noticed that the local armchair economists are expecting a Us style crash because our consumer debt levels are at the same level as the US when they had there crash.

But it seems to me that bears are born bearish and then look for reasons to justify their positions.

When our consumer debt was lower why weren’t you out buying houses and flipping them? You could be a rich bull by now.

For the past 6 1/2 years bears grasp at whatever fact or figure they can find to justify there crash hypothesis. And they are always wrong.

Guys, it’s getting a bit sad and pathetic.

jesse
Member
@Anonymous: “Yesterday was a big sales day” Here are the stats from November 2010 and 2011: November 2011 data Average Sales 116 Total Sales 2426 Average Listings 155 Total Listings 3263 Average sell/list 74% Days in month 21 Sales 2,426 Listings 3,263 Max daily sales 167 Min daily sales 87 Max daily listings 229 Min daily listings 92 November 2010 data Average Sales 122 Total Sales 2566 Average Listings 144 Total Listings 3026 Average sell/list 85% Days in month 21 Sales 2,566 Listings 3,026 Max daily sales 152 Min daily sales 93 Max daily listings 191 Min daily listings 83
patriotz
Member

@specialfx3000:
“Imagine all sellers don’t budge and no one buys, then price index will always remain high.”

Someone always buys because someone always has to sell.

Bailing in BC
Guest
Bailing in BC

I found this in the Sun and it made me laugh. Is this bloke Higgins trying to say that lots of people in the States were in negative positions before the crash?

“Higgins said the real estate slowdown has been gentle rather than abrupt, and he doesn’t expect prices to drop suddenly or significantly. He said Canada’s situation is very different from the United States before the crash because Canada has very few people in a negative position on their mortgages and people do not have mortgages with sudden, large interest rate increases.”

Read more: http://www.vancouversun.com/business/Canadians+going+overboard+consumer+debt+British+Columbians+most+money/7549887/story.html#ixzz2CJBuD4SS

specialfx3000
Member
specialfx3000

@patriotz:

“Someone always buys because someone always has to sell.”

Houses in Detroit don’t fly off the shelf. Even those that were priced at $1.

My used boxers were for sale at $100. No interest. Kept reducing the price now down to 1 penny. Still no interest. I’m gonna throw it in the garbage tomorrow.

patriotz
Member

@specialfx3000:
You post which I replied to referred specifically to sales in Vancouver.

But the general point is correct, if something has no utility there will be no buyer at any price.

jesse
Member

Here are the November dailies up until now:

74
75
95
79
81
76
66
104
121
Average 85.7
Stdev 17.6

Here are the November 2011 and 2010 dailies:

2011
116
120
167
106
136
118
87
107
141
137
98
125
105
135
102
101
91
91
106
130
107
Average 115.5
Stdev 20.0
2010
96
146
134
97
121
118
140
100
135
125
143
108
148
93
143
152
109
120
96
106
136
Average 122.2
Stdev 19.8
boogeybear
Guest
boogeybear

Why wouldn’t personal debt increase faster?.

It’s time for the last hooray. Take a vacation, buy a TV, etc., etc. Max out those lines of credit and cards. It doesn’t matter if you are about to declare bankruptcy. The creditors can only get so much.

A sudden and significant uptick in consumer debt, is a signal of an upcoming increase in consumer bankruptcies.

Devore
Member
Devore

@specialfx3000: They’re $1 because no one’s buying but there is lots of inventory? Aside from being an interesting thought exercise, there are always transactions taking place. Even if sales are too thin to provide good comparables to your property, buyers will extrapolate from similar sales and add/subtract their own value from the differences.

Anonymous
Guest
Anonymous

High consumer debt is a direct result of a very over valued housing market. As a big portition of a family’s income goes to service the mortgage not much is left for other items and the family is forced to borrow. And more borrowing will lead to even more borrowing until the music stops.

taylor192
Member

Thanks jesse for showing that the “high sales” are merely “average” Nov sales.

Its getting bad when the bulls think a return to the average represents a “high”.

mclovin
Member
mclovin

Yes Bull! Bull! Bull! We are wrong again.

Here’s BMO’s local housing market scorecard:

“Vancouver: Seller be-aware… There’s little doubt that Vancouver faces some of Canada’s least favourable market conditions, with the sales-to-new listings ratio averaging less than 39% in the latest 3 months, near the lowest since the financial crisis. Sales have plunged 27% y/y in the latest 3 months, while the MLS Home Price Index was below year-ago levels in October. Prices have slipped almost 3% in the last 6 months. Despite softer prices, they remain about 10x estimated family income, by far the loftiest valuations in Canada.

Full article below:

http://www.financialpost.com/m/news/blog.html?b=business.financialpost.com/2012/11/15/canadas-home-sales-slide-in-latest-sign-housing-market-is-cooling&pubdate=2012-11-15

Vote Down The Facts
Guest
Vote Down The Facts

I wonder how much debt Canadians have expressed as a ratio of credit available to them? Are they almost maxed out?

Anonymous
Guest
Anonymous

@Anonymous: ….Anyone care to put forward any explanations for yesterday’s big sales day…..

I heard it was because they’re not making any more land! No wait; it’s because we’re hemmed in my mountains and ocean! No wait; it’s because of the great weather! No wait’ it’s because of the Olympics! No wait, it’s because Eath Van ith the new Thaughnessy! No wait, it’s because Cam Good took a dump! No wait; it’s because prices always go up! No wait, it’s because everybody from China is moving here! No wait, it’s because there are new helicopter pads being built everywhere. No wait……

Bally
Guest
Bally

@taylor192:

It is even more striking that bulls will tout the current 25% drop in sales vs. 2011 as the return of a strong market. It’s almost as amusing as them touting all the money they’ve made when they haven’t actually banked a thing. Nothing like a big dose of self-delusion to get you through the day.

crabman
Guest

Steve Keen has found a strong correlation between increasing debt and falling unemployment rates. When Canadians start paying down debt, we should see a big rise in unemployment – like the current situation in the US.

Unsettled Worker
Guest
Unsettled Worker

“According to a survey conducted by the Mustel Research Group, 58 per cent of Metro Vancouver residents believe this is not a good time to sell a home.” (quoted from Winter Sleep for Real Estate Market in Vancouver?)

@patriotz

I agree with you for 100 %. I don´t see any possibility how to sustain our market right now. The question is what will happen next. I hope it won´t be a major crash of economy.

TPFKAA
Guest
TPFKAA

@jesse: Wow. 28% less sales so far. And with a lower std dev too, to really rub it in!

pricedoutfornow
Guest
pricedoutfornow

@Bailing in BC:

I disagree. I know quite a few people who are in negative positions. Perhaps not in the lower mainland, but certainly in the Okanagan there are many people who bought condos or houses which are now worth up to $200k less than what they were in 2007. Someone I know owns a condo which she could sell today for $165k. Problem? Her mortgage is $240k. Also, my old street in Kelowna had houses selling for $500k in 2006 or 2007, now these same houses go on the market for $300k (and often don’t sell for that). Sooo….to say there are “few people in negative positions” in Canada is a falsehood-I guess we just don’t hear about it in the media but certainly these people do exist

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