When the right thing to declare is Bankruptcy

Many Franks pointed out this profile from CBC’s Sunday Edition on a bankrupt homeowner.

This isn’t really a tragedy.

It isn’t even just a story about personal responsibility.

This is actually a simple “here’s what” for all the policy makers who thought “what could be the downside of offering up government backed zero down 40 year loans?”.

Sure, it’s all ‘booming economy this’, ‘free money that’ for a while.

And who doesn’t like free money?

Seven times in the preceding two years I had approached the bank that held the lion’s share of my credit card debt and asked them to reduce the interest from 20 percent to something more manageable, something more like 10. I explained that I had been laid off, that I was now not only a single mom but a full-time student, living on student loans. I explained that I was trying my best to pay it off but I couldn’t even make a dent in it with interest that high. Seven times they turned me down. The last time I met with a bank officer, she told me to make all my payments on time for a year and then come back and she’d consider it. I shuffled off, head bowed.

And then the mortgage company told me they were calling the mortgage – a forty-year-mortgage with no money down, made back in the day when you could still do that. I have paid nearly sixty thousand dollars towards that mortgage. Nearly five years in, I have yet to touch the principal. Get a new lender, they told me or come up with the pay-out amount, the same amount of money I borrowed initially. Impossible. I cried.

The silver lining? Bankruptcy was a relief. The kids will be fine, their mother obviously loves them, and the bank made their money.

I paid that credit card debt four times over. The bank is NOT getting ripped off here. They’ve done just fine by me. And my house? We loved our little house, it has been just lovely for us. And now it will be just lovely for some other family who needs a home. We’ll find another little house, or an apartment, and we will make it fine for us, too.

Read the full story over at the CBC.

story submitted by iconoclast

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Sunshine 123

@ Anonymous 144
“They are separate issues..”
No wonder you stayed Anonymous, the issues are obviously completely related because the rats will be near the dumpsters which will be expanding right into the MC2 area…Go troll somewhere else Anonymous.


” Enjoy the 180′ ocean, city, mountain views from the large sundeck over looking Kits Beach. ”


what a joke, crappy 10X zoomed in picture of a totally obstructed view. And realtors wonder why they get a bad rap….idiot


@148 What’s there not to get? If a house doesn’t sell it either remains in inventory or potentially part of shadow inventory where the seller likely wishes to sell it but it is not listed. Sure some owners may have completely changed their mind about selling and then you may be able to state it is gone from any shadow inventory as well. We will never know. Those are the only possibilities by simple exhaustion. Therefore, if you forecast out reasonable sales, you can calculate Months to clear current inventory. Again, this is current inventory (not future listings) and by inventory I mean both listed and future shadow inventory (thus taking into account future delistings). The only assumption is that once someone lists a home, it fails to sell, and is delisted it, it stays in shadow inventory. Let me… Read more »


The rats that this city needs to worry about are the two legged variety at the corner of Cambie and 12th.



You don’t get it.

If MOI is (say) 6 months, that does NOT mean that inventory would clear to zero in 6 months, given no new listings and an unchanged rate of sales and delistings.

MOI is calculated only from sales and ignores delistings, i,e. it always underestimates the total attrition of listings.

Thus inventory would clear faster. The more delistings relative to sales, the more MOI underestimates attrition and overestimates the clearing period.


Vancouver’s Green Composting Program is expanding!


The transfer station at Main & Cambie, across from MC2 project expected to become a lot busier… More rats and garbage smells!

That’s OK, as long as no one puts in a retirement home or hospice.


Anon 144
I hear you. Many realtors try to capitalize on “walking distance to Starbucks”, NOBODY will on walking distance to the garbage dump.


@ patriotz

That’s why I said: “including future shifts to delisted shadow inventory”

You have nitpicking down to a science.


@Patsan #143

“Never in your life you will see such fatten to slaughter rat families.”

This sentence is unintelligible. Real estate in Vancouver is in a deflating bubble. MC2 pre-sales will be worth less once the units are actually complete. This has NOTHING to do with rats. Many cities around the world have far worse rat problems than Vancouver does. Many cities have far worse rat problems and don’t have housing in a bubble. They are separate issues.


Let me share some hands-on experience with the transfer station between Cambie and Main.
Long time ago we lived in our own townhouse that was about the distance from the station comparing to the MC2 project. We had a lot of fun with close proximity to the station for many reasons.
Future owners of MC2 beware:
1. Never in your life you will see such fatten to slaughter rat families.
2. On worm sunny days when normal people open windows, you will think twice before doing so because of unforgettable odor from the station.


From the comments to Barry’s article – a perfect explanation (the rest of this comment contains some questionable statements): “I am an American who has been in Canada since 1994 and has worked in Banking most of the time since. One thing that struck me soon after arriving is that there are oligopolies in most large industries. I came to realize that this is because Canada has an inherent insecurity being right next to the largest super power in the world. As a result, there is a fear of being dominated by the use in many spheres including in business. To prevent this Canada has wanted to have Companies large enough to hold their own against US competitors. Give the size of Canada relative to the US (1/10th the size) the only way to do this is to create oligopolies.… Read more »


An article by Barry Ritholz:

April 10, 2013
Why Canada Avoids Banking Crises


As usual, the comments is the best part. In general, I am surprised how popular the idea of “there are no subprime mortgages and there is a solid banking system in Canada” is among Americans and Canadians.

Bull! Bull! Bull!

i’m looking at the charts you linked too, and i don’t see anything exciting. inventor, moi, sales, etc, are all close to levels we’ve seen before.

what are the charts telling you?

on the other hand, when i look at Ottawa and Montreal charts i see a potential blood bath.

i think bears are seeing things that aren’t there. just as they irrationally see a civic composting program as hurting condo buyers (Bo Xilia’s comment), they see something dramatic in what the data tells us is at worst a cooling market.

Bull! Bull! Bull!

Main & Cambie don’t intersect Bo. How do you define ‘across from’, because the transfer station is not across the street from MC2.

Maybe you define it as, across 2 streets, a condo development, a warehouse block, and then a left turn.

great to see bear logic at work.

Bo Xilai

Vancouver’s Green Composting Program is expanding!


The transfer station at Main & Cambie, across from MC2 project expected to become a lot busier… More rats and garbage smells!


re: “Sales up, MOI down, Correction is over…..”

someone forgot to take seasonality into account.

easiest way to understand this is by looking at Jesse’s charts

Special attention to the Inventory chart, Sales chart, and Sales/work-day chart.


re: “… Correction is over…..”

– Prices are now about 5% below peak which occurred about a year ago. This is rate of decline is typical of what we saw in the US during the early phase of the crash.

– Prices have leveled out or slightly increased during the last few months. Some markets in the US also saw this pattern – during the second year of the decline there was a leveling off period which lasted a few months before declines continued at a faster rate.

– Inventory is a leading indicator of where prices are heading. Currently it is indicating lower prices more strongly than it has at any point in the last decade.



Over the last 7 days the average daily increase was:
At this rate we would reach 17,000 in 0 days (Apr-11-13)
At this rate we would reach 20,000 in 50 days (May-30-13)

Last year during the same period the average was 35

Over the last 30 days the average daily increase was: 29
Last Year during the same period it was: 30
And last last week it was: 26

Inventory is at the highest level it has been in the last decade. And it is increasing at a faster rate than the previous record for this period. This is a strong indication we will see further significant declines in prices.


No correction this year because:

1) Look at Calgary. Record low inventory. Ben Rabudoux says it is solid.

2) Interest rates not going up for a long time. Doing so would hurt record high house prices, record high stock prices, record high bond prices. Isn’t this where all the rich people park their money? They make the rules. Only way out is for sustained inflation.

3) no more Flaherty, Cmhc, osfi changes to regulations.

Wishful thinking does not make it real. Why on earth would vancouver crash if Calgary is booming?

Maybe next year. Anyone that thumbs down this post…well good luck with your life.

Bulls Finally Get It

@ Next Year

“The correction is over” = Acknowledgement that the correction has been happening.

That’s a good start. Welcome aboard.

Next Year

MOI continues to drop, sales continue to rise. HPI will have another month-over-month uptick this month. The correction is over.

The data does not lie. Instead of reflexively voting this down, why not try to argue against it. You claim to love the data, well the data is telling you that the correction is over. Let’s see how you deal with this argument.


Financial Post: “The West is driving new home price gains in Canada”
– hmm, shouldn’t “The West” include BC? Where’s BC in that article?

– ah.. found the BC data in the Bloomberg article:

Bloomberg: “Among the 21 metropolitan regions surveyed, 4 posted 12- month price declines in February. The largest annual decreases continued to be in British Columbia, where new housing prices in Victoria were down 2.2% and prices in Vancouver declined 0.6%. Vancouver and Victoria have not seen annual increases in new home prices since September 2011 and September 2008, respectively.”

Short'em High

@patriotz#129. That is an interesting thought experiment. Zero relistings. Let’s think about which sellers would delist their property long enough to be excluded from the next month’s inventory reading. If average sale prices rapidly increased, some sellers’ financial condition might improve enough to withdraw their listing. That is plausible. However, if prices are changing very slowly or declining, which sellers would be delisting? The answer, for practical purposes, is zero. If a property doesn’t change hands, the financial obligation of that property doesn’t change hands either. This is what MOI is measuring and it does so on the very reasonable assumption that everybody isn’t suddenly winning the lotto. Technically, it would be nice to know how many properties are permanently delisted when prices are rapidly increasing. But, when prices are changing slowly or decreasing, the number of delistings drops out… Read more »


No, because MOI is inventory divided by sales only, not sales + delistings. If there were no new listings and inventory declined at the previous rate it would clear much more quickly than would be given by MOI.



I see – it is a pretty inaccurate measure. Last month’s MOI is then effectively stating how many consecutive March-like months would it take to clear current inventory (including future shifts to delisted shadow inventory).