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0.5% of Home Get Foreclosure Notice

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April 29, 2008 – Comments (3)

Amazing, in the last quarter more than 0.5% of homes, 1 in 194, got foreclosure notices in this past quarter.

I worked in the bank through Vancouver's 1980-1982 bubble burst and I saw people lose their home, but my sense is this one quarter is the same as the total we had in that period.   People had way more equity and were not mortgaged to the hilt. 

As I've stated before, Canada has a far more stable financial system just from the fact that mortgage rates are only guaranteed for a maximum of 5 years, usually.  There are some offered at 7 and 10 years but the premium on the rate charge means they aren't used much. 

So, when interest rates sky rocketed in the late 70s and early 80s people saw their payments go up a lot when they had to renew their mortgage, but they all elected 1 year terms.  Most mortgages were under $50k, indeed, I only remember one mortgage over $50k in the small place I worked.  So, people had to rein in spending and saw their mortgage payments go up.  In two-three years rates were back to normal and only one year of the rate reset was really hard.

Many people had made extra payments on their mortgage.  Indeed, even though there were people really struggling, it was also a period where I saw many people paying off their mortgage on a house, not a condo or townhouse, in their 30s.  People had the income to absorb the hit and it eased up fairly quickly.

But then, when I look back at Vancouver's economy from this and I considered my own employment history, all of the financial institutions I worked for went under.  A travel agency I worked for went under.  A specialty chemical place I worked for went under.  None of the businesses I worked for between 1979 and 1986 survived.  I didn't really consider how profound that is until very recently.  I just knew that I felt very put down a lot for not having a steady employment record.

3 Comments – Post Your Own

#1) On April 29, 2008 at 12:08 PM, ricoy5 (25.86) wrote:

dwot,

You generally make a lot of good points, but I must disagree with you again on this housing/lending issue...  mostly because you speak from the lens that you are used to, and it differs much from the one I see.  You see the price of homes as WAY too high... so  much so that getting a loan to buy one should be the exception (paraphrased from your post 2 wks ago)

The price of a home is variable, and fluxuates most through the demand for that home.  While I agree that the loose (non) credit underwritting and low interest rates allows speculators to artificially pump up demand, in general that demand is still high in lots of places.

The value of my home has slipped a little bit from the "peak"; a neighbor just sold for $675,000 that would have fetched $725 12-18mo ago.  The same could be said for other places in America... the value of corn is sky high... so therefore the price of farmland in Kansas is also peaking (as of yesterday, per NPR)

I'm not disparaging where you, or anyone else, are from, but it is not a one-size-fits-all.  People keeps moving here to Los Angeles.  ALL THE TIME.  This keeps the value up. 

No worries... to hear the blogs on this site, I'm the only person in America to get a fixed rate, fully doc, 80% LTV with my own equity.   But for me, I'm fine with it.  My wife and I are pretty securely employed, and we both have no intention of ever living somewhere else... so we pay a premium to live in Los Angeles.

People who want to live in LA but don't want to pay that premium, they live in Landcaster or Riverside... and then realize, "wait, this place isn't LA, this place sucks..." and the value of their community plummets.  People who buy homes at the peak price in places where no one is moving to, won't keep those same levels...

and people who buy homes that they can't afford, either through lying about thier income, or using creative and risky leverging techniques... they will always struggle to keep their home, whether they bought at the peak or not, recession or not.

anyways... I started this with a coherent rebuttle, and I think it's in there somewhere, but mostly I just rambled.... carry on, and keep up the good posts, I generally like your work.

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#2) On April 29, 2008 at 9:01 PM, dwot (49.06) wrote:

ricoy5, news indicated your area is down about 20% in price and I personally believe the forecasts that say another 20% down before it settles.

I can't see how the US escapes a stagnation of wages this round.  There has been a stagnation of wage in the US, but I am convinced that Vancouver has had it about 10 years longer than most people and places in the US. 

You are right that I see it though what I've seen, but that's also why I think things will be far worse than you anticipate.   At some point governments have to start paying their bills or make cuts and that's going either be a tax hit or an economic slow down.

The last three posts on my Making Sense of My World blog are about housing bubbles I've been around.  I've lived in Vancouver for 3 and Toronto for 1.  Vancouver's third one is still going strong.

The first of the 3, where I put together the two housing price graphs you can see how much more Vancouver has gone up, where as a percentage starting from 2001 it didn't look so steep.  The consumer price index was reset with Vancouver at high prices when wages hadn't kept up at all and constantly I knew we were the most expensive place yet our rate of inflation would come in lower.  It was because the high housing costs made the base higher and I didn't realise how much that was being used against workers in negotiations.  So, we had zero increase in housing for 8-9 years, yet other costs were going crazy and they'd tell use inflation was under 2%.

Your home looks like it was expensive.  May you not have any job losses or pay cuts... 

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#3) On April 29, 2008 at 11:04 PM, dwot (49.06) wrote:

This link has actual prices...

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