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U.S. home foreclosures: the worst isn't over

The Associated Press

Latest comment posted at 7:09 PM EDT 16/04/08

Foreclosure filings against home owners soar 57 per cent in March, compared with a year ago, as growing numbers of Americans mail in their keys and walk away, according to a new report ...Read the full article

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  1. Dom From TO from Ontario, Canada writes: And does everyone really believe we are immune to this?? Not going to happen here because our banks and consumers are so much smarter, is that about right?

    Good Luck.
  2. Richard Ball from Canada writes: Dom From TO: Sorry to burst your negative Canadian bubble, but the conditions that precipitated the US housing disaster are not present in Canada, namely, a) inflated expectations of ever-increasing prices, b) super-easy credit to unqualified purchasers, and c) variable rate mortgages where the rate is very low for the first year or two and then doubles when the initial period is over.

    However, if Canada is pulled into a recession, it will put (normal) downward pressure on house prices.
  3. Dom From TO from Ontario, Canada writes: Thanks Richard, Moo Moo said the cow as it followed the herd over the cliff. My bubble ain't burst because I sold. But thanks for your insightful and well researched comments.
  4. Wilma De Bruyn from Toronto, Canada writes: And the Private Bankers are laughing all the way (inside the Bank). Committee of 300=the great manipulators.
  5. Dr Demento from Canada writes: The situation is far worse in the US for the reasons expressed by Richard Ball. In addition, mortgage interest in the USA is tax deductible, unlike in Canada. This creates an incentive for American homeowners to carry as large a mortgage as possible. In Canada it is to your benefit to pay off your mortgage as soon as possible.

    There really is no comparison . . .
  6. Steve Not an Alberta Redneck from Calgary, Canada writes: There are people who have used the increase in their house's value to subsidize their lifestyle. Also, new buyers may be in over their head, but this is nothing like the American situation. However, look for prices to decline in many markets.
  7. Mitchell Cardno from Calgary, Canada writes: Anyone care to explain Stats Canada's New Housing Price Index (April 11, 2008)?

    Basis was 100 in 1997. If inflation were 2% a year, over 11 years, the inflation adjusted price index would be 124.

    Some major cities extracted from the document
    Vancouver - 123.8
    Victoria - 119.3
    Calgary - 251.4
    Edmonton - 245.7
    Regina - 218.7
    Windsor - 103.6
    Toronto - 145.3

    Sure we may not have a national housing crisis, but I find it very difficult to believe that some major Canadian cities (Alberta) are not going to follow the U.S. housing market crash, irregardless of lending practices by banks
  8. Dave S from Canada writes: Mitchell Cardno from Calgary, Canada writes: Sure we may not have a national housing crisis, but I find it very difficult to believe that some major Canadian cities (Alberta) are not going to follow the U.S. housing market crash, irregardless of lending practices by banks
    _________________________________________________

    Alberta is in the process of repeating their blunders of the last oil boom. If anyone recalls, people just walked away from their houses and their corresponding mountains of debt when the price of oil plummeted.

    One can only hope oil prices come down gradually enough for people to adapt this time or are supported in the long term by new Asian demand.

    Seems like the new generation will have to learn this lesson again in Alberta.
  9. H M from Canada writes: Given that pretty much every single new homeowner did a 5% downpayment, all those mortgages are insured.
    And at no point were Canadian banks giving mortgages to people with no income.
    I am sure there are people who have been doing equity-takeouts who will be in over their heads or 'upside down' on their property, and Calgary especially is overvalued.
  10. Mitchell Cardno from Calgary, Canada writes: Directly from Canada Housing and Mortgage Corporation

    A CMHC insured mortgage provides you with down payment flexibilities - you can own your home with little or no down payment.

    With CMHC Flex 100, lenders are able to offer qualifying home buyers financing of up to 100% of a home's value. CMHC Flex 100 is well suited for home buyers with a proven track record of managing their debt and the financial capacity to afford homeownership but who have not yet saved up a 5% down payment.

    Something tells me that we're not as immune to a housing crisis as we like to think we are
  11. Mitchell Cardno from Calgary, Canada writes: The link to CMHC's premiums is:

    http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm
  12. Dom From TO from Ontario, Canada writes: Mitchell, careful! No bubble bursting allowed. This is strictly a forum to pump real estate. Real Estate is the only possible smart investment.

    Sorry for the sarcasm but the herd mentailty is still very bullish. This reminds me of the posters when Google was above $700 screaming to buy.....2000 tech bubble euphoria is present as well.

    Good Luck.
  13. Gold Standard from Canada writes: People need to wake up to real money and what is happening. Big business is consolidating 9getting rid of the little guy) and the Fed is going to own all the properties for nothing more than printed money which we will be paying for by lowering its value.

    LOL wow we are such suckers.

    Garbage like this cannot happen with a real dollar thats backed by real money.
  14. Keith Sawatsky from Calgary, Canada writes: We're toast........things are exactly the same here as they are in the US. Our 'trigger" event just has not yet occured. In Calgary, the trigger will probably be our dramatically falling sales, as they have been down between 30-40% each and every month for the last 5 months in a row. People are waking up from the years of propoganda forced down our throats by the REIC (real estate industrial complex).

    Zero down, zero job, zero credit mortgages were/are available here........the infamous NINJA loans.

    Our house prices doubled and in some cases tripled over 2 years in many major cities. Not a single economic event has justified this, and I doubt there is one that could. Pure speculation and easy credit did it. Sound familiar......??

    When I can rent for 1/3 the cost of buying a place, why buy at our insane property valautions? It's only shelter after all........
  15. Concerned Canadian from Streetsville, Canada writes: It amazes me that there can be so many readers of the G&M that do not grasp the differences between the Canadaian and US markets. THe economy in Canada is not as bad as the US. We are adding jobs every months. The US is losing jobs every month. Our trade surplus is growing. US trade deficit is growing.

    Canada's economy is more diverse and we are expanding our trade with partners outside of the US.

    While we will feel the pain if the US falls into a recession, we will not have the same kind of foreclosures as the US simply because the structure is different
  16. Adil Burney from Canada writes: Concerned Canadian from Streetsville, Canada writes: "Canada's economy is more diverse"

    If this is so, (I assume that he means that Canada's economy is more diverse than the US), then why is 75% of the TSX either mining/oil&gas/commodity/banking? Why are there few pharmas, consumer good, retail plays?

    While Canada's economy may doing better (for now) than the US, let's not delude ourselves that we are more diverse. We ship about 75% of our exports to the US. We are heavily leveraged to the commodity markets and our 6 banks.

    As for all the arguments that our housing is different because we don't have subprime: Did they have subprime in Britain, Spain & Ireland? Then why are their prices falling?
    http://canadahousingcrash.blogspot.com/2008/04/housing-bubble-bursting-worldwide.html

    Subprime didn't sink the US. High prices, high inventories & imploding banks are a dangerous combo. Right now, we have the high prices and the inventories and imploding banks look like they may be coming. Somehow the bulls like to believe that housing only goes up... We have "overprime" http://canadahousingcrash.blogspot.com/2008/04/canadas-overprime-problem.html

    Bulls, please explain why those other markets are falling. I expect that you will say b/c they had bigger run ups than Canada, but the US runup was of similar magnitude to Canadas...
  17. Peter Simpson from Vancouver, Canada writes: "Nevada clocked in the worst foreclosure rate for the 15th straight month. One in every 139 households in the state received a foreclosure-related notice last March."

    No surprise here. Miles and miles of flat easy to build on land. Loads of cheap, in many cases illegal workers, creating homes for under 200k and selling them for 500k.

    This is what Warren Buffet scratch his head.....a big disconnect between costs and sale.

    Flood Vancouver, Calgary and Toronto with cheap workers. Wave a magic wand to create miles of unused land. Use predatory lending practices. Dramatically slow the economy. And prices will fall.
  18. Peter Simpson from Vancouver, Canada writes: Adil Burney -

    Britain, Spain and Ireland saw major run ups for different reasons. Spain decided not too many years ago to walk away from the dark ages and join Western Europe. Then Barcelona had the Olympics....Spain attracted businesses and foreign investment....there's lots of great weather spurred get away places...

    Ireland created a tax free zone in the West, this was a sweetheart deal cut with the EU and businesses flooded in. Housing, like most things in Ireland, is a long drawn out experience. Simply put, they have been very poor at meeting the housing demands of new comers. Their population has been rising as people move in, mainly from Poland, and young Irish stay in Ireland.

    London arguably displaced New York after 911 where tens of thousands of highly paid jobs were added. And the UK economy has done very well. (Housing has softened each of the last 5 months.)

    Anyway, they did have a very big run - quite possibly higher than ours - up but the supply side has probably caught the demand side.
  19. John Connor from Canada writes: When someone has nothing to lose, chances are they will lose it. The policy of "insuring" a high ratio mortgage with a loan to value ratio in excess of 90% is misguided, and dangerous.

    Remember what CMHC is. It's a government entity funded by premiums paid by borrowers as a percentage of the loan to insure the lender (usually banks, trust companies, etc) against default.

    Since the cost to the borrower is low, compared to the amount of coverage obtained, the difference, if default occurs, comes from.....TAXPAYERS!

    This theory is sound in good times, when income is strong, jobs plentiful, and debts covered. However; enter recession, layoffs begin, incomes drop, EI is unavailable dut to recent changes, debt loads are still high......Getting the picture.

    Who picks up the tab? The taxpayer of course.
    I say again, with little to lose, one might just lose it.
  20. Concerned Canadian from Streetsville, Canada writes: Adil Burney from Canada writes: As for all the arguments that our housing is different because we don't have subprime: Did they have subprime in Britain, Spain & Ireland? Then why are their prices falling?

    As a matter of fact tehy did have a version of "sub-prime". I lived in England from 1999 to 2004 during that time banks were offering mortgages with zero down payment, some banks ev en offered interest only mortgages so that no equity was ever developed in your property.

    Canada is different you must have a minimum 5% downpayment and anything less than 25% must be insured.

    As far as diversity is concerend, we are continually diversifying our exports as little as 20 years ago nearly 90% of our exports went to the US now closer to 70%.

    Housing prices may get thier every 20 year adjustment but it is not possible for the same ails of the US to invade Canada.
  21. Dom From TO from Ontario, Canada writes: Concerned Canadian, it is 20% not 25% now. Recently changed, (but since you are so on the ball you obviously knew that and mis-typed)

    No 0% down mortgages in Canada? Open any newspaper to the real estate section and see "0% down and even 7% cash back"

    Please stop making uninformed comments, you might mislead the average reader.

    Thanks,
  22. Volatility Stalker from Canada writes: The potential housing problem in Canada is not related to sub prime - but neither is the US housing situation. The primary issue is what multiples of yearly income are required to buy a home.

    By that measure, Vancouver is a crisis waiting to happen. So are some other Canadian cities. Spain, Ireland and the UK are in a worse bubble than either the US or Canada.

    It might be interesting to note that the US is "fortunate" to see their bubble burst first. All the news of foreclosures to the south represent a cleanup effort in progress. It is likely their market will stabilize as others begin their trip down the hill in due course.
  23. Adil Burney from Canada writes: Peter Simpson: thanks for the bullish details on Britain, Ireland and Spain. I agree with your reasoning but let's remember one thing. All booms are founded on real fundamentals, but the party usually gets too carried away. Look at the tech boom of the 90s. The internet was the biggest thing since sliced bread. But it got overdone. The same thing for Spain, Ireland, Britain. No one is saying that they are going back to the 70s. But drop in prices is likely. SAme for the US and Canada. Canada is in far better shape today than in 1993. Housing prices partly reflect that. HOwever, it has got overdone. The same way prices can go up 20% annually, they can also go down 20% over a few years...

    Concerned Canadian: 70% is 70%; Canada has diversified but we are heavily US dependent on exports and exports are a huge part of GDP. 0% down or 5% down (both exist here). It is a drop in the bucket as far as equity in a house. If the house drops 5%, you have lost all your equity. 40 yr amortizations mean you are basically paying interest.

    Volatility Stalker is right- subprime is not the reason in the US and Vancouver is in trouble as the yearly income required to buy is off the charts. And with due respect to the beautiful city of VAncouver, it should not carry such a huge premium in affordability vs other CDn cities. Yes, I know that it doesn't really have winter, but it is not exactly Hawaii...
  24. bill k from Canada writes: No sub-prime? Zero down or 5% down on a 40 year mortgage is insane. One couple on maxed out ( a tv show) bought a house and used their credit cards to pay the 5% down payment plus if that wasn't bad enough had used their line of credit to make mortgage payments. If this isn't a house of cards you people are clueless. What do people with nothing have to lose? Anyone taking a 40 year mortgage is not thing about paying it back but are just riding the wave to sell at a later date for more money or if worse comes to worse walk away with out losing anything. 40 years allowed the bubble to last a couple years longer and even RE agents admit that helped the house of cards that much longer.

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