Rate surge in Lower Mainland, but not comparable to U.S.-style meltdown
Ian Austin
Province
Kap Hiroti is a foreclosure expert at Foreclosurelist.ca. Photograph by : Gerry Kahrmann, The Province
Lower Mainland foreclosures have doubled in the last two years as affordability has decreased along with the promise of quick profits.
Kap Hiroti, who tracks Lower Mainland foreclosures at ForeclosureList.com, says foreclosures stand at 20 per week, up from 10 per week in 2006.
“For one reason or another, they didn’t pay the mortgage, or insurance, or property tax,” says Hiroti, who advises real estate owners looking to foreclose or prospective buyers looking to buy a foreclosed property. “Or they get behind in their strata or condo fees, or face a one-time cost such as a roof or a leaky condo, which might set them back 40, 50 or 60 thousand dollars.”
The Lower Mainland, largely buoyed by Olympic optimism and a good international reputation, has so far eluded the real-estate meltdown south of the border.
In the U.S., home foreclosures hit a record high in the first quarter. Almost one in 100 homes were pushed into a foreclosure proceeding in the quarter, the Mortgage Bankers Association reports.
And the U.S. mortgage delinquency rate hit a record 6.35 per cent, indicating foreclosures will still climb.
As house prices fall in the U.S., foreclosures often result when people whose mortgage is worth much more than a home’s potential selling price simply walk away rather than make payments on a losing proposition.
Even Ed McMahon, Johnny Carson’s sidekick on “The Tonight Show” for three decades, may lose his home to foreclosure. McMahon’s Mediterranean-style estate on storied Mulholland Drive north of Beverly Hills faces a $643,596 default notice on a $4.8-million mortgage.
Former baseball star Jose Canseco is another of the 650,000 U.S. homeowners in the foreclosure process.
“It’s happening to anyone and everyone,” Canseco says.
Hiroti believes the Lower Mainland real-estate market has “flatlined,” meaning investors who were counting on making a profit no longer see an upside.
As a result, some have chosen to lose their investments through foreclosure rather than hanging on with no sign of a significant upside return.
“They were kind of speculating that the market would go up, but when the market flatlines, some people just choose to get out. Local people are getting priced out of the market.”
Helmut Pastrick, chief economist with Credit Union Central of B.C., says many foreclosures result from unexpected turns of events — a job loss, a divorce — and are not necessarily driven by traditional investment decisions or market swings: “It could be income, divorce, or a change in the household.”
Falling interest rates will help some people who have trouble making payments, he says.
“Since January, mortgage rates have dropped more than one per cent. I think we’ll see rates at this level, or even lower, through the end of this year, and they shouldn’t increase until at least 2009.”
Pastrick says most Canadian lenders have taken a much more cautious approach to lending money. He doesn’t expect as many Canadians to be faced with foreclosure as in the U.S., where the twin problems of lax lending standards and falling housing prices have created a crisis.
The foreclosure news comes at a time when the once-hot Lower Mainland housing market has cooled significantly. Greater Vancouver sales were down 33 per cent in May from a year earlier.
After four years of double-digit price increases, the latest figures show a year-over-year increase of just 5.5 per cent so far in 2008.
Observers say a U.S.-style housing market collapse here is unlikely, thanks to Vancouver‘s healthy job market, population growth and a location constrained by mountains, ocean and the U.S. border.
© The Vancouver Province 2008
