Edmonton Housing Bust

Wow, this year has just flown by. It’s already that most holy of holidays, that’s right, Festivus! I bet you all have been good little boys and girls, so come on up and get your presents… not so fast, Ernst & Young, you got some ‘splainin’ to do!

I was thinking of doing a “Naughty and Nice” list, an airing of grievances if you will, but that sounds like a lot of work, and I have a Christmas party to get to. The punch bowl isn’t going to spike itself, and without that my creepily hanging out underneath the mistletoe later in the night awkward and lonely. Hard work, but someone’s gotta do it. Instead I come bearing gift, an update on the mortgage arrears numbers. I know, I know, it’s not a Best Buy gift card, but it’s better than socks!

As you can see, we’ve hit yet another new high. Eclipsed the 0.80% mark even. Up from 0.78% last month, and 0.69% a year ago. Cue the chorus, we’re still WAY above the national average of 0.43%, or even the next highest regions, which is a position shared by B.C. and the Atlantic Provinces. Our eastern and western extremes might not have a whole lot in common, but they do share an 0.45% arrears rate.

On the opposite end of the spectrum, Manitoba continues to enjoy the lowest rate in the country at 0.29%. As Manitoba has largely remained unscathed by the housing foolishness that much the rest of Canada has experienced the last few years, I suspect they’ll hold that position for a long while. Saskatchewan comes in at 0.31%, good for second, but they are starting to creep up, and I suspect we will see that rise a fair bit as they’ve had quite a bubble of their own, nominally maybe not as large as ours, but proportionately maybe even larger.

And just for good measure, Ontario and Quebec reside in the middle, and both sit at 0.35%.

So, I’ll send you off on your holidays with that. Hope you’re done your Christmas shopping, or are at least ready for a good scrap for what’s left. I knocked mine out in a mere couple hours last Friday. Fortunately being a young single guy, I enjoy low expectations when it comes to presents. In other words, liquor and gift cards for everyone! I may be lame, but at least I’m self aware.

If you get a chance tonight (or better yet, fire up the PVR), check out a little flick on Movie Central called “Coopers Camera”… it’s a riot of a Christmas movie. It’ll send you into the horror of a weeks worth of family get togethers with a smile on your face, especially those other children of the 70′s/80′s out there! Be warned though, this isn’t one for the kiddies. Happy holidays everyone!

The CBA rolled out their September mortgage arrears figures this week. Seems they may be plotting to perhaps reverse course again, as while they were technically up, it was only by a trace amount. For all intents and purposes it remained effectively unchanged from August in Alberta, at a national high of 0.78% (up from 0.67% a year ago).

Seems to be much the story all across this land on Grey Cup Sunday, as most regions remained unchanged, or at most were up/down no more than 0.01%. Nationally the rate remained at 0.42% for the 5th consecutive month, which is down 0.01% from a year ago. We won’t get into all the provinces numbers this time around, you can read the linked to report for your self should you be so inclined.

Instead, to shake things up a little bit I’m going to take a look at the numbers from a bit of a different angle today for Alberta. Rather than just report the rate, we’ll look at the two numbers that compose said rate, the number of mortgages outstanding, and those in arrears… and specifically, how they change year-over-year.

We can only go back as far as 2004 for this, as while the CBA has numbers going back to 1990, the number of institutions reporting has increased over time, and thus when a major one comes online this of course causes a major skewing of the nominal numbers. It’s not a big issue with the rate itself though, as you would expect the new numbers to somewhat fall in line with the previously reporting institutions.

As it doesn’t look like they’ve had any major changes in this regard since mid-2002, we can thus report the numbers from mid-2003 on, but just for presentation purposes we’ll start at January, 2004. Unfortunately for us this doesn’t provide us with a baseline number, as by 2004 the housing market was already starting to amp up, but what ya gonna do?!

Hard to draw any definite conclusions from that graph, but we can see some general trends around the times that the arrears totals start changing course. First we see it in early ’07, as the growth in number of mortgages starts to fall off prior levels, and the number of arrears starts to head up (granted it’s still very much negative at this point.

Eventually arrears hits positive territory, and continues growing until early ’09… and we all know what happens then to interest rates, and the responding goosing of the housing market. At this point mortgage numbers again start trending up, and arrears growth plateaus, and eventually reverses course and starts dropping off.

This was the sort of behavior I was looking for in the rate itself but didn’t really surface. Arrears just by it’s nature is something of a lagging indicator, and it appears that trends and momentum in the underlying figures may play a larger role in deciding the actual rate than I expected. Making it something of a lagging indicator or a lagging indicator if you will.

From here on out perhaps I should start checking in on that year-over-year nominal change in mortgage arrears, it seems to be a bit better barometer for the mood of the market than the arrears rate.

The CBA pumped out another update on arrears while I wasn’t looking… and as of August they’re up again, now sitting at 0.78%, the highest level on record. This is up 0.02% from July, and 0.13% from a year ago.

Seems consumer sentiment shifting again in the spring may have gotten us back on our earlier trajectory after the little reprieve in the aftermath of central banks collapsing prime rates.

In contrast, Nationally the rate held for the forth consecutive month at 0.42%, down from 0.43% a year ago. Another interesting development is that B.C. is just about to overtake the Atlantic region for the second highest rate in the country (behind Alberta), they are both listed at 0.45%, but B.C. is still a tad lower when we go to further decimal places.

Quebec remains at 0.35%, while Ontario is down a tick to 0.36%, and Saskatchewan is up a tick to 0.30%. Manitoba remains the lowest in Canada at 0.27%, up from 0.26% in July, but unchanged from a year ago.