Gravity Affecting Europe's Bubbling House Prices

Cheap credit continues to buoy overvalued countries in Europe, but gravity is tugging on those markets.

chart from:  clicks and mortar

Downdraft

The price-to-rent ratio now indicates that Canadian properties are 76% overvalued, though things look less bubbly on the income measure and Canadian lenders are a far more disciplined bunch than pre-crisis American lenders were.

The notion of discipline apparently doesn't extend to loaning money far outside the range of reasonable economic value. Not sure why not. Walk-aways are linked to overpaying, not to quality of mortgage qualification.

And then there is the exchange rates...

Consider London. Homes there may feel as expensive as ever to Britons, but a large sterling depreciation means houses look some 15% cheaper to foreigners now than they did five years ago.

Fujitsu JP Morgan report gives sober view of Australian house prices

Housing price growth = credit growth. That's not real wealth. Sad thing is, the lofty valuations are fleeting but the debt is real.

Fujitsu skewers, ANZ boosts housing

The strength of this report is its detailed assessment of the various demographic cohorts that drove the expansion of credit and the fading prospects of them continuing to do so:
. . .
This report is a must read. We’ll have more on it in the next few days.
Presumably by coincidence, ANZ also released a new housing report today drawing the opposite conclusion . . . 

Interest Rate Exposed Canadian Mortgage Holders

With a 2% rise in interest rates (which would still leave it well below long term average)
57% of Canadian Homeowners could afford their house
20% said it would significantly hamper owning their home
23% didn't know

First off, ~28% of Canadian Homeowners don't have a mortgage, so I'd really hope that rising rates don't affect them. Take them off that first number as a freebie and we are left with 29% of homeowners who are mortgage holders who didn't over extend, or a mere 50% more are feeling secure relative to those feeling insecure. That's a pretty terrible ratio. Also 23% don't know? Let's hope some of these financially ignorant respondents actually belong in the own outright category and things aren't as bad as they look based on this skimming glance at the situation.

 BMO Homeownership Stress-Test Report: Are Canadian Homeowners Prepared Financially for Rising Rates?

Stress tested homeowners by province. Chart from BMO.

Note that the stressed and unsure outnumber the comfortable in BC.

Copper as Currency

Copper was previously being used to sanitize official bank loans so that they could be used for banned purposes, like real estate development. Now the game is broader. Insight: China's copper traders play yuan for profits

At Shanghai's Waigaoqiao port, a sprawling 10 square kilometer free-trade zone, thousands of tonnes of copper cathode plates sit in stacks turning green after years of exposure to the elements.

These increasingly savvy financing deals mean that what used to be reliable metrics of regional demand, such as draws from copper stockpiles in London Metal Exchange warehouses and copper imports to China, have become muddied. They also mean the spread between the Hong Kong and Chinese yuan may be as important as China's industrial demand in determining imports.

"You can take an LC from one bank, pledge it to another bank and borrow against it from another bank to take advantage of a whole range of different rates," he said. "All we know is that we are selling a tremendous amount of metal to China for reasons that don't appear to be logical."

Financing deals draw in surplus metal from as far away as New Orleans, greased by low freight rates and rent at Shanghai bonded warehouses that is a quarter of storage costs in other global ports monitored by the LME. This has sucked the world's stock into China, tightening supply outside the country. As the global market moves into a small deficit this year, it has helped to firm premiums -- the price paid on top of LME contracts to get metal. This means when the world economy picks up, an auto parts maker in Detroit, or a copper tube maker in Hamburg may have more trouble securing metal and may face higher costs to do so.

Too much to excerpt. Read the whole thing.

China Slowdown Sinks Aussie Dollar

If investor appetite for Aussie denominated products declines rapidly that will strain the 30% of mortgage funding sourced from foreign capital. China Pulling Rug From Under the Aussie

But that is all changing, even faster than expected. China is no longer the economic power house it once was with recent data suggesting a gradual slowdown is far from assured.

At the same time, the recent strength of the Australian dollar is taking its toll. The Australian economy is now starting to suffer and high interest rates, that have made the currency attractive, could soon be a thing of the past. Fears that China will not achieve a soft landing have risen sharply over the last few weeks with industrial activity contracting faster than forecast and with inflation pressures failing to subside.

The impact this is having on corporate China is now starting to show. According to Morgan Stanley, the country’s largest metal producers reported an 18% decline in net income. Overall, corporate profits in February fell by a massive 5.2%.

You are all a bunch of whiners

Pete McMartin suffered through renting, borrowing heavily from his parents to buy, it's exactly the same as now, you whiners. Affordable housing in Vancouver? Why bother?

We rented for eight years, raising our three kids in that time. It was only with the help of my in-laws that we could afford our first house, and then only after cashing in all our assets, including all our RRSPs. Then we borrowed big from the bank.

Well, actually, it's not totally the same. Vancouver home ownership out of middle-class reach

Kershaw has compared B.C. incomes and house prices now with those in the 1970s.

In the 1970s, the annual household income for couples aged 25-34 was the equivalent of $73,000 in today's dollars.

Today, the same age group earns just $68,000 a year.

Kershaw says even with more women working, households are earning less, not more — and at the same time, the average cost of housing, adjusted for inflation, has increased by 149 per cent.

Oh and by the way, since Mr. McMartin has terrible retirement savings because he lost out on all that early compound interest, he'd like to thank you ahead of time for supporting him in his old age. He really needed a house and will need your help with that. Thanks.

Foreign Buyers Put Floor Under US Market

Existing home sales: Foreigners are buying. What's their impact?

Foreign sales in Florida may be doing more than buoying the market. "Iit may be enough to turn it around, depending on the selling pressures," writes Susan Wachter, professor of real estate and finance at the University of Pennsylvania's Wharton School in Philadelphia, in an e-mail. "It is not just that a quarter [of buyers] are foreigners, it is that foreigners are likely to be the marginal buyers – those that are offering top dollar. Their wealth has not been hit by the crisis, unlike the balance sheet of the US buyer."

(I assume she meant NOT marginal buyers...)

Two other states hit hardest by the housing bust are among the four most popular states for international buyers, according to the NAR: California (12 percent of international sales in the US) and Arizona (6 percent). The US is also the most popular locale for international buyers of commercial real estate. Perennially the No. 1 destination of investment money, the US received fewer first-place votes in 2011 than in 2010, as other locales, such as Brazil, grew in popularity, according to a survey released in January by the Association of Foreign Investors in Real Estate, based in Washington. Still, 60 percent of the commercial investors in the survey said they planned to increase their property purchases in the US this year.

Creeping Carrying Costs

This is what happened in the U.S. Monthly costs became the sole qualifying criteria for debt, ignoring total debt load. Anything in this BMO press release about total debt load? About mortgage debt not exceeding 3.0-3.5x total income? (Or truly conservatively, 2.5x) Nope.
BMO Financial Tip of the Week: Housing Affordability and the One-Third Rule

When assessing whether or not a new home is financially realistic, it's important to consider that housing costs - including mortgage payments, utilities and taxes - should not take up more than one-third of your total household income. Furthermore, servicing your overall debt should not account for more than 40 per cent of your income.

By ignoring total debt load in qualification the banks have completely negated the economic benefit of low interest rates. Instead of low rates allowing consumers to pay down debt, which would bring on a decade of prosperity, it is being used to sucker consumers into maximum debt, which leaves the central bank with no maneuvering room to raise rates without breaking the backs of households. All in the name of profit for a handful of people.

I also love the smarmy tone of the rest of the release. They are pretending to act responsibly.

Oh and better yet, the affordability calculator listed in it doesn't work.

BMO: Skyrocketing prices bound to come down

So many mixed signals from the banks and the Canadian government. Oh, too much debt BMO CEO says, oh and by the way, we offer a mortgage at 2.99%. Somewhere, deep inside this bank, the incentive structure is badly messed up. Skyrocketing house prices bound to come down, BMO head says

Bank of Montreal (BMO-T58.90-0.17-0.29%) chief executive officer Bill Downe told the bank’s annual meeting in Halifax that soaring household debt levels are highlighting the need for a soft landing in the residential real-estate market. As a way of tightening lending, Mr. Downe said he supports a move toward shorter amortizations on mortgages in Canada to reduce consumer exposure to debt.

Shorter amortizations don't solve the high leverage problem of 0% down. They need to lower the leverage by either 1) enforcing 5% down, for real, no gifts, no cash back. 2) Requiring 10-15% down so that a gift or cash back is harder to arrange. It's the leverage, people. Reducing the leverage from 360:1 to 300:1? Big deal.

It's all about the marginal buyers. The market is being made right now by those who can't save for a down payment. Start actually requiring that and the market will fall.

Mr. Downe said BMO’s decision to focus on offering 25-year amortizations, as opposed to 30-year terms, is to direct consumers into loans that have lower costs over the long term.

Yeah, but interest rates are 2.99%. Over time they have averaged between 7 and 8%. Long term costs are far less an issue than, one: low barriers to entry into the market and two: new buyers having dangerously low equity.

But RBC argues that BMO’s mortgage campaign involves terms that are less flexible and could prove costlier for borrowers if they run into financial trouble or need to refinance.

You know what's even better than being trapped in an underwater mortgage and needing to sell? Having to hand the bank a massive check on top of it for fees. If they will even take one at all.

"Chaos if the curbs relaxed" -- Wen Jiabao

China Home Prices Post Worst Performance in a Year on Curbs Why the word "performance"? It's not supposed to be speculative. It's shelter. This is a big part of the problem. Words mean things.

Relaxing the curbs could cause "chaos" in the market, [Premier Wen Jiabao] said

This is the stare down contest of all time. This man is not going to blink.

New home prices fell in 27 of 70 cities last month from a year earlier and prices were unchanged in six cities, the national statistics bureau said in a statement on its website yesterday. That is the worst since the government began at the start of 2011 releasing individual data for 70 cities instead of a national average.

Note, this is NEW home prices.

The eastern city of Wenzhou posted the biggest drop for the fourth month, with home prices declining 0.5 percent from January and 8 percent from a year earlier, according to National Statistics Bureau data. A credit squeeze on smaller businesses in the city prompted Wen to visit in October and pledge financial aid.

There are anecdotes of private property liquidation to cover business costs and loan shark debts. Makes sense that Wenzhou would be the hardest hit given the collapse of the private lending sector. Property shifts money from the official banks (via mortgages) into private lending. (e.g., The person you buy the apartment from takes your mortgage money from a state bank and pays off their loan shark.)

Existing home prices in both Beijing and Shanghai dropped 0.2 percent from January, according to the statistics bureau.
. . .
The country's home sales declined 25 percent in January and February, according to data from the statistics bureau on March 16. The value of homes sold fell 25 percent after surging 26 percent in the first two months of 2011.

And speaking of chaos . . .
China’s Stocks Rise on Support Measure Prospects; Chalco Climbs

The Shanghai Composite Index (SHCOMP) rose 1.36 point, or 0.1 percent, to 2,378.20 at the close. The measure climbed 0.8 percent after the 21st Century Business Herald reported that as much as 40 percent of Guangdong province’s 100 billion yuan ($15.8 billion) of pension funds may be invested in stocks. The index later fell as much as 0.7 percent after the government said the money will “mainly” be invested in bonds.

Hat tip: pension pulse

Proposed Guidelines, Thank You Captain Obvious

Something about having to institute guidelines that state the blindingly obvious... does make one wonder what is going on.
OSFI - Office of the Superintendent of Financial Institutions (of Canada)
FRFI - Federally Regulated Financial Institution
RMUP - Residential Mortgage Underwriting Policy


OSFI Draft Guideline

HELOC products provide an alternative source of funds for consumers. However, FRFIs should recognize that, over time, these products can also significantly add to consumer debt loads. While some borrowers may elect to repay their outstanding HELOC balances over a shorter period of time relative to the average amortization of a typical traditional mortgage, the revolving nature of HELOCs can also lead to greater persistence of outstanding balances, and greater risk of loss to lenders. As well, it can be easier for borrowers to conceal potential financial distress by drawing on their lines of credit to make timely mortgage payments and, consequently, present a challenge for lenders to adequately assess credit risk exposure.

For HELOCs, as described under Principle 4 of this Guideline, OSFI expects FRFIs to have clearly articulated amortization requirements in place for all outstanding HELOC balances. FRFI approaches should be risk-based, and better practice would consider:
• A clearly-defined period (e.g., 5 years), after which the outstanding balance of the HELOC converts to a fixed-term with a reasonable amortization period; or
• A set percentage of the outstanding balance of the HELOC due each month that equates to a reasonable amortization period.

I'm actually quite surprised that when CMHC ceased insuring HELOCs that they didn't become much more rare. Much of these guidelines is an eerie (for me) list of exactly what went wrong in the U.S.

Mortgage default insurance (mortgage insurance) is often used as a risk mitigation strategy. However, mortgage insurance should not be a substitute for sound underwriting practices by FRFIs, as outlined in this Guideline. It should not be considered a substitute for conducting adequate due diligence on the borrower, or for using other risk proxies such as the minimum down payment.

For example, a credit bureau score, offered by the major credit bureaus, is an indicator often used to support credit granting. However, a credit score should not be solely relied upon to assess borrower qualification, since these indicators measure past behaviour and do not immediately incorporate changes in a borrower’s financial condition or demonstrated willingness to service their debt obligations in a timely manner.

Maintaining sound loan documentation is an important administrative function for lenders. It provides a clear record of the factors behind the credit granting decision, supports lenders’ risk management functions, and permits independent audit/review by FRFIs and by OSFI. As well, maintaining sound documentation is necessary for lenders to demonstrate compliance with mortgage insurance requirements and ensure insurance coverage remains intact. Consequently, FRFIs should maintain complete documentation of the information that led to a mortgage approval. . . .
. . .
As a general principle, an independent third-party conducting a credit assessment of a FRFI’s mortgage loan should be in a position to replicate all aspects of the underwriting criteria, based on the FRFI’s sound documentation, to arrive at the derived credit decision.

Automated valuation tools – Where FRFIs use automated valuation tools, processes should be established to monitor their on-going effectiveness in representing the market value of the property. Controls should also be in place to ensure that the tools are being used appropriately by lending officers.

FRFIs should not structure a mortgage or combination of a mortgage and other lending products (secured by the same property) in any form that facilitates circumvention of the maximum LTV ratio limit it establishes in its RMUP. Further, the LTV ratio should not be relied upon solely as an alternative to assessing the borrower’s demonstrated willingness and capacity for repayment of the loan (see Principles 2 and 3).
Down Payment
With respect to the borrower’s down payment for both insured and uninsured mortgages, FRFIs should make reasonable efforts to determine if it is sourced from the borrower’s own resources or savings. Where part or all of the down payment is gifted to a borrower, it should be accompanied by a letter from those providing the gift ensuring no recourse. Incentive and rebate payments (i.e., “cash back”) should not be considered part of the down payment.

I like these OSFI guys/gals. Where have they been the last five years, I wonder.

Hard Landing in Progress

Gwynne Dyer: China’s impending financial crash

Land in Wuhan has tripled in price during the property boom, and could quickly fall back to the old price or below if confidence in the city’s future were to falter. That is quite likely to happen, since Wuhan’s housing stock is already so overbuilt that it would take eight years to clear even the existing overhang of unsold apartments at the current rate of purchase, and never mind all the new stuff.

Multiply the Wuhan example by hundreds of other municipal authorities that are also borrowing billions to finance a similar “dash for growth,” and you have a financial situation as volatile as the “sub-prime mortgage” scam that brought the U.S. economy to its knees. Except that when the Chinese property boom implodes, it may bring the whole world economy to its knees.

I don't fully subscribe to the world contagion hypothesis. Yes, Brazil, Canada, Australia, will take a hard whack, but the drop in commodity prices will partly balance out the drop in export customers for the U.S. and Europe. Months ago, China stopped buying and started selling off U.S. Treasuries. Nothing happened. Only 500 billion of China's reserves are free for stimulus use, the rest is tied to Yuan. Every month they have an account deficit that number ticks down. At 30 billion a month, it won't last very long.

Crazy notion I'll toss out there: Imagine if China starts selling its gold to raise cash.

China hard landing already here: JPMorgan analyst

“If you look at the Chinese data, you should stop debating about a hard landing,” Mr. Mowat, who is based in Hong Kong, said at a conference in Singapore Wednesday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.” His team was a runner-up for best Asian equity strategists in a 2011 Institutional Investor magazine poll.

RPData New Capital Markets Report

This is post 1 of several. Capital Markets Report (free registration)

The Australian housing sector is the country’s largest and, arguably, most important asset class. The total value of homes across the country as at December 2011 was $4.54 trillion.

I hope you are not bragging about that. I don't know about you, but I like my most important asset class to increase my productivity.

By way of comparison, Australian equities had a total market capitalisation at the same time of $1.17 trillion.

Hm, I think you might be bragging. This reminds me of Total BC Assessment Surpasses $1 Trillion At that time, British Columbia had a GDP of 191 billion. For a Housing Valuation to GDP ratio of 5.2x. In comparison, Australia has a GDP of $1.57 trillion (USD, according to the CIA fact book), for a ratio of 3.0x. To provide further perspective. The state of California has a GDP equivalent of $1.9 trillion and a total housing valuation of $3.72 trillion for a ratio of 2.0x.

This simple statistic is especially important for Australian banks given that, unlike their peers elsewhere, our banks have the majority of their assets on balance sheet in the form of prime mortgages.

Are you trying to scare us? Because you are. Or are you just explaining why every borrowable share of your banks' stocks are already borrowed and shorted by off-shore hedge funds?

And according to the Australian Bureau of Statistics, more than 60 percent of all Australians own a home – one of the highest rates of home ownership in the world.

This begs the question of who is buying the next house. For those of you who think Canada and the U.S. are higher at first glance. I think the 60% number is per capita. Not owner occupied households. Hence the seemingly lower number. It is not unheard of for Australians living in rental accommodations to own a house or houses somewhere else.

[Some stuff about how mean foreigners are thinking Australian RE is a house of cards and blaming the Euro crisis for scrutiny...]

We don’t subscribe, however, to the predictions that residential housing values are about to show significant declines.

Oh, this is going to be good. 7MB PDF of "it's different here". I can't wait.

Canada's Five Year Bond Rate on Long Grind Upward

Since mid December Canada's five year bond has been on a slow upward grind.

Canada 5 year bond

The Missing

Local official goes missing after debt rumors

The Chenzhou Agricultural Machinery Bureau published a missing persons notice in the Chenzhou Daily seeking its deputy chief Wang Changhong, who had been missing for months, according to Xinmin net.

Sea change for China’s shipbuilding business

The son of Wenzhou shipbuilding executive Chen Tongkao scrambled to quell fears of a company shutdown after his father, under financial pressure, fled the country in mid-February. Chen’s whereabouts are unknown, and since his disappearance the city’s business community has buzzed with rumors about the status and future of his apparently captain-less company, Dongfang Shipbuilding

China: toils of communist boss give insight into workings of the party

Meanwhile, a Chongqing businessman appears to have vanished in Beijing shortly after publishing a microblog message saying "the jigsaw puzzle around Wang Lijun" would soon become clear. Zhang Mingyu had claimed to have a recording of Wang warning him to stop accusing another businessman of corruption. Zang's lawyer, Pu Zhiqiang, said Zhang had been visited by police and other officials who wanted him to return to Chongqing, and was now out of contact. Questioning their jurisdiction, Pu added: "Chongqing police came to Beijing to take him. This is more like a kidnapping." Chongqing police said they had no information on Zhang. Earlier this week fugitive Chinese businessman Li Jun described Bo's anti-crime campaign as a "red terror". He alleged in interviews with the Financial Times and Washington Post that Chongqing security officials had tortured him and seized his assets. Chongqing officials declined to comment.

Bo said his former ally Wang Lijun's flight to the US consulate in nearby Chengdu last month had surprised him. "I truly never expected this to happen. I felt it was extremely sudden," he said.

Chinese RE Developers Flee Debt

According to media reports, since August of last year close to ten real estate developers in Changsha City, Hunan Province have abandoned their businesses and fled. They include Jiangbin Homes, Zhongyuan Residence, Dongfang Navigator, Zhongyang Residence, Keke Little City, Lipujin Cubic, and Xiangjiang 700. Authorities in the provinces of Henan, Jiangsu, and Zhejiang have also reported about developers fleeing with large sums of money. Most recently, the president of Yuyang Enterprise in Nanjing City, Jiangsu Province took several hundred million yuan of loan money and disappeared overnight. Chen Fei, a millionaire developer in Zhijiang Province, abandoned the Shengli Square development project and fled with over a million yuan. Several heads of a real estate development firm in Anyang City, Henan Province disappeared with a large sum of money that was allegedly raised illegally.

China moves yuan closer to market

Data over the weekend showed China’s trade balance plunged $31.5 US billion into the red in February as imports swamped exports. It followed reports on Friday that inflation eased in February while bank lending, retail sales and industrial output fell below forecast, all pointing to a cooling economy.

Vancouver Housing Inventory Knocking on Door of Record Highs

Vancouver housing inventory about to surpass 6 year high. It may be a high over a longer number of years, but REBGV doesn't provide inventory data back farther.

Chart from b5baxter at vancouverpeak.com via vreaa.wordpress.com

There Are Threats of Trouble in Canada, But They are Not Immediate

Lots of varying predictions recorded in this one.
Ghost of Fannie Mae Haunts Canadian Housing as Exposure Worsens: Mortgages

Government-owned CMHC insured C$541 billion ($546 billion) in mortgages as of Sept. 30, an amount equal to 31 percent of Canada’s annual gross domestic output, as home prices climb and construction expands. In 2006, when U.S. home prices peaked, the combined exposure of the government-backed agencies to potential defaults was slightly more than a third the size of the economy, according to Bloomberg calculations based on U.S. Federal Reserve data. Fannie and Freddie were bailed out in 2008.

Another 1980s-style housing correction can’t be ruled out, said Finn Poschmann, vice president of research at the Toronto- based think-tank C.D. Howe Institute. “Everything under the sun will happen again. It always does,” Poschmann said, adding CMHC’s stress tests would be more credible if the agency provided enough data for outsiders to validate the results.

“Although there were a lot of discussions in the public domain about a house-price bubble, I must say clear evidence is lacking to support those conclusions,” said Mathieu Laberge, CMHC’s deputy chief economist, in a telephone interview.
Unlike the U.S., Canada avoided having to directly inject public money into the country’s financial institutions during the financial crisis.

Arg! What is it with this myth? Or do bailouts from CMHC AND the U.S. not count somehow?

By insuring mortgages against default, CMHC says it helps lenders keep mortgage rates low. The agency also buys mortgage- backed securities from financial institutions, which it says lowers funding costs for banks and other lenders.

Thereby driving prices up until housing becomes unaffordable. For the good of the consumers.

Even Bloomberg apparently can't come up with a current number on CMHC's total book, citing September's data. Really curious what it's at right now. Again, this price war on mortgage rates smells of trying to lock in the last of CMHC's coverage. I would if I were the banks.

S&P Scenarios for China's Impact on Australia

Hard or soft, China's landing to dent Aussie houses

A new S&P report has claimed a soft landing in which China experiences 8% GDP growth could see Australia's house prices eroded by more than 5% in 2012. A doomsday scenario in which China saw 5% GDP growth could see Australia sent into a recession, with house prices falling 20%.
S&P analysts Craig Parker and Vera Chaplin predicted a soft landing was the most likely scenario for China, saying the effect on Australia was likely to be "muted".
. . .
The second-most likely scenario, Chaplin and Parker said, was a "medium" landing in which Chinese GDP growth fell to 7%, shaving 10% of Australian house prices and sending unemployment to 7.2%. The analysts gave this scenario a 25% likelihood of occurring. The hard landing scenario would see unemployment swell to 11.3%, but S&P said there was only a 10% probability this scenario would come to pass.

Overpaying Leads to Default

A little note to those who can't see past the bank fraud in mortgage issuance as the cause of the U.S. housing mess. The credit bubble, and rise of prices over fundamentals was the root of the problem. All the rest (subprime, ratings agencies rating junk as AAA, brokers being coached to fudge loan applications, prime borrowers getting subprime mortgages because brokers made more money on those . . . etc. etc.) were merely symptomatic of a broader problem, which is deregulation leads to shadow banking, which leads to a credit bubble. People buy houses with leverage, so the bubble shows up there most prominently.

If you think your market is going to escape because banks only issue prime mortgages, here's a stat for you: 40% of Prime Jumbo mortgages (i.e., too big for Fannie and Freddie) are in strategic default.

Strategic Mortgage Delinquencies as High as 27%

For Alt-A loans, considered between prime and subprime in terms of expected defaults, the share is about 35 percent, up from about 30 percent. For subprime loans, the amount is about 25 percent, up from less than 20 percent, their report showed.

The ratio is about 15 percent for loans less than $100,000, compared with almost 35 percent for mortgage larger than $400,000, according to the analysts. The share among borrowers with the highest credit scores was more than 40 percent, compared with about 20 percent for those with the lowest.

Why do people default? Very simple. Because they paid to much for their house.

Record numbers of church foreclosures

Banks foreclosing on churches in record numbers

Since 2010, 270 churches have been sold after defaulting on their loans, with 90 percent of those sales coming after a lender-triggered foreclosure, according to the real estate information company CoStar Group.

In 2011, 138 churches were sold by banks, an annual record, with no sign that these religious foreclosures are abating, according to CoStar. That compares to just 24 sales in 2008 and only a handful in the decade before.

Medians from Another Planet

Despite medians historically being quite stable in the Toronto market, something jolted prices last month. Really jolted. It's like an entire spreadsheet column of outliers. I rechecked the number three times before posting.

From TREB

Note that condo prices on the chart did not hit a new peak, despite the refilling of the giant sloshing punchbowl.

Guessing that this is a sales mix shift, I plotted the last few months of sales by price range and normalized it to 100%.

Detached House Sales Mix Toronto

The bright red line is Feb. And indeed, something odd is going on. Rather than follow a normal distribution like the rest of the months, Feb is a perfectly straight line on the backside. If this were my raw data, I'd carefully go through and make sure there wasn't a chunk of missing data in the 500-600k category. I hope TREB rechecked their numbers three times.

Triple Whammy on Deck for Australia

China is slowing and represents 23.7% of Australia's exports
Fixed capital expenditure in Mining represents 10.5% of Australia's GDP
Construction represents 7.5% of GDP and 9.1% of employment
Relative to fundamentals house prices are insanely lofty (my paraphrase of the charts)
Australians have been borrowing foreign money to sell each other houses and the exit from that will drop the Aussie Dollar

Australia's Economy May Suffer 3 Major Blows