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Calgary Resale Supply – Bankruptcy Threat Growing But Not A Problem Today November 23, 2009

Posted by DustinRJay in bankruptcies, Calgary real estate, foreclosures.
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Much has been said about the growing amount of mortgage arrears in Alberta, but how much does that impact supply?  As shown in previous graphs on this blog, the resale market has generally been rising whenever sales\new listings is greater than 50%.  Given that Calgary condo and single family home average resale prices has risen over the last year, the supply\demand situation has obviously shifted to create stability in the market.

Most Calgarians know by now that mortgage arrears and bankruptcies are up.  And most Calgarians I believe may think that the correction was due to the increase in bankruptcies.  This couldn’t be farther from the truth.

2009 was a year that had a lot less new listings than in 2007, and 2008. So even while bankruptcies have increased, supply is down measurably as well.  Supply due to bankruptcies remains a fairly small contributor to the overall resale supply picture. 

One of the problems that caused the initial correction, was not a vast increase in bankruptcies, but that supply levels during the correction period were much greater than demand.  Resale supply can come from many sources including death, divorce, and job transfer, but also low rental yields and offloading by investors, new housing construction and speculation of a market downturn.

Alberta bankruptcies are likely to continue to increase into 2010 (2.7 times January 2007 filings), as the rising mortgage arrears (4.2 times January 2007 amounts) have shown that banks have a bit of a backlog of mortgage arrears to clear out.  Banks and the CMHC should communicate to developers and other market participants to expect more supply from mortgage arrears turning to bankruptcies going forward.

The following graph shows an estimate of Calgary consumer bankruptcies (estimated as 33.5% of the total Alberta population when compared to the Calgary CMA which includes the towns of Airdrie, and Cochrane in addition). 

[click above image to enlarge]

Note that bankruptcies also include mortgages, bank and company loans, credit cards, taxes, student loans and utilities.  In 2006, mortgages were declared as a liability in a bankruptcy only 17.5% of the time.  Therefore, I believe the bankruptcy estimate as a component of new listings is a more pessimistic guess than actuality.  One also needs to consider that bankruptcy filings have not kept up with mortgage arrears, and this may be because the judicial and banking system is in the process of staffing up to deal with a higher volumes as compared to the cylical lows in mortgage arrears that occurred in mid-2007.

Please vote below and feel free to elaborate on those risks further in the above comment section!

Data Sources:  Bob Truman – First Place Realty , Office of the Superintendent of Bankruptcy Canada

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Comments»

1. Ed - November 25, 2009

Radley: I have been a fan of your blog for a while. I believe you have very acurately predicted the market trend for the Calgary market.

I ave one request of your favour, can you do a cross reference diagram of Gold price versus house price. The gold seems to be indicating US dollars, which gives pressure to Canadian dollars and BOC is caught iin the middle of rate and housing market too hot. In the end of the day, gold seems to have some correlations with the Candian housing market.

Thanks

2. Crystal Tost - June 17, 2010

Thanks for keeping your blog up, I find it easy to read.

3. hermes kelly bag - July 5, 2010

Thanks for keeping your blog up, I find it easy to read.

4. hermes kelly bag - July 5, 2010

Gold price versus house price. The gold seems to be indicating US dollars, which gives pressure to Canadian dollars and BOC is caught iin the middle of rate and housing market too hot. In the end of the day, gold seems to have some correlations with the Candian housing market.

5. buy real estate rockford mi - August 9, 2010

Thanks for the info. It really helps keep us involved.

6. Jim - August 28, 2010

Montgomery Triangle Calgary

After reading about NotaBle restaurant and this Montgomery Triangle:: I had to give them a shot. Ate dinner at NotaBle last night, it was Excellent. Drove around Montgomery looking for the Montgomery Triangle. Finally found this beautiful little area next to the Bow River and the Shouldice Athletic facility, not many Montgomery people do not refer to the Triangle too much. It is an Excellent area to own some real estate. Very few little homes on big 50 foot lots left. Almost all high end side by side duplexs. Great area!! and Great Restaurant!!

7. Real Estate Calgary - October 13, 2011

Calgary real estate may face problems and these may arise due to the combination of poor economy and inappropriate options for the people. It would be important to observe variety in order to make sure that the needs of people will be met.

8. Steve - February 26, 2012

It’s 2012 and look at the Calgary Real Estate now.

Homes in Panorama Hills Calgary .

9. Miranda Moser @ Calgary Real Estate Pro - June 28, 2012

I agree with the previous comment. The market is recovering nicely and it’s good to see those days behind us.

10. Drew Peacock - October 19, 2012

Calgary real estate is set to roll over and start to crater but the best deals are still found in the NorthWest. Montgomery is probably number one in terms of value add and appreciation

Montgomery triangle is awesome!

11. codybattershill - December 6, 2012

Great article! Lots to think about.

12. Ismail - October 8, 2013

Really needed this for a project. Thanks for sharing.

13. Glenn - October 23, 2013

Interesting info. Glad I stumbled upon it.

14. Ron - December 14, 2014

It is interesting to read the comments from 2011 and 2012.–Look where we are now! Calgary real estate is rocketing. That Montgomery community and the Montgomery triangle is wayyy up in value. They are building three new high end duplexes in the Montgomery triangle right now.

Montgomery triangle is awesome


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