Dramatic headlines leap from the cover of today’s Sunday Star Times ” Mortgagee home sales now 1 in 20″!
I fear I will begin to sound like a broken record, but are the facts really as presented in this headline? – the fact is that in July there were 321 registered title transactions in which the terms of the sale, as registered with the land transfer office, involved the liquidation of the title by the mortgagor of the title.
In the same month the Real Estate Institute members, who comprise all licensed real estate agents in NZ reported that the number of unconditional sales amounted to 6,014 properties.
Notice anything about these two sets of statistics? – whilst there is no exact breakdown to the mortgagee sales stats, there is no clear correlation that says all 321 sales were of residential properties, which is what the REINZ statistics measure.
The article does comment that just 18% (58) of the properties sold as mortgagee sales were classified as homes at which the property owner owned no other properties. This is the traditional perception of a repossession, with the consequential eviction of a family forced to relinquish their home in a mortgagee sale.
The fact is, that within the 321 sales registered as mortgagee are many types of properties or titles. These comprise development projects of apartments, non residential properties, investment properties and commercial properties.
So whilst there is no clear and truly accurate ratio, it would appear to be a tall ask to say that 1 in 20 homes sold in July were mortgagee sales – probably somewhat less.
By way of comparison, the number of mortgagee properties listed on this website has been monitored and reported regularly – the chart below shows the data right up until this weekend and clearly showing that inventory levels have fallen since the start of the year, equally as shown by the red line the level of keyword searching for mortgagee property on the site has been falling over the same period.
Returning to the newspaper article – the comment that “The effects of the recession are going to be felt by many for years to come” is true; for just as unemployment is a lagging indicator as it continues to rise as the economy starts to come out of recession, so it will likely be for mortgagee properties of all types.
So true Alistair. OTOH, one would have to think that, regardless of the composition of the mortgagee properties, if it is a trend that continues over time, it does suggest that a lot of “players” are over-extended. And even though it’s “not as bad as in the U.S. and U.K.,” the cheerleaders have hammered the argument that mortgagee sales are less likely in NZ because we can’t send the keys back to the bank in the post. That argument actually puts these stats in a worse light, considering the associated disincentive.
J.C.
Very relevant comment – would be so interesting to see if our credit / bankruptcy rules were as the US we may well have seen a doom loop and therefore the prediction of Bernard of 30% fall would have been correct.
So is our credit / bankruptcy rules to our benefit or our downfall?
As the saying goes – what goes up must come down! – but then again with the Dow Jones creeping to 10,000 after only 6 months from its low point of 6,000 you have to think in the case of the US it may be – what comes down must come back up!!
Personally, I think the credit/bankruptcy rules are in our favor in terms of people taking individual responsibility for their contractual obligations. Whether or not that means we have behaved responsibly, I don’t want to comment. However, as an out-an-out property bear not so long ago, I personally feel that there are limits to how far prices can fall in NZ (and BH’s prediction was rash even if the rationale looks sound).
Secondly, if you look at the U.S., their situation is exacerbated by the fact that banks are keeping foreclosed property on their books instead of recouping their losses. It’s obviously to protect their dodgy balance sheets, but you would imagine that this is keeping a “floor” under an already fragile market. They should be warned that the Japanese banks tried the same thing (keeping worthless assets on their books at silly valuations) which eventually required bailouts from the govt.