The latest data released by Terralink International show that mortgagee sales (registered sales of property and land detailed as having been sold on behalf of the registered owner by the mortgagor) have again hit a new record high of 343 in the month of September. This figure is up from August when the number had declined slightly to 241 after a peak of 321 in July.
This trend is dramatically portrayed in the chart below which tracks the mortgagee sales as a % of all residential property sales in each month since 2000 and clearly shows this significant and steady increase over the past 18 months .
As noted previously these sales stats are not limited to just traditional residential homes, they do include investment developments of houses, apartments some of which have not been completed construction. The commentary from Terralink in the media release states that around 20% of these sales relate to traditional family homes.
It has been interesting to track these sales over the past year as against the rise in mortgagee properties listed on realestate.co.nz. The chart below matches the inventory of listings of mortgagee property to sales by month over the past 3 years.
What is clear in reviewing this chart is the fact that sales have now exceeded inventory – this is a function of two factors. Firstly inventory (which is clearly not growing) only relates to individual residential dwellings which is only a subset of sales, and secondly the clearance rate of mortgagee properties is general very quick which ensure no significant build in inventory – this is a good sign of a healthy property market.
The key fact of mortgagee sales, is exactly as with unemployment, and as a function of unemployment itself the rise of mortgagee sales significantly lags the economic recovery. That is to say as the economy recovers as all the key indicators now show the delayed lag effect of unemployment still has the ability to impact individuals who loose their jobs and potentially end up loosing their homes. The reported statistics published at the beginning of this month showed unemployment has continued to rise now reaching a 9 year high at 6.5%.
Looking to the future there are positives to be taken from this mortgagee sales data as stated above. A high clearance rate of mortgagee properties is a good sign – compare the scenario in NZ where the current level of listings of mortgagee properties at 344 out of the total inventory of 56,112 – a mere 0.6% to the US – this recent report shows that almost 10% of all family homes with a mortgage are in some stage of foreclosure up from 2.65% a year ago.
Another observation of the state of the NZ property market as measured by the mortgagee foreclosure is the extent of consumer interest in searching for mortgagee properties – a category very actively searched on realestate.co.nz.
Prior to the recession searches for mortgagee property constituted a small component of keyword search on the website – roughly around 700 per month. As the economic recession hit the activity of searching grew and grew through 2008 passing 5,000 per month and peaking at over 9,000 in early 2009. This latter peak as with the peak in early 2008 were influenced by extensive media reporting. The full data is presented below showing the 34 months since the beginning of 2007.
The recent trend of searching is somewhat lower than equivalent months in 2008 potentially indicating that the focus on this category is less about seeking bargains and consequentially buyers may well now be seeing mortgagee listings (few as they are) merely as options in a purchase selection rather than a specific purchase option or investment option thereby reinforcing the view that the property market is far more balanced than a year ago.
The richness of data accessible these days as demonstrated above is so vital in providing insight to enable people to make well informed (or at least better informed) decisions.
Thanks Alistair
I had no idea mortgagee sales were up to 5% of all sales!
Great data as always
Steve,
The first chart is in someways over simplistic, and for that I do apologise. The fact is that it is a useful indicator of the ratio of mortgagee sales to total sales. The reality is that within the total mortgagee sales reported by Terralink are transactions that are not truly residential sales – for example there are commercial property sales, development projects and some businesses. The denominator in this chart is the REINZ monthly sales data.
Having said all of that for complete transparency the fact is these factors would have been consistent through out the reporting period so the scale of the increase would be just as marked, it just might be that instead of 5% of all sales being mortgagee it may be 4%.
Some good data Alistair.
It would be interesting to see data on failed development mortgagee sales. Have we seen the last of them, or are there more to come ?
Another factor in the delay between financial decline and Mortgagee sales is the time it takes for a property to get to Mortgagee sale status, probably around a year or so by my guess, from losing your job to the point the bank takes over.
Keith
Unfortunately I do not have access to this data – we get the top line data from Terralink. Within the data is the detail which could provide such information, however in relative terms the absolute numbers are still relatively low so in any one month you may get massive variances.
” A high clearance rate of mortgagee properties is a good sign.” I would agree with this statement and this would be the case in an efficient market. Whenever I look at trackers, I try to focus on events then make a hypothesis based on what I see from the trend. For me the onset of the GFC is particularly meaningful and the increasing no. of “distressed sales” is consistent with the sickness of the wider economic environment. Given the scale of recent events, it will be interesting to see the graph in 5-10 years time.
J.C.
It will certainly be interesting to keep a track on this data in the coming months and years to see as you say the true fall out. In the past it tends to be the case that once the recovery has set in the focus (of main media, which in the past was the only medium) switched to other metrics.
Hi Alistair,
Thanks for the clarification.
Even 4% is more than I’d thought. Not based on any analysis, just that I hadn’t realised it was so high.
Steve