Whilst the statistic released by Terralink on mortgagee sales is bleak news for those at the sharp end of loosing their homes, the NZ picture is a far different picture from that experienced in the US – the home of foreclosures!
Terralink reported that in the month of June; 289 registered sales of land and property were as a result of a finance company or bank selling the property following the borrower defaulting on the loan agreement. This is the highest single month ever and now represents just under 5% of all homes sold in the month. However when compared to the the US where the proportion of all homes sold that have been foreclosed (mortgagee sales) over the past year have been over 40%, NZ is suffering nothing like the same fall out.
In the US the foreclosure problem has been the catalyst of the collapse of property prices which is still running at close to 20% year on year decline, and currently around 30% lower than the peak of the market over 2 years ago. Compare that to NZ where the current national property price is now less than 3% below below the peak of October 2007.
In the US the property market has got trapped over the past 2 years in a doom loop scenario, a situation that they are only just getting out of.
The flood of foreclosed houses coming onto the market as prices have fallen leaving homeowners financially underwater had in itself further depressed prices leading to more homeowners defaulting.
Compare this to NZ where firstly the scale of mortgagee sales is far lower and therefore consequentially has less impact on the overall market stock of properties for sale. Additionally there have been enough bargain hunters to ensure mortgagee sales have moved through the market efficiently without flooding the market and consequentially further depressing prices.
This “natural clearing” of the mortgagee market can be well represented in the chart below which tracks mortgagee property listings on the website over the past 33 months and reflects the rise in early 2008 with a tailing off through 2009 to date.