Ooops

Every year, it seems, some hapless, inexperienced, enchanted tourists slip on the sensuous, wet and smooth rocks at Peggy’s Cove, and are carried to their maker on a breaker.

It’s a small secret the boys in charge of Nova Scotia tourism guard closely. Scenery can apparently kill you.

A few clicks up Peggy’s Cove Road, on the way to the highway snaking back to Halifax, there’s more danger, as in most communities where people are madly bailing out of houses. Just as the country’s major real estate boards were screwing up the courage to announce dismal numbers yesterday, this post appeared on kijiji:

We’re giving away our home, just take over the payments!

There are 2 years left until the renewal date on the current mortgage then you can refinance the remaining balance however you want to. There is roughly $395,000 left on the balance. We have $520,000 invested in this home but we’re moving to the US and need to go now! You will earn a very real ~$120,000 in equity by taking advantage of this offer. No down payment, no tricks, no BS. Just assume the mortgage and take all of the equity for free. Yes, we’re giving it away.

As it turns out, the home has been for sale for months, at a steadily declining price by a man whose doctor wife has already moved to the States. If a Boomer house in rural NS was worth half a million, then this would be a deal. But the market says otherwise. And the lucky ‘buyer’ who gets it for nothing but $395,000 in debt might end up owing a hundred grand more than he or she owns. Plus a fat mortgage renewing in two years at a fat rate.

Welcome to a glimpse of the future, in Tantallon, Nova Scotia. Look for more scared people to be handing over their keys to strangers in the coming year, once it becomes clear equity is going negative and selling’s no longer an option.

A year ago, who would have imagined this?

In the last 24 hours:

  • The Calgary Real Estate Board reported that sales of single-family homes in July plunged 42% from the same month last year. Condo sales were down 44%, and this was the third month in a row of cascading deals.

“It seems that consumers are not as upbeat as they could be,” said Sano Stante, the board’s president-elect, in a torrent of understatement. He went on to blame the lousy job market in Calgary (who would have thought that possible with $82 oil?) and a net loss of population in the city. Calgary. Tomorrow’s country. Where house prices declined last month at an annualized rate of 48%.

  • In Victoria a single-family home dropped in price by $35,000 last month. “A chill swept through Greater Victoria’s summer real estate market,” said the Times Colonist, in reporting a 43.5% crash in sales.

Cameron Muir, chief comedian for the BC Real Estate Association said, “we have seen consumer demand come off,” and blamed higher mortgage rates, tighter borrowing rules for first-time buyers and “fragile” consumer confidence brought about by the HST. He did not mention the fact houses cost $615,000 in a town where the average household income is $76,650. Mr. Muir finished his routine by forecasting that BC housing prices will increase this year by 6%.

  • And in Vancouver, head realtor Jake Moldowan shrugged off another month of toe-curling stats saying, “Activity in today’s marketplace is clearly trending in favour of buyers.”

Sales in July took a 45.2% dive from the summer of 2009, and a 24% drop from the month before – which was itself a stinker. The number of new listings is trailing off now, while active listings remain high – a trend being repeated in several major markets as potential sellers foolishly decide to wait for better days. They should be here about 2015.

  • Meanwhile in the Big Smoke, sales down 34% while listings collapse.
  • Et ici: moins de transactions à Montréal, à des prix plus élevés

At the risk of being boring (why start now?), this is asset deflation. It has the power to eat the middle class. Unchecked by better times and good news, it leads to continually lower prices and fewer sales. (After all, why buy a house if you know it will cost less in three months?) The most likely consequence here will be a wave of negative equity as many buyers in 2009 and 2010 find they’re like the guy in Nova Scotia – with digs worth less than the mortgage. Then whaddya do? Kijiji? Craigslist? Accelerant?

Just stay away from the rocks.