TV actors from Stargate SG-1 facing foreclosure in BC

[Cosmo]

From MacLeans Magazine...

Christopher Judge is accustomed to turning heads in Vancouver. During the decade-long run of the cult hit TV show Stargate SG-1, which was filmed in and around the city, Judge starred as the muscle-bound alien Teal’c. But when the six-foot-three actor appeared in B.C. Supreme Court in mid-November, amid raised eyebrows from the galley, it was for a role he’d desperately hoped to avoid. Judge, who owns three luxury homes in B.C., faces foreclosure. He’d flown up from Los Angeles the night before to ask the court for time to get a new appraisal done on one of his properties, a West Vancouver home with stunning views of the city that he’d bought for $2 million in 2006. At the same time, one of Judge’s former co-stars on the show, Michael Shanks, is facing foreclosure on another sprawling West Vancouver home purchased in January for $4 million. “I was always told the safest place for your money is in the real estate market because it would never drop by 50 per cent, but that’s exactly what’s happened,” a congenial Judge said outside the court. “I watched the L.A. housing market fall and now I’m having to watch the B.C. market go down, too.”


[Hey Christopher, cheer up buddy, I have it on good authority from other perberts that the BC market will not suffer they way you are talking. Apparently this is a desirable place to live and foreigners with money - that's you buddy - will keep prices inflated... or at least will sell to other foreigners with equal amounts of money. No worries pal.]

The passage is from a great article titled "Real estate prices are falling, and a U.S.-style collapse could cost taxpayers plenty - Could it happen here?"

Here is the link to the article, if you are interested: http://blog.macleans.ca/2008/11/27/could-it-happen-here/

 

[geek]

Err... the article was a bit too vague for me to understand.

I assume that there is a foreclosure because he couldn't pay the mortgages on his properties. So what is the connection between falling real estate prices and not being able to pay the mortgage.

 

[Cosmo]

Err... the article was a bit too vague for me to understand.

I assume that there is a foreclosure because he couldn't pay the mortgages on his properties. So what is the connection between falling real estate prices and not being able to pay the mortgage.

When you take out a $2 million mortgage, and the value drops 50% (which has now happened for a lot of the West Vancouver properties)... only a fool continues to make the payments on that mortgage (especially if you have three like that).

If you lost a lot of money in the market (and no longer have income from interest/dividends), combined with your various debts... It's more prudent to simply walk away from the mortgage (ie. let the bank foreclose).

Foreclosures are up 150% in BC simply because people are holding properties which are now worth far less than what they paid for them.

By the end of spring, anyone who bought in 2006/2007 will be holding a property worth 30-35% less than they paid for it.

For those who got the mortgage with 0 down (or even 5%), they will be 'underwater'... meaning even if they sold the property today, they would still owe the bank about $180,000 (or more).

Any of those people who also encounter financial difficulties are simply going to walk away from their mortgage. Others are simply going to say "why should I now pay though the nose for a property worth $200,000 less than what I paid for it?". It was fine when values were going up 10% a year, but not when they are falling.

And CMHC (meaning the taxpayers... ie, you and I) will be on the hook for it.

 

[Sit_on_my_face]

When you take out a $2 million mortgage, and the value drops 50% (which has now happened for a lot of the West Vancouver properties)... only a fool continues to make the payments on that mortgage (especially if you have three like that).

If you lost a lot of money in the market (and no longer have income from interest/dividends), combined with your various debts... It's more prudent to simply walk away from the mortgage (ie. let the bank foreclose).

Foreclosures are up 150% in BC simply because people are holding properties which are now worth far less than what they paid for them.

By the end of spring, anyone who bought in 2006/2007 will be holding a property worth 30-35% less than they paid for it.

For those who got the mortgage with 0 down (or even 5%), they will be 'underwater'... meaning even if they sold the property today, they would still owe the bank about $180,000 (or more).

Any of those people who also encounter financial difficulties are simply going to walk away from their mortgage. Others are simply going to say "why should I now pay though the nose for a property worth $200,000 less than what I paid for it?". It was fine when values were going up 10% a year, but not when they are falling.

And CMHC (meaning the taxpayers... ie, you and I) will be on the hook for it.

Cosmo....good article.

Also, Vancouver Real Estate prices will continue to decline well into 2009 IMHO.

Condo prices need to come down more though I think.


http://www.canadian-housing-price-charts.235.ca/vancouver_housing_price_chart.htm




???????

 

[Cosmo]

"Fools" like my parents would never have been caught DEAD defaulting on any loan they agreed to. They would take their lumps and they'd know that eventually their home would be paid for and they'd be celebrating. They would be optimistic and would know that eventually the value would likely go up.

Ahh... but your grandparents (or at least their generation) would have walked. Especially if they lived in the United States.

Believe it or not, there is a legal quirk that originated in the the Great Depression of the 1930s, that stipulates banks cannot easily pursue borrowers for any balance outstanding on the main mortgage on their homes.

Laws were actually created to protect the right of people to simply 'walk away'.

Consequently, by walking away, borrowers also walk away from the loss on their property.

As for the social stigma, BBC News did a story on it back in July (http://news.bbc.co.uk/2/hi/business/7529277.stm).

It stated,

Traditionally in America there is a social stigma attached to those who default on their debts, which should be a deterrent to walking away from your home.

But according to Susan Wachter, professor of real estate and finance at Wharton School of Business, in the depth of this crisis the social attitudes to such actions are changing.

"This is the kind of conversation that's going on at cocktail parties, at swimming pools," Professor Wachter says. "And suddenly this option which was truly unthinkable in the past becomes thinkable."

Professor Wachter believes that, to date, most people have had their homes repossessed because they could not manage the repayments.

The trend of people now positively choosing to walk away because it makes financial sense to do so is a worrying new development.

"The dangers are extraordinary," Professor Wachter says.

"If all that is needed is that the house value is less than the mortgage value, there is a large number of homeowners in the United States who are in that situation".

According to Professor Nouriel Roubini, New York University, walking away has become commonplace.

"I would say it's probably 70% of the volume of our foreclosures right now," he says.

As a sign of the changing times, some 60% of borrowers do not even bother to contact their banks to attempt a renegotiation of their loan. They stop paying and they stop talking, they just plain walk away."

And it could lead to total disaster. It is impossible to know for sure how many of the people who are now walking away from their homes could have gone on paying their mortgages.

But Professor Nouriel Roubini of New York University, one of the first economists to warn of the dangers of the American house price boom, believes the number of people positively choosing to walk away is growing rapidly. "This is becoming a tsunami of voluntary defaults," Professor Roubini says.

"The losses for the financial system from people walking away could be of the order of one trillion dollars when the entire capital of the US banking system is only $1.3 trillion.

"You could have most of the US banking system wiped out, so this is a total disaster."

======================================

And as I noted in a post in October (reinforced by 60 Minutes last Sunday - see my post referencing the 60 Minutes piece), there is another wave of defaults coming in 2009 from another form of subprime mortgages (Alt-A, Jumbo Prime and Option-ARM) that is estimated to total $1.5 trillion in foreclosures.

Morally reprehensible or not... that's why are teetering on the cusp of Recession to Depression.

It has only just begun.

As for BC Real Estate... never mind prices in March 2008. Two years from now people will rave at how high prices were in December 2008 and how they should have sold then.

 

[smackyo]

wow, thats too bad. i've met this gentlemen quite a few times through work. very down to earth and very nice. great guy to talk to. he always seemed to remember my name to.

sad to hear that happening.

 

[Fudd]

What we need is some form of price control similar to a system of rent control that they have in some areas. In New York City there are appartment units that are rent controlled so they are affordable for low income people which allows them to live and work in the City instead of having to commute from a distance.

I would love to see a system price controls here in Kits and downtown Vancouver so people with low incomes an still afford to buy. The prices of homes and condos here have really gotten out of control in the downtown core. I still remember when a single bedroom around 600 square foot was going for $300000, then in the last few years some shot up as high as $500000+. Its unbelievable that a some downtown condos were going for half a million dollars.

A lot of the increase in price was driven by greedy developers and even common people who just got greedy and started buying and selling condos for a "profit".

I also think people should not be allowed to own more that one home to prevent this problem. The governments need to pass a law banning this practice of having more than one home. This will keep the housing prices down and prevent greedy profitering by people who "invest" and flip homes for outrages profits.

If this had been law especially in the US this who economic crisis would not have happended.

 

[Valoo]

Thats a shame. I met the guy a few times and hes a really great person. He almost treated my like a friend instead of a rabid fan. Hope it works out for him.

 

[island-guy]

What we need is some form of price control similar to a system of rent control that they have in some areas. In New York City there are appartment units that are rent controlled so they are affordable for low income people which allows them to live and work in the City instead of having to commute from a distance.

I would love to see a system price controls here in Kits and downtown Vancouver so people with low incomes an still afford to buy. The prices of homes and condos here have really gotten out of control in the downtown core. I still remember when a single bedroom around 600 square foot was going for $300000, then in the last few years some shot up as high as $500000+. Its unbelievable that a some downtown condos were going for half a million dollars.

A lot of the increase in price was driven by greedy developers and even common people who just got greedy and started buying and selling condos for a "profit".

I also think people should not be allowed to own more that one home to prevent this problem. The governments need to pass a law banning this practice of having more than one home. This will keep the housing prices down and prevent greedy profitering by people who "invest" and flip homes for outrages profits.

If this had been law especially in the US this who economic crisis would not have happended.

More stupidity.

If people can't own more than one home, there goes the rental market.. so people who can't afford to buy have to live under a bridge? Brilliant.

And as far as price controls goes, why don't you go first. Go out and buy a $500,000 condo and then sell it to someone else for $200,000.

They tried price controls once, in Russia. The result was 10-20 year wait-lists to buy a place to live and families cramming 10 people into a 1 bedroom appartment. Another brilliant idea. Of course, people with money won't wait on a waitlist, they'll simply leave. There goes the tax base to fund social services.

There is more demand than supply and if price doesn't make supply meet demand then you get wait lists (like in the canadian healthcare industry).

 

[island-guy]

But we do need some form of a rental market. There is a demand for it because not everybody necessarily wants to own it. This could be controlled through zoning.

Won't work.

If you make it unprofitable to own rental properties by increasing the taxes and decreasing the rents, people won't own rental properties.

Zoning areas as 'rental only' will simply result in big abandoned buildings if they aren't profitable to rent. Especially in times like these, landlords would just walk away from mortgages and leave the banks with the properties.

The banks would evict the tenants and take the write-down rather than lose money renting the property.

It has been tried elsewhere and that's what happened.

The ONLY thing that keeps low-rent housing on the market is the ability of owners to clear nice profits on the investment one way or another.

If the housing prices continue to drop, expect to see a lot of rental properties disappear from the market as people walk away from underwater mortgages and the units get bought up by bottom feeders looking to reno them and jack up the rents.

Meanwhile there will be more people looking to rent, because they lost their houses to underwater mortgages.

Too many people in Vancouver have been getting 2nd, 3rd or 4th mortgages and spending the money to improve their lifestyle. Now it is time to pay the piper and they can't afford their own mortgages and there won't be much available in the way of rental properties as it is.

The result is going to be a whole lot MORE homeless people, not less.