Intro

Today, we’ll look at fresh signs of stress in the housing market, where mortgagee sales listings have doubled since early February,
And we’ll look at the increase in the staggering amount of bank lending in the last 5 years. Banks are now heavily dependent on the housing market. More on that in a minute

Mortgagee Sales

But firstly, we look at the latest results from the interest.co.nz mortgagee listings index.
We are tracking the number of listings for mortgagee sales on trademe.co.nz and realestate.co.nz.
The overall number is up 7% this week alone and has more than doubled since we started tracking these figures in February.
It’s a very interesting exercise. Just go to these websites and search for mortgagee to see what type of house is up for sale. There’s a lot of investment properties, particularly anything that looks a little leaky.
And there’s quite a few sections as well as developers struggle to get funding to build houses or apartments on that land.
The story in Auckland is uglier, where the number of mortgagee sales listings have risen 19% in the last week alone and is also more than doubled in the last 6 weeks.
Elsewhere the number of bankruptcies and “no asset procedures”, which is a sort of bankruptcy lite, has risen sharply in the last four weeks.
Times are tough and getting tougher.

Deposit Insurance

Now for a closer look at how exposed the banks are to the housing market.
Our analysis of the bank’s disclosure statements for the last 5 years show they are much more exposed than they used to be.
Now almost half of all bank assets are mortgages on land and houses. That’s up from just over 40% five years ago. That’s because of the huge boom in house prices and the bank lending that went with it.
Banks now have NZ$148.3 billion of mortgages. That’s double what it was 5 years ago.
It means that a crash in the housing market and a big increase in defaults and people not paying their mortgages on time will affect the banks here. The exposure to the housing sector here is even greater than it is in Australia.
ASB is the most exposed of the big banks with just over 63% of its assets in mortgages. At the lower end of the scale is BNZ with 42%.
It just reinforces our call last week for a debate on a bank deposit insurance scheme.
Along with Australia, New Zealand is one of the few countries that does not have a deposit insurance scheme just in case a bank fails.
As we saw over the weekend with the near failure of Bear Stearns, these things can and do happen, even for the big names.
We believe New Zealand should set up a government run deposit insurer that charges the banks and therefore their customers a small fee to insure the first 100 thousand dollars of deposits for each depositor.
That will help reduce the risk of a run on a bank and will ensure at least some protection in the event of a disaster. It will also prevent the government from having to bailout or nationalize a failing bank.

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The First Time Homebuyer Tax Credit has been extended and expanded, and the details can be found in our most recent special edition.

For December, we take a look at the results the incentive had on stimulating home sales since 2008.

According to the IRS, about 1.4 million people have taken advantage of the first time homebuyer tax credit.

Not surprisingly, California ranks number one with the number of people filing a claim for the tax credit, while Alaska and Wyoming are among the states with the fewest number of claims.

But those numbers dont tell the whole story. For more, we go to Bryon Ellington. Bryon?
Bryon: Thanks, Jay.

According to the Internal Revenue Service, every state in the Union has participated in the First Time Home Buyer Tax Credit.

If we look at the results according to the total number of claims, heres how the rankings shake out:

California is number one with more than 160 thousand tax payers taking advantage of the first time home buyer tax credit.

Texas is number two with over 131 thousand.

And Florida is number three with over 105 thousand.

But when we look at the data in terms of per capita claims, or the percentage of folks in each state who took advantage of the tax credit, we get radically different results.

Heres a look at the top three in terms of per capita participation in the tax credit

Nevada is in the number one position with more than 20 thousand claims out of a population of 2.6 million.

Utah is in the number two position with over 17 thousand claims out of a population of 2.7 million.

And Arizona is in the third position with over 38 thousand claims out of a population of 6.5 million.

Whats more, we find Alaska moving from near the bottom of the rankings to number 26 above California! And Wyoming, the least populated state in the U.S., moves to number 16. Thats just a bit behind Texas in terms of per capita tax payer participation.

Back to you, Jay

Jay: Thanks, Bryon. Thats it for This Month in Real Estate. Thank you for joining us.

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