troubling data shows significant rise in power of sale listings as homeowners navigate economic pressures

A recent analysis using TRREB data shows a significant rise in power of sale listing in the GTA, with a decline in home prices and many homeowners going underwater on mortgages. This decline is being directly linked to economic pressures.

As per the data, in some parts of the GTA, home sales and prices have seen a decline and are still continuing their descent since the 2022 peak. The result has been a huge devaluation of home prices with many home owners having gone underwater on their mortgages. Further, as debt burdens become overwhelming, many are turning to bankruptcy as a last resort, thereby resulting in their homes being sold by the lenders under power of sale.

In September 2024, the number of power of sale listings reported were 204 as compared to 96 reported during the same period in 2023. Additionally, the average number of power of sale listings have gone up from 4.5 in 2020 to 83 in 2024 and so far the average monthly POS listings stand at 159.

Another recent report by MNP found that despite rate cuts, it’s consumer debt index has dropped 85 points, signaling an increase in consumer debt perception, all-in-all despite the rate cuts by the Bank of Canada. The report also found that for more than half of Canadians, the interest rates may not fall quickly enough to provide the financial relief they need (56%). A similar number of respondents stated that interest rates will need to drop much further before their financial situation significantly improves (57%) and about two-thirds (66%) said they desperately need interest rates to go down.

One of the primary drivers behind this increase in bankruptcy filings is the phenomenon of being “underwater” on mortgages. This term refers to a situation where the amount owed on a mortgage exceeds the current market value of the property. In my daily practice, as housing markets continue to be volatile, I have seen many homeowners and businessowners find themselves trapped in this unenviable position, unable to sell their homes without incurring significant losses.

In a similar vein, the Office of the Superintendent of Bankruptcy reported in August that the proportion of proposals in consumer insolvencies increased to 79% during the previous 12‑month period and consumer insolvency filings accounted for 95.5% of total insolvency filings. During the same period business insolvencies had also increased by 51.6%.

As these reports and data shows, the real estate marketplace is always continuously evolving. Thus, the decision to buy or sell real estate should always take into careful consideration all such factors. Therefore, it is crucial to carefully evaluate your financial situation, long-term goals and local market conditions before making a decision. As a real estate professional with over 20+ years of experience in the industry, I have first-hand witnessed the housing affordability crisis and worked with both buyers and sellers in this market in my every-day practice. If you need expert guidance for your buying and selling needs, please don’t hesitate to reach out to me.