Distressed Listings

Happy Monday Morning!

Despite the sharpest house price correction in more than three decades, mortgage arrears in Canada remain low. Recent data from the Canadian Bankers Association shows the national arrears rate was a paltry 0.28% (as of February 2026), which means just over a quarter of a percentage point of mortgages are in arrears. Or rather, 28 mortgages out of every 10,000 were 3+ months behind on a payment.

This is well below levels in the United States and the United Kingdom.

Source: Canadian Bankers Association

In other words, nothing to worry about. Right?

However, one can’t help but notice the growing number of court-ordered listings littering the MLS.

In fact, the number of court ordered listings for sale is the highest it’s been in two decades.

The reality is, the Canadian Bankers Association only tracks mortgage arrears at federally regulated banks. What’s missing from their 0.28% figure is all the bad loans issued by credit unions, private investors and mortgage investment corps.

This is likely why the MLS is telling us a much more concerning story. The big banks are the most conservative of lenders, but even for them, we believe the trend is higher.

From a close industry source, Mortgage delinquencies at one of the big banks have doubled in the past three months. With 70% of the growth coming from Vancouver & Toronto.

In other words, more forced sellers looking for a bid in an illiquid market.

Stress is evident everywhere you look.

Here’s consumer insolvencies in BC. Record highs. Courtesy of my good friend Ben Rabidoux.

Source: Ben Rabidoux, Edge Analytics

Keep in mind this is just at the retail level. We’ve repeatedly noted the enormous stress in the development space, which is really ground zero for this bear market.

From an article in BC Business magazine this past week,

Bids are com­ing in below the debt levels on projects that have run into trouble in the last year. And there seems to be no end in sight.

“This is a monu­mental re-set,” says Mark Good­man, whose broker­age spe­cial­izes in apart­ment and multi-fam­ily devel­op­ment sites. The com­pany has a list of court-ordered sales on projects from Van­couver to Langley that it’s work­ing on. “We’re going to see con­tinu­ing pain and more dis­tressed sales for at least two years. And the price is going to have to be sig­ni­fic­antly lower.”

At the Van­couver Col­li­ers divi­sion that deals with fore­clos­ures, court-ordered and des­per­a­tion sales, it’s the same story.

“Until early 2025, we had sev­eral land sales in dis­tress that res­ul­ted in mul­tiple com­pet­ing offers when presen­ted to court for approval. In the early part of last year, there was greater optim­ism that the mar­ket would recover. This has stalled with uncer­tainty remain­ing on where pri­cing is going to land,” says Jen­nifer Darling, asso­ciate vice-pres­id­ent.

The beatings will continue until morale improves.

Here’s completed and unsold inventory. Finished units sitting empty, accumulating interest costs.

Nobody knows when we’ll hit bottom. Timing markets is hard. Although it’s safe to say we have a pretty high conviction that distressed, court-ordered listings should continue to accelerate through the back half of this year.

Let’s watch.