The economic struggles happening in Alberta are well known. With the falling price of oil and job cuts, it is the toughest financial climate that province has seen in decades. The housing market in reacting accordingly, but mortgage laws in the province are causing something you don’t see everywhere else; people just walking away from their homes. In Alberta there is a clause in many mortgages that is called a “non-recourse” action. The homeowner basically just hands the keys of the house over the bank and says “its yours, I don’t want it anymore.” The bank cannot go after you or your assets. This can only occur on homes that had at least 20 percent down (not insured from CMHC) and, as many homes have dropped 20 percent in value, many people see the financial gain to just walking away. Walking away will show up on a person’s credit rating (it didn’t use to 30 years ago) and that make the decision harder for some. Walking away causes huge headaches and costs for banks. They now have to deal with the full costs of selling the home and in a downward spiraling market. There will be consequences for banks with heavy Alberta mortgage exposure.
There were more layoffs announced this week in Alberta. Calgary based Husky will be cutting costs to try to remain financially stable and lower its cash flow needs for 2016. Husky did not release the exact number of people being let go but this article states it will likely be a combination of full time and contract workers and could total around 600 people. Alberta’s unemployment rate has reached the highest since 1996 and that number is expected to climb as resource companies continue to lower costs as much as possible in an attempt to ride out oil prices that have fallen below $30 per barrel and closed at $27.94 on Tuesday. Husky is trimming costs in every area and trying to sell off underperforming assets that are draining cash. Husky already laid off 1400 workers in October so this news was sadly likely a bit of surprise to those getting walking papers.
It has been a tough week for social media company Twitter as #RIPTwitter was one of the most popular hashtags this week on their own site. The hashtag was in reference to the changes reportedly coming to how users could organize and view tweets. Many users did not think the change would be positive or benefical. On Wednesday this week, things got worse as the company reported much lower than expected quarterly results. The company reported a loss of 13 cents per share when analysts had predicted a profit of 12 cents per share. Also surprising was the complete lack of user growth. Twitter reported unchanged user growth from the previous quarter at 320 million. RBC had predicted modest growth of 3 million more users. Not making a profit is not good but not growing users when a company is as young as Twitter is down right bad news. The stock is already off 50 percent since July when founder Jack Dorsey came back, and these bad numbers will cause most shareholders to question why they have stock at all. Many market watchers expect Twitter to be taken over shortly and it will cease operating as a stand-alone company.