Tag Archives: Retirement

“My neighbours, in their late 60s, just put their house on the market. They had said they would die in that house, but now they are worried that with the housing market going south they may be losing a lot of equity and they better sell now before it gets worse.”

“I can’t believe it!
My neighbor and his wife, who are in their late 60s, just put their house on the market.
I talked to them often before, and they said they would die in that house and leave it to their only son.
But now they say they are worried that with the housing market going south they may be losing a lot of equity and they better sell now before it gets worse.
To make matters worse, 1 year ago they took out a HELOC for $30k to help their son buy a condo.
Two week’s ago their son received a note from his strata that a special levy of $40k to cover inefficiences in the building envelope has to be paid.
Another leaky condo!
Needless to say, the old couple has no other assets than their rapidly depreciating house, so they are panicking.”

– Real Estate Tsunami at VREAA 23 May 2013 10:53pm

Hello again to all readers.
Posts recommence with this powerful anecdote from RETsunami.
We will aim to pop up anecdotes here on an occasional and irregular basis; we trust they will be appreciated nonetheless.
Keep well.
– vreaa

“My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”

“My folks have owned in South Surrey since the mid-70′s, mostly in just two locations, but in their empty nest years yo-yoed between downsizing and re-upsizing to various condos, townhouses, duplexes, etc. trying to ‘find the right fit’, and all of a sudden they find themselves at 65 still owing half the value of their home + recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it and dad will keep working until the debt is paid before considering retirement. Now they are talking of selling and renting, which I have encouraged them to do, but they would feel ashamed in their peer group to ‘stoop’ to that.”
Dazza at VREAA 6 April 2013 11:05 am

The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.

“The average Canadian homeowner doesn’t think they’ll be mortgage-free until they’re 57 — two years longer than what they expected last year, a survey by CIBC suggests.
The survey also found that half of those surveyed said other debt, from credit cards to lines of credit, have increased and impeded their ability to pay off their mortgage more quickly. …
The report released Friday also found those in British Columbia expected to be the oldest at 59 when they have paid off their mortgage, followed by those in Manitoba and Saskatchewan at 58. …
Colette Delaney, executive vice-president of mortgage, lending, insurance and deposit products at CIBC, said that the longer someone has to hold a mortgage may mean the less savings they have for retirement.
“Being mortgage free sooner can help accelerate retirement savings, but carrying a mortgage into your late 50s can have the opposite effect and make it more challenging to reach your long term savings goals,” said Delaney.

– from ‘Canadian homeowners don’t think they’ll be mortgage-free until they’re 57′, Canadian Press, 5 Apr 2013

Let’s simply face it that the average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
In a closely related sense, locals are overdependent on their RE holdings for their retirement funding, and are at high risk of their retirement plans being severely hobbled by coming RE price weakness.
– vreaa

“One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”

“One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized $185,000. Home equity loans and “helping” out the kids does take a toll.”
ex-kitsie at VREAA 30 Mar 2013 3:17pm

Even longstanding owners are speculating on future price strength.
– vreaa

More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”

mortgages-property
Allan and Karin Hoegg are pictured in their home in Vancouver, British Columbia on March 8, 2013 [image F.Post]

“In 1995, Allan and Karin Hoegg were mortgage-free. But no more: today their Vancouver home is a valuable source of income as they plan for full retirement.
Allan Hoegg says when their son and daughter-in-law wanted to buy a house, they took out a variable-rate mortgage so they could help them out. “We wanted to take advantage of the stability of the current rates.” To cover the mortgage payments, they rent out a suite in the home to students.
The couple also established a home line of credit that allows them to free up cash for investment purposes when they need it. “It gives you maximum flexibility and you can pay it any time you want without penalty,” he says. “It’s dead easy.”
Like many people planning their retirement, there’s a sentimental side to keeping their home, he says. But there are just as many practical reasons. In the Hoeggs’ case, selling to downsize would mean substantial commissions and moving costs. “Besides, real estate is a very good investment in Vancouver,” he says. “The longer we can stay here, the greater the possibility of no-tax capital gains.”

“For the most part, people want to stay in their homes, says Rob Regan-Pollock, senior mortgage consultant with Invis – Team Rob Regan-Pollock mortgage brokers in Vancouver. “The fact is they’re sitting on a big nest egg. So when they get near to retirement, they start asking how they can use that equity to help them in their retirement.”
There are plenty of options to consider, from applying for a line of credit or reverse mortgage to renting out your property to finance your monthly costs at another residence.
A line of credit is the most flexible option, Regan-Pollock says. “If for some reason you can’t meet your monthly expenses, a line of credit on your home can be a very good buffer. The interest rates are low — typically prime or prime plus one per cent, depending on the institution and your qualifications. It’s also quite sustainable, since your home will often appreciate in value more than the amount of debt being drawn down against it.”

- from ‘Home is where the retirement money is’, Denise Deveau, Financial Post, 13 Mar 2013

Comments from ‘Bo Xilai’ below the FP article, 27 Mar 2013:
“Denise, why didn’t you mention Allan Hoegg works for Invis – Team Rob Regan-Pollock mortgage brokers. Of course he’s going to use his house as an ATM… he’s just eating his own cooking. And at the same time you’re interviewing Rob Regan-Pollock as an “expert” in your piece. http://www.teamrrp.com/team/
More fake real estate stories using employees as plants.” …
“They used an employee of the “expert” interviewed without disclosure and, I would argue, in a deceitful manner to promote a strategy beneficial to the “expert’s” reputation and business interests.”

group
Allan Hoegg (top left) part of Team Rob Regan-Pollock mortgage brokers [image teamrrp.com]

[thanks to 'C', for sending news of the article and 'Bo Xilai's comments to vreaa via e-mail, 27 Mar 2013]

This article is interesting..
1. for the undisclosed insider publicized as client
2. for the journalist’s ineptitude or, alternatively, collaboration
3. for the retirees’ dependence on RE holdings for retirement funds
4. for the fact that such borrowings were used to purchase more RE
5. for the need for tenants in their ex-SFH to cover mortgage payments
6. for the assumption that Vancouver RE is “a very good investment”
7. for the assumption that prices will continue to rise.
– vreaa

For those readers unfamiliar with the recent high profile case of industry insiders masquerading as condo buyers, please see:
CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!, VREAA 13 Mar 2013

UPDATE:
This article also headlined and discussed by Whisperer here:
‘Another media scandal from the real estate industry? News article appears to be contrived shill piece from PR company.’, 28 Mar 2013

Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”

“Every Friday I play hockey with a bunch of guys who are over 55. I’m a goalie, so even though I’m not 55, they let me play – I guess it’s hard to find 55 year old guys whose knees are willing to bounce up and down off the ice for an hour and half.”
“Anyways, I overheard a conversation in the dressing room last Friday. One of the older guys (over 60) mention to the guy beside him (over 70) that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house. The over-70 guy nodded in approval. The over-60 guy asked if he had heard of anyone doing this before, as they couldn’t see any other way to continue to fund their retirement.”
“The over-70 guy nodded, and said “Yup, we did it a couple of years ago. We’ve been renting now for two years – we had to do it, because we couldn’t afford the property taxes each year anymore”.

– anecdote from ‘Ross’, relayed by Garth Turner at greaterfool.ca 27 Mar 2013

“Boomer retirement supply” will be just one of the factors weighing on the Canadian RE market in these coming years.
In Vancouver, there will be many other downside weights. We anticipate that the largest will be the loss of speculative buying (all buying based on the idea that prices go up will stop). Another downside weight will be the knock on effects of a shrinking RE sector (loss of jobs; loss of related economic activity; people leaving). Yet another will be the disappearance of the ‘move-upper’ market (as condo prices contract, almost all wannabe move-uppers will be stuck.. they will not provide support for townhome or SFH prices). Another downside weight will be cash flow negative properties coming to market that have only been held because prices have remained strong enough (we’d expect this to include some of the empty condos we recently heard about). Collapsing RE markets in China will have a modest direct downside effect, but also a larger indirect downside effect through the psychological impact on local speculators.
This list is not comprehensive, I’m sure readers can think of other mutually-perpetuating downside mechanisms. When a speculative mania cycle turns from ‘virtuous’ to ‘vicious’, the multiplier effects reverse.
Boomer supply will be just one of the many downside weights. Many who are reliant on paper RE wealth for their retirement fiscal health will come to market; as prices drop, some will do so with urgency.
– vreaa

Lower Mainland Couple In Their 70’s; RE Makes Up 216% Of Net-Worth; Desire To Buy More – “My friend is getting worried about his parents’ financial situation.”

“I was talking to a friend earlier today, He’s getting worried about his parents’ financial situation…
Get this:
$2.6 million invested in real estate… all in the Lower Mainland.
$1.4 million of mortgage debt (54%). Dad is over 70, mom not much younger.
Imagine a collapse of 50% of the market in the LM. The entire family’s net worth would be wiped out. Really scary. The irony? They want to invest even more in real estate (because they lost so much money in mutual funds…).”

Makaya at VREAA 6 March 2013 8:22am

We still believe that the (90 minus age)% guideline for maximum percentage of net-worth that should be in RE makes sense.
These guys should have less than 20% in RE, their actual number is 216%… and they want to increase it!
We’ve heard enough of these stories now to extrapolate that there are a significant number of people in this position. They are very vulnerable to price declines, and they make the market that much more vulnerable, too.
– vreaa

“Forty percent of homeowners over age 65 had mortgage debt in 2010, compared with just 18% as recently as 1992, Reuters reports.
The Investor Education Fund recently found that 24% of Canadian homeowners surveyed expect to have debt on their principal residence after they retire. Of those who expect to owe money on their homes when they retire, more than one-quarter said they don’t know how they will pay it off.”

advoc8 at VREAA 6 Mar 2013 at 2:12pm, quoting from ‘How Baby Boomers are rewriting the rules of retirement’, Financial Post, 6 Mar 2013