“They asked “How do I know it could go down 3%? In the long term real estate always goes up.” I was angry, and stammered “Fine, you are 72 right now so in the long run you will probably be in a geriatric home. The condo will be liquidated to pay medical bills. Get your cash out now and enjoy it rather than hanging on.”

“The old timers aren’t that keen to cash in, my folks have two places, one in Van and one on the island that they like to visit about once a month. I created a model for them that showed even with a modest 3% decline they are better to sell and take a loss now than hold on and still stay at the empress every weekend amg be ahead. They refused and said they like to open the closet and have their stuff and if things got bad they could rent it out. I next showed them that if they sold now, at a loss, and rented a place over there, they would still be better off and de-risked. Their response was “How do I know it could go down 3%?”. My response was I don’t but Van has dropped more than 10% since the peak and how do they know it is not going to fall”. In the long term real estate always goes up was what I was told. I was angry at this point and stammered fine, you are 72 right now so in the long run you will probably be in a geriatric home and the condo will be liquidated to pay medical bills; I just want you to get your cash out now and enjoy it rather than hanging on.”
YLTN@Work at vancouvercondo.info 10 Jan 2012 at 8:35am

Imagine 10,000 couples in this position.
They find it hard to conceive of substantial price drops.
The market drops 5%, 10%, then 15%. Then 20%.
How do the 10,000 respond? Not all in the same way, of course, but what percentage would, at 20% off, come to market?
– vreaa

30 responses to ““They asked “How do I know it could go down 3%? In the long term real estate always goes up.” I was angry, and stammered “Fine, you are 72 right now so in the long run you will probably be in a geriatric home. The condo will be liquidated to pay medical bills. Get your cash out now and enjoy it rather than hanging on.”

  1. Just claim your rich buddy in Manhattan is renting. “Vancouver is different” is invariably the only “argument” left.

  2. These sound exactly like the conversations I had with my mom in 1999-2000 just before the stock market imploded. It didn’t matter how carefully I explained that the downside was now substantially bigger than the upside, it was always, “Well how do you know? What if I take my money out now and it goes higher?” *Sigh.*

  3. since they won’t be needed most of those shipping containers to haul stuff from china to export markets
    http://tinyurl.com/7br7ff2

  4. “you are 72 right now so in the long run you will probably be in a geriatric home and the condo will be liquidated to pay medical bills; I just want you to get your cash out now and enjoy it rather than hanging on.”

    “angry at this point and stammered”

    well, dont blame others’ thinking, but another idea is that you wanna put your hands on dad’s pocket the sooner the better! you are just another speculator on your parents’ health and forturne.
    Thank to VREAA for this piece.

    • if you are in a good position and won’t be too adversely affected, there is a valid argument for sitting tight and ignoring all the fuss. there is an opportunity on the table for people who want to cut exposure but it’s not like call your broker to sell stocks. can be very disruptive especially for older folks.

    • Vancouver home owners heading into retirement who have 40% or less of their net-worth tied up in RE, who could afford to see the paper value of those holdings drop to 50% of current market value without their financial futures being in jeopardy, need not worry about the RE market.

      We are not opposed to people owning RE; we are speaking out about severe overextension into RE.
      Many in this town are heading to retirement with RE making up 75%, 80%, 100%, sometimes even more (!!), of their net-worth.
      And many younger folks are leveraged 5 to 1, 10 to 1, 20 to 1 to the RE market. A 50% hit will ruin their future financial well-being.

    • Actually, no, you could not be more wrong Fred. I keep pushing my folks to cash out and spend their money. They talk about sailing but are afraid to buy a boat. They talk of travel but see it as to costly. It drives me nuts as I have planned for the future and have no need for an inheritance and have told them such; I believe my exact words were “you can’t take it with you, so enjoy now what you have managed to build, don’t scrimp and save to leave me an inheritance”.

      They have spent their whole lives saving so now they just ant comprehend spending; I want them to enjoy the last years as much as possible while they still have their health.

      BTW Fred, anyone that incorporates inheritance in their financial planning disgusts me and is not someone I would ever associate with and your comment makes me so angry to the core as you see this anecdote from your view point which probably means if you were in this situation you would be going for their cash.

      • yltnboomerang

        Oh yea, I’m also YLTN@work in case you couldn’t figure it out.

      • Thanks for the additional info, YLTN.
        BTW, we know this could be hard to assess, but how do you think your parents would respond to prices steadily dropping 5, 10, 15, 20 % ?

      • I am sorry to make you feel angry. a few questions:
        -if my viewpoint was not your intention, why would you feel angry with an anonymous poster?
        -do you have to be angry with every viewpoints that do not meet yours?

      • Fred, accusing someone of angling for a bigger chunk of his parents’ inheritance is not “asking a few questions.” Perhaps that’s where the anger came from.

        As I said up above, I had similar conversations with my mom regarding her mutual fund investments over a decade ago.If you had suggested I was just after her money, I’d have gotten rather angry too.

      • yltnboomerang

        I know how my folks will respond if prices drop 5, 10, 15%, denial. They have made up their mind that even if prices drop, they only go up in the long term “buy and hold”. They will never sell the place until there is no loss, the fact that the market value is currently less than they bought it for means to me they will never sell it.

    • You are one repugnant human being Fred. Don’t transfer your own twisted greed and avarice onto others. Most of us bears don’t want people to suffer during a RE crash but recognize one is needed in order to allow normal economic life to return to Vancouver.

      You claim that you are not paid to post here which just means you are nothing more that a semi-literate bottom feeder trying to gain some measure of relevance through posting provocative statements. FYI, it doesn’t make you relevant…just sad.

      • …. not to mention insanely boring.

        We don’t censor alternative viewpoints (we encourage well considered argument of any sort), and we even tolerate the occasional expletive, BUT we just may have to step in if trollish drive-by comments end up being more and more of a gigantic distracting yawn.

      • fred has never, not once, said anything of redeeming value. Shut down this nasty real estate agent. Block his IP.

      • lives are bitter sweet arent they!
        it’s never me, it’s always the other guys.

        [No, it is you. – ed.]

  5. It sounds like somebody wants to ensure their inheritance does not diminish. As I’ve mentioned before, an old school buddy that convinced her mother to sell in Kits was surprized to realize only $185,000 (approx.) after the sale since her mother was living on reverse mortgage money. I have the feeling that this is going to be the unwelcome news many heirs will be getting in this age of high utilities and many medical procedures only partly funded (cataract surgery, for example). Care aids to help seniors stay in their own homes are only slightly subsidized, foot care and many other necessities are not funded at all. Also, get ready for the government to expect seniors to pay for long term living – at the moment the government doesn’t make you sell your residence but I suspect that will change. In California, for example, you can’t have transferred the title of your home in the previous five years if you want to qualify for seniors’ long term care at state expense – I wouldn’t be surprized is that doesn’t happen here. The take-a-away, don’t go into debt expecting a windfall to bail you out.

    • Valid points to be sure. And when you think of it, it is perfectly reasonable for the government to expect seniors to sell their homes and use that money to finance their long term care living. A person who owns a home or even a car cannot get disability payments. (I know someone who had to sell her car after becoming disabled, then live off the proceeds until that money was gone before being allowed to start collecting ODSP here in Ontario.) Why would we apply a different standard to seniors? Sure it’s nice to leave your family a nest egg. But the taxpayers certainly have a right to expect that those with means will use those means to contribute to their own care. This will be a contentious change when it happens. Both seniors and those expecting inheritances will be froth-at-the-mouth angry. Especially the latter group.

    • I have also thought about the inheritance issue – my parents (boomers) have inherited at least a few hundred thousand dollars from their parents and have blown it all on expensive vacations and dinners out, gambling, etc… I have never expected to inherit but I’ve also been pretty clear that it is highly unlikely I will be ale to contribute to their care in later years. My parents seemed to consider it a given that they would inherit, I’m not sure that my generation (X) has the same expectations. Especially with financial products like reverse mortgages/ HELOCS and such, I think many folks counting on inheritances to help them get on better financial footing down the line may be in for a nasty reality check.

    • same goes for pensions – no defined benefits and state services are likely to be underfunded by the time we retire. Yep, we’re on our own, and planning accordingly.

  6. So they dont think it will drop 3% when its already dropped over 10%.

    Just imagine the stampede when it drops past 20%. All these baby boomers who thought it was all locked away.

    They will suddenly look up and go George, George we gotta get out, we gotta sell because we were depending on our property to get us through our retirement and its value is falling quickly. Just imagine when that happens.

    Actually i dont. Look at those listing figures over at Vancouver condo info. The heards heads are up and they are starting to realise something is changing. Something is changing and the panic is starting to set in.

    Listings.
    288 231 206 217 376 351 266 232 218 428 324 = 3,137 approx 285 per day

    sales
    65 30 76 43 91 59 48 59 55 65 82 = 673 = approx 61 a day

  7. I know a lot of financial planners and they’ve been having talks with retirees and their children. One increasingly common concern by the planner and the children is that the boomers aren’t planning for the future an have a “Peter Pan” live forever attitude. They even brush off the illnesses that affect their friends in their mid-70’s or the afflLictions that disable them from going up and down stairs. They should be selling monster homes and getting more manageable properties while the getting is good but they don’t want to leave “their home”. This is only a boon to the reverse mortgage predators.

    • Blame the bank commercials for that. Apparently all boomers retire at age 53, then live another 50 years off the clever investments the bank has made for them. During this time, they engage in typical retirement activities like riding Harleys through rugged mountain ranges, running barefoot on the beach, rock climbing, hang gliding, attending quaint rural festivals deep in the Amazon rainforest, and of course, helping their own kids with the expenses of adopting a Vietnamese child. Over the past few years, I’ve seen “retired couples” doing every one of these activities – in bank commercials. Never once seen it in real life. Not even the running barefoot on the beach part. (They walk. They always walk.)

      • Ragingranter — just wanted to thank you for your very entertaining and informative posts!

      • me too, good work.

      • Agree, some great posts from ‘rr’…
        Smart.. and funny, too.

      • I’m blushing. You’re all very welcome.Glad to be of some value. And glad to have found this blog. Lot’s of eye-opening anecdotes, just like VREAA promises. Plenty of insightful commentary too.

        I’m especially relieved to discover that I am not the only person who thinks that the credit/housing/economic situation has gone completely and totally off the rails. Lot’s of celebrity doomers out there, but very few regular people on the street seem to be worried about what is happening. And that worries me greatly.

        I’ve got friends taking vacations on their credit cards and then rolling the balances into their mortgages upon renewal. These are reasonably successful mid-40s couples with kids; people who ought to know better. Either they’re crazy or I am. This blog and its regular commenters have restored my faith – at least temporarily – in my own sanity. 🙂

    • The average 73 year old man has a 50/50 chance of living another 5 years. Time to let loose.

  8. Royce McCutcheon

    Trolls like fred better believe there’s no such thing as karma.

    It’s a small minority for sure, but I do seem to be encountering more Boomers suffering from inheritance-chasing insinuation/paranoia of late. Ironically, I’ve heard multiple young people recently saying simply that their fear isn’t losing an inheritance they never planned on collecting – it’s that their folks will become dependents due to pension clawbacks and living lifestyle plans that exceed what their investments will allow.

    • This is reality for my mother – she wouldn’t be able to keep her house if it wasn’t for her roomies – my sister and my brother. Will I see an inheritance? I’m not planning on it.

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