Friday, October 29, 2010

Only 24% of BC Boomers own their home mortgage free

How's this for a looming disaster on the horizon?

According to a news release by TD Canada Trust, only 24% of BC Boomers own their home mortgage free (hat tip to pipewrench in yesterday's comments section).

In addition to that chilling statistic, TD Canada Trust found that only 40% of BC Boomers are likely to live in their current home during retirement.

This is consistent with an new Ipsos-Reid poll that says 64% of BC homeowners plan to sell their homes within the next 10 years.

Can you see the recipe for disaster here?

We already know that 70% of all Boomers don't have funds set aside for retirement. Any retirement funds they hope to have will come from the sale of their home.

These two studies all but confirm that Boomer's plans are to down-size, pay off their mortgages, move to a smaller home and use the left over funds as their retirement income.

And to make that work more effectively, TD Canada Trust has found that almost half of boomers in B.C. will consider buying a property south of the border where real estate has completely crashed in the United States.

The chilling statistic here is that since over 75% of BC Boomers have an outstanding mortgage to pay off, it leaves them in a potential retirement pickle.

Once they pay off the mortgage, and then buy a smaller, cheaper house free and clear... there's only so much room left over for a retirement fund.

When you consider that this is the first year that Boomers are hitting retirement age, and that right now they are selling into a stagnating market, how long before we see the significant price reductions start?

And when the downward slide begins, how long before those other Boomers - a couple of years out from retirement - start to panic?

How long before they see the margins on their bubble inflated homes begin to shrink to the point where they fear prices dropping below a level they need to cash out and still have a retirement fund?

Bank of Canada Governor Mark Carney has suggested there is a possibility of "an abrupt drop in the housing market". What sort of mad dash will there be to slash prices and 'get out' if there is a perception the market has started that 'abrupt drop'?

If there is a 15% market drop, without a rebound like we saw in 2009, you will see a lot of Boomers panicking.

And panicking Boomers who fear their retirement is at stake will slash prices to move their property ASAP.

There is far too much at stake not to.

It all strengthens my belief that Vancouver is shaping up to experience the mother of all housing collapses.

I can easily see a 50% price correction and firmly believe it will be closer to 70% as the Boomer wave moves into retirement.



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1 comment:

  1. Calling all rich asian investors! Please save BC Boomers from themselves!