Vancouver, BC – November 14, 2012. The British Columbia Real Estate Association (BCREA) reports that the dollar volume of homes sold through the Multiple Listing Service® (MLS®) in BC declined 14.6 per cent to $2.7 billion in October compared to the same month last year. A total of 5,276 MLS® residential unit sales were recorded over the same period, down 10 per cent from October 2011. The average MLS® residential price was $508,292, down 5.1 per cent from a year ago.
“While consumer demand was stronger in October on a provincial basis, home sales continue to trend below last year’s level,” said Cameron Muir, BCREA Chief Economist. “Tighter mortgage credit regulation has moderated housing demand on the South Coast.”
“However, an increase in residential sales was recorded in the Okanagan, Kootenay, Chilliwack and BC Northern board areas,” added Muir.
Year-to-date, BC residential sales dollar volume declined 18.2 per cent to $31.1 billion, compared to the same period last year. Residential unit sales declined 10.5 per cent to 59,946 units, while the average MLS® residential price was 8.6 per cent lower at $518,321.
This article appeared in the Globe and Mail on November 11th, 2012 and was written by Robert McLister.
Just a few decades back, many thought it unthinkable to still be paying a mortgage during retirement. But a growing minority are now doing just that.
Whereas our parents paid off their mortgage in roughly 12 years on average, about one in four homeowners are now carrying a mortgage into retirement. In fact, retirees are accumulating debt at three times the average pace.
Aversion to debt has clearly waned. Almost one-quarter of baby boomers say paying off their mortgage by retirement is “not very important” or “not at all important.” And more than half of Canadians expect to carry a mortgage into their golden years.
“My philosophy is to not carry any debt into retirement,” says retirement expert Gordon Pape. “But people today have a very casual attitude about it.”
So, just how big of a problem are mortgages in retirement? After all, places like Switzerland – which rivals Canada for the world’s strongest banking system – have 100-year “generational” mortgages. (What a way to get back at your kids!) And in a number of other prosperous European countries, interest-only mortgages – with theoretically infinite amortizations – are commonplace.
The threat posed by having a mortgage in retirement depends, not surprisingly, on the borrower’s income, savings, debt and other living expenses.
Statistically speaking, if you’re a typical married couple over 65, the latest government figures show that you take home about $46,000 combined each year. The median retiree’s mortgage is about $87,000. That implies a $411 monthly payment on a standard five-year fixed rate mortgage. That’s about 11 per cent of the typical retiree’s after-tax income, something that is easily tolerable.
On average, mortgages in retirement aren’t sending people to the poor house. Where it could get dicey, Mr. Pape says, is when interest rates rise. For a sizable minority without financial breathing room, “There is potential for real trouble down the road.”
For many single or lower income seniors, carrying a mortgage can be like walking in a minefield. All it takes is one misstep or personal crisis to explode your budget and fall behind on debt payments.
A couple relying 100 per cent on Old Age Security, for example, will earn a maximum of $26,800 annually in Ontario. In this case, that “typical” $411 mortgage payment would account for 18 per cent of their income. While unlikely anytime soon, a three percentage point interest rate hike would bump that to 25 per cent. Then you have to add in the property taxes, maintenance and all the other home ownership costs.
It’s bad enough assuming they just have the average-sized retiree mortgage. If they’re closer to the average Canadian mortgage of $170,000 and their income is in the lower third of the population, then well over half of their income would be consumed by home ownership costs. That is simply unmanageable and unfortunately there is no data on how many people are in this boat.
Apart from the cost, it’s often tougher to get approved for a decent mortgage in retirement. If your earning power has waned and you’re carrying even an average debt load, your ability to tap home equity for cash could be limited. Qualification challenges could even reduce your options to switch lenders or port your mortgage to a different house.
Even the “mortgage of last resort,” a reverse mortgage, could be off the table if you’re not old enough and/or you have an existing mortgage that’s more than 25-40 per cent of your home value.
So that brings us to the next question: what solutions do seniors have?
One is to work longer. Our neighbourhood butcher is still employed at 89 and that may not be so unusual going forward. Many Canadians expect to work past 65. They’re working 3.5 years longer than a decade ago and only 30 per cent anticipate being fully retired at age 66.
“If you have to work a few years past your retirement target date, do it and get rid of debt,” says Mr. Pape.
Another option for mortgage-holders is to get a fixed rate with a five-year term or longer. That protects those on fixed incomes from payment hikes. If you’re facing an underfunded retirement and you have a mortgage, “I would lock in a low rate while you still can,” he recommends.
You could also extend your amortization to 30 years. That maximizes cash flow in retirement and lets you make extra payments when you’re able. Couple this strategy with a home equity line of credit (HELOC) and you’ll get an emergency source of cash for unforeseen events like medical expenses or income loss. A “readvanceable” HELOC also lets you re-borrow any extra pre-payments if absolutely necessary, which lessens the cash flow risk of making them.
Despite these tips, the goal isn’t to manage a mortgage in retirement. It’s to avoid a retirement mortgage altogether. And to do that, you’ll need to start young.
The chilling truth is that there are just over 9.3 million Canadians age 55 and over and 43 per cent of them say they haven’t saved enough for retirement. But by 55, time is running out. A Statistics Canada study in 2009 found that people in their 70s spend only five per cent less than they did in their 40s. It takes years of saving to replace that kind of income and dispose of a mortgage.
By now, you’ve probably sensed that being pro-active is key. But many people haven’t been. As many as one in three say they plan to live off the equity in their homes. That’s a gamble in any real estate market. But if you’re retiring in the next decade and relying on uncertain home price appreciation, it’s especially risky. You need diversified savings and you need that mortgage out of the way.
This article appeared on the Global BC website on November 8th, 2012.
OTTAWA – The pace of home building slowed in October to a softer reading than economists expected in a report by the federal mortgage insurer, providing yet more evidence of a cooling housing market.
Canada Mortgage and Housing Corp. said Thursday there were 17,507 actual housing starts last month. That translates into a seasonally-adjusted annual rate of 204,107 starts, down almost nine per cent from an annual rate of 223,995 recorded in September.
CMHC said there were drops in both single- and multiple-unit starts in urban areas last month.
Declines were recorded in all regions, with Quebec reporting the biggest drop at 16.9 per cent.
“The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies,” Mathieu Laberge, deputy chief economist at CMHC, said in a release.
“Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto.”
Seasonally-adjusted urban starts decreased 1.5 per cent in British Columbia, 6.4 per cent in Ontario, 12.3 per cent in the Prairies, and 16.8 per cent in Atlantic Canada.
The agency, which provides mortgage insurance to home buyers and market intelligence to the real-estate industry, estimates rural starts came in at a seasonally-adjusted annual rate of 21,973 units in October.
Earlier this week, the federal Crown corporation predicted 177,300 to 209,900 of housing units will be started next year — substantially less than the forecast of 210,800 to 216,600 for 2012.
Bank of Canada governor Mark Carney said the slowdown is consistent with the bank’s expectations.
“We view household formation around 190,000 annualized and the starts are a little north of 200,000, so they’ve slowed from a very rapid pace to a pace that’s still above household formation,” Carney said in Montreal.
“We’re expecting this decreased contribution from housing relative to GDP… We’re starting to see some things that are consistent with that, so it’s entirely consistent with expectations.”
Emanuella Enenajor of CIBC WM Economics noted that “despite low (interest) rates and surprisingly resilient investor demand, housing construction looks to be struggling to attain new heights in recent months.”
“Although the housing starts data tend to be volatile month-to-month, we expect to see a trend in softening starts through 2013, as a slowdown in secondary market activity weights on homebuilding.”
The CMHC data suggests housing starts — where trends tend to lag those in the home resale market — are falling in line with home sales figures released in the last few months, which points to a broader slowdown in Canada’s housing market.
The latest figures from Canadian Real Estate Association found sales in September fell 15.1 per cent from a year earlier, due in large part to a further tightening of mortgage rules and a slowdown in Vancouver.
A real estate expert at Queen’s University called the drop in housing starts in October “significant” and said it’s “clear evidence” that the housing market is slowing down.
“(The numbers) provide sound evidence reinforcing the idea that housing markets in most regions and cities are cooling off rapidly,” John Andrew, director of the Queen’s real estate roundtable, said in a release.
“Housing starts are clearly responding to the decrease in new and existing home sales that we’ve seen in most markets over the past few months, especially for condos. I expect this trend to deepen over the remainder of 2012 and likely into 2013.”
In a global outlook released last month, the International Monetary Fund singled out housing and household debt, which currently sits at a near-record 163 per cent of income, as the key areas of concerns for Canada.
Those concerns have been voiced before, including by Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, who has moved four times in as many years to reduce mortgage lending.
Over-saturation, high prices, high debt levels and recent tightening of mortgage rules are impacting the resale market, economists have noted, particularly in the previously torrid markets of Toronto and Vancouver.
Read it on Global News: Global BC | Housing starts fall in October with drops in all regions, CMHC says
OTTAWA – The pace of home building slowed in October to a softer reading than economists expected in a report by the federal mortgage insurer, providing yet more evidence of a cooling housing market.
