'House of cards' will implode

Is there a housing bubble in the Lower Mainland? Housing zeppelin is more like it. Bubbles, after all, are soft and cute and harmless. Zeppelins, conversely, hurtle into the ground, spewing flaming wreckage in all directions. And that's precisely what we're about to witness in the region.

Consider the factors that have pushed our prices so absurdly high that the average family now spends 70 per cent of pre-tax income to buy and own a home.

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Consider that we've already rocketed past the danger zone of most cities in the disastrous American run-up. Consider all that's conspired to morph our region into the top two overpriced real estate markets in the world.

It starts at the top, with the federal government and the Bank of Canada. Despite doling out repeated warnings over our addiction to credit and our per capita debt, which now stands at a deeply troubling $1.50-plus per $1 of disposable income, those in charge have continued to facilitate easy mortgage borrowing and a credit culture. Why? For one, housing-related industries account for a quarter of our GDP. We'd look far less impressive globally were we not buying and selling obscenely expensive homes to one another.

And it filters down from there. The media, supported so heavily by real estate industry advertising, plays up self-serving industry propaganda and consistently portrays deceptive PR stunts as "news," while blissfully ignoring realities such as plummeting sales and mushrooming inventory in former hot spots such as Richmond and Vancouver West, and an already tanking market in key neighbouring zones such as the Okanagan and the eastern Fraser Valley.

Our banks and lenders, meanwhile, squash accusations of subprime lending (loaning to high-risk borrowers - the same practice that helped crush millions of American families) while actively participating in it. Land developers literally work overtime to catch the end of the mania and the correspondingly sky-high valuations. Realtors pump the "Buy now or be priced out forever" mantra and work to falsely convince us offshore Chinese are grabbing everything in sight.

Ultimately, locals are inundated from all sides with stories of unicorns and pots of gold and wrongly believe the pyramid scheme of the past decade will somehow, illogically, continue forever.

But, like The Matrix, not all is as it seems.

When the smoke clears, when developers have glutted the entire region with product, when realtors are no longer rock stars and and pseudo-financial advisors, when the CMHC stops backing every high risk borrower that comes calling (the corporation, run by a board with blatant ties to the real estate industry, will soon sport a much shorter leash), when newly introduced mortgage restrictions have sliced and diced the number of potential buyers, when interest rates have jumped from their emergency lows, when local TV producers stop airing dubious realtor PR stunts (helicopters purportedly loaded with offshore realtors, trumped-up condo lineups, marketers posing as investors) as hard news, when the market is flooded with the homes of bailing baby-boomers seeking to fund their retirements, when the imaginary tidal wave of incoming Chinese is revealed as the mere speculative ripple it has been, when fatigued owners realize killer home payments devastate every other aspect of their family's lives, and most importantly, when the mania dies (manias always die) and when real estate ownership is no longer the Holy Grail, there will be nothing left but you and decades of onerous payments on a crashing asset.

You will wonder what could have possessed you to overpay by 50 or 100 per cent for a creaking "old timer" in a lousy neighbourhood or a "new" slapped-up-in-a-month-by handy men townhouse in a future ghetto. Your realtor will not be there to console you, your lender will not hand you free money to extricate yourself.

So - what do you do? If you bought near the peak (roughly mid2011), and particularly if you're feeling the strain already, contemplate selling - before the downward spiral picks up steam. If you've so far resisted the siren song, continue to resist. Instead, rent.

Renting gets a bad name in a transitory environment where even pizza delivery guys contemplate $300,000 condos, but remember: Renters are immune to exploding zeppelins. Renters are free to invest the money they saved by not buying. Renters do not surrender thousands per annum on property taxes, repairs, renovations, city utility bills and burdensome monthly maintenance fees. And renters can move without enduring the cost and hardship of selling.

Your realtor will tell you "Renting is throwing your money away." You can tell him he's a liar.

Buying and owning a principal residence can be a smart move. But not here, not now.

Not when mania is at the helm, not while deception remains healthy and not when the long slide they don't tell you about has already begun.

Check out two of the busiest local housing blogs: Vancouver Real Estate Anecdote Archive (www. vreaa.wordpress.com) and Vancouver Condo Info (www.vancouvercondo. info).

Gord Goble is a freelance photographer for the Coquitlam NOW and other newspapers, and a freelance writer. He lives in Surrey.

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