NEWS RELEASE:

Real estate collapse? Bring it on!

August 30, 2008 –British Columbians with loved ones invested in the real estate market may want to steer them away from precipices and sharp objects for the next while.

Real estate, the increasingly dominant part of a given person's wealth, appears to be headed in a direction that it hasn't seen in more than a decade — down.

The Real Estate Board of Greater Vancouver released a report Aug. 5 indicating that the benchmark price for all property types tracked in Metro Vancouver, excluding Surrey, dropped 2.1 per cent since May. More ominously, the number of property listings is up 24 per cent and the number of overall sales is down 44 per cent compared with July of 2007, numbers that have the real estate industry's spokespeople frantically trying to hide the panic button from the thousands of over-leveraged homeowners currently in the market.

But amid the bleak chorus of anxiety and fear there are a few notes of hope, and they aren't being sung by the HGTV-addicted homeowners, real estate agents and other members of the section normally responsible for delivering them. They're coming instead from young people, those without access to trust funds or generous relatives, a group whose hopes for home ownership had been trampled underfoot by the running of the real estate bulls.

For them -- for us -- the possibility of a drop in prices is good because it means that for the first time in our lives the idea of home ownership has moved ever so slightly from the realm of impossible dream to that of attainable goal.

The past 15 years have witnessed the longest and largest real estate boom in two generations. In Canada's hottest markets it has become a legitimate get-rich-quick scheme underwritten by both the banks and the government, with no-money-down mortgages and 40-year terms allowing anyone with a pulse and a credit rating to get into the market.

Even rank amateurs have gotten into the traditionally dangerous game of real estate speculation, making huge profits flipping everything from condominiums to suburban homes. For young people, however, this real estate profiteering has made already unaffordable homes unattainable, limiting our options to a sickening selection of overpriced shoeboxes in the sky or downmarket bungalows in the suburbs.

In Toronto, the cost of a single family detached home is $446,781; in Vancouver, ground zero for real estate speculation in Canada, the average price is $753,165.

It's bad enough that most young people can't afford to even dream about entering the real estate market. But as Rachel Giese revealed in a March 2008 feature for Toronto Life magazine, those who do manage to get into their house of dreams might be in even worse shape. These young couples, the so-called "house poor," have to beg and borrow for the necessary down payment and then devote most of their after-tax incomes to paying the mortgage, sacrificing their vacations, evenings out, and dinners at restaurants whose names don't begin with Burger or end with King.

These sacrifices might be worth it if they allowed young couples to buy a house that didn't resemble a former grow-op or crack house, but they don't. As Louise and Daniel, the pseudonyms of two of Giese's subjects, put it, "there's something wrong when two people with good, stable incomes, with a tremendous amount of help from their families, and with very little debt can't afford a reasonably nice house in the city. What are people without those things doing?" more>

Source: Vancouver Sun