Real estate prices and sales finally came down in May in Vancouver and the Fraser Valley but in Chilliwack they stayed steady. (File)

Painful Truth: Is it a bubble if it never bursts?

Housing markets do not make sense, and maybe they never will

Housing in Canada, and especially in B.C., is again going bonkers. Prices are up by ludicrous amounts. People are flinging cash, sight unseen, bidding wars are breaking out – it all feels pretty familiar, doesn’t it?

Since the early 2000s, in the years leading up to the Great Recession, we’ve had multiple sharp increases in property values. Each one has prompted flurries of doomsaying – including some from me – about how it would all end in tears, surely there’d be a crash, speculators would go broke, homeowners would find themselves underwater and struggling to make payments, finally we would have sensible real estate prices.

Well, that hasn’t happened yet.

We’ve had a couple of extremely brief corrections, neither of which did more than partially deflate the bubble, and after each of them, it seemed to inflate faster than before!

So now I don’t know. Maybe it’s a forever bubble. Maybe prices really won’t come down. Maybe, as everyone is so fond of saying, it is about “strong economic fundamentals.” Fundamental what, I don’t know.

I’ve entirely lost the ability to be shocked by the local property market. I just shrug every time some deranged new stat is announced.

In the last few months, the average price of detached residential property in the Fraser Valley has graphed as a near-vertical line; in February it approached $1.4 million.

Sure, why not?

A house in Walnut Grove sells for $500,000 over its asking price?

Fine, totally normal.

It will take 11 years for an average couple to save up enough for a down payment for a house at current prices? Well, that’s cheap. It’s 26 years in Greater Vancouver!

I guess those youngsters will just have to give up their avocado toast and fancy lattes, and save like their parents did when houses cost $50,000!

I honestly don’t know what to say about the current real estate market.

It’s obviously a bad thing. It’s sucking up so much money that it’s deforming the rest of the Canadian economy. For people buying into the market now, almost no money will go towards retirement savings or investing, because everything is going to the house. The house is the retirement plan; for many folks, there is no Plan B.

And it shouldn’t work. It’s like a Jenga tower, held up by the extremely shaky supports of low interest rates, FOMO, and moral hazard.

There’s basically no good options. Four or five years ago, I was rooting for a major correction in the housing market, but now I can’t do that.

All the options are bad.

A major correction wipes out vast amounts of “wealth” held by ordinary people. It will put thousands out of work. It could damage the entire national economy.

On the other hand, no correction, full steam ahead, just enriches flippers and the already-wealthy, and turns Canadian cities into hollowed-out playgrounds for property speculators. It’ll kill our communities and disinherit the next several generations.

But hey. Maybe I’m wrong.

Maybe it’s not a bubble. Maybe it’s just strong economic fundamentals.

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