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Bring on the Real Estate Crash

My generation has been shut out of the housing market for years. Something's gotta give.

By Vanessa Richmond 20 Nov 2008 | TheTyee.ca

Tyee contributing editor Vanessa Richmond writes the Schlock and Awe column about popular culture and the media.

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This I can afford, unless a boomer already owns it.

[Note: story updated at 12:20 p.m. on Nov. 20, 2008.]

"Collapse," "crash," "fall": that's how some Canadian and international media are describing the Vancouver real estate market.

"Homeowners have been blindsided by the speed of the housing market downturn. A sense of irrational exuberance had people stretching to buy homes they couldn't afford and agents say the overextended market hit a wall [in Vancouver last] summer," reports the Globe and Mail.

"Canada's most expensive housing market is hitting a significant slump, with home sales numbers falling and prices declining," writes the Report on Business. A Globe and Mail story quotes Cameron Muir, the chief economist for the B.C. Real Estate Association, as saying, "The bull market in housing is over in British Columbia, and it's been over for several months."

A generation celebrates the bust

It sounds like schadenfreude, but for the young generation shut out of the housing market in Vancouver, this news is a call for cautious celebration. Friends eagerly swap URLS, quotes and stats such as these by e-mail, and talk about it at parties and bars.

But the reason it's only cautious celebration is that even though boomers are wringing their hands over their decreased home values, that decrease still isn't nearly enough to make a "normal" life possible for Vancouver's younger generation.

Housing prices fell 8.8 per cent between May and October 2008, the biggest drop in decades, but that still only means a 3.9 per cent year-to-date price reduction, and that isn't much when you consider that prices have gone up by 69.5 per cent since October 2003.

The benchmark price of a home this month in Greater Vancouver is $695,962, down from $764,616 in March of this year. The average price of a detatched house in Vancouver was $921,000 in February, which has also gone down by about 8.9 per cent. Um, yay.

The truth remains, as Andrew Ramlo of the Urban Futures Institute said, "If you are in your mid-30s coming into the market at $900,000, you either have to win the lottery or have a lot of money behind you."

Housing Boomer Advice

Some boomers have suggested to me that my generation is far more affluent than any other because we're sitting on houses that have suddenly become worth a million.

If only. I think they're confusing us with themselves. Most people I know are working artists, musicians, professionals and small-business owners in their 30s and 40s: the so-called creative class. A small minority "got in" to the housing market before the spike; the rest rent basement suites, apartments, or duplexes, pay high rent (to boomers, mostly) and make sacrifices to live in the city. Few expect they'll ever be able to own in Vancouver. For many, the cost of housing means if they stay in town, they won't be able to afford to have kids. Or, if they move somewhere affordable enough to have kids, they'll have to leave their support networks, aging parents and job prospects behind. And without the security of home ownership, retirement also looks shaky.

One friend's mom (a boomer) said if our generation were to stop spending so much money on dinners out, we might be able to afford homes. She and her husband bought a house in West Vancouver 40 years ago, and comfortably raised three kids on one middle class salary. She’s inferring it's what we could have if we smarten up.

In 1977, the average detached house in Greater Vancouver cost $67,100 according to the Real Estate Board of Greater Vancouver, and Statistics Canada data shows the average Vancouverite earned $10,687 per year. Today, the average detached house in Greater Vancouver costs $825,206 and Statistics Canada’s most recent data, from 2006, shows the average Vancouverite earns $36,700 a year. That means in 1977, a house in Vancouver cost about six times the average salary, and now costs 22 times the average salary.

I’m afraid the numbers just don’t support her suggestion that being able to have the life they did, and own sprawling five bedroom homes on the water in West Van, comes down to the cost of sushi.

Until about a decade ago, you could be a middle class worker, or even an artist or a hippy, and still comfortably get a mortgage, and have kids. When I walk around my neighbourhood and talk to the people who own the average bungalows and sprawling character homes -- some bohemians, some working class, a few middle class people -- they tell me they were able to work reasonable hours, buy a home, pay it off, and even retire early.

It's what we still learn as kids: if you stay in school, work hard then get a normal job, you can buy a place and raise a family. Most young Vancouverites, whose parents are in such a position, are glad their parents are safe and secure and warm in their likely mortgage-free homes, but it's far from our own reality.

Class defined by birthdate

It's, in fact, lead to what I suspect must be the greatest example of generational tension in this postcard city. The haves and the have-nots are mostly defined not by class or birth but by birthdate.

Most people I know in Generation X and Y either have a secret sense of shame about not being able to achieve a "normal" life despite their hard work, or a sense of anger that they've been shut out by factors outside of their control. I don't want a sprawling house worth a million dollars. I want a small one or an attached one worth much less than that, that's large enough to raise a family in, but with a responsible footprint. One that lets me live a life unencumbered by high rent that won't ever translate into equity. I'd like the stability that comes with owning, the freedom it gives me to tinker on small projects to improve my own environment.

I admit that while I like most boomers individually, I have no warmth for them as a group. Simply put: their gains are at our expense. Did they not think that such increased housing values would have to be made up somewhere? Did policy makers not look around and think they needed to address a housing situation that was rapidly making one generation into millionaires and leaving another outside in the rain?

Housing, a market failure

Whoever thought it was a good idea to profit from housing? What if drug companies hiked medication prices sky high just in time for this generation's retirement? What if health care wouldn't cover the costs, and left most of the boomers unable to afford care. And the kicker -- what if governments turned a blind eye saying it's just the free market?

One friend said to me I can't be angry because boomers didn't do it on purpose: most are oblivious to what it means for our generation. To that, I ask about how the court would view the defense that you didn't know you were breaking the law. Ignorance is not a defence, is it? This is harsh, I know, but my generational anger's been brewing a while.

Another friend says that it's just human nature. People are greedy and built to take care of themselves. But I know that's not true. His parents are glad housing prices are coming down, and don't mind what it means for the value of their own home, because they know it means he'll one day be able to buy a place to live, have his own family, and be safe. And that makes them happy.

I agree politicians and policy makers have lots of important, pressing issues to deal with, like homelessness. But it'd be great if they'd then turn their attention to the extortionately housed.

And here's an idea to get them going: how about a tax that makes it prohibitive to flip houses and apartments? Got a better idea? I know our generation is open to any suggestions you've got.

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