“I’m a realtor in Toronto,” he says, “and I’ve been telling my clients since the beginning of the year to expect a big crash. No, I’m not telling them what to do, but I feel it’s my duty to inform them. Interestingly, 100% of the first-time buyers that I was in touch with (all with a small down payment) have decided not to buy.”

But, Uri Kogan says, homeowners are a tougher sell. “Most of them – some who have minimal equity as well – are either completely oblivious or just hope for the best. Even though a price adjustment of just 15% will probably force them to sell. How can they not listen?”

Easy, Uri. Most people who own houses would rather eat roofing nails than contemplate a market correction. Reading this blog alone causes cardiac arrest. So just imagine if they heard about Vlasios Melessanakis.

That dude’s just made some news after words he wrote for his employer – OSFI, the bank regulator cop – fell into the hands of a reporter. The number Vlas is throwing around as a possible correction? A withering 40%.

As you may know (because I keep telling you), the bank cop is about to do F’s dirty work through regulation instead of legislation. Come the end of this year there’ll be new rules trashing HELOCs, killing cash-backs, forcing banks into more careful screening of borrowers and mortgaged properties and closely tying the size of a mortgage to the equity people have and their ability to pay. Imagine. The nerve.

To some this is draconian stuff. Like Robert McLister, a mortgage broker and editor of Canadian Mortgage Trends, who whined about OSFI when the draft guidelines were published in March. In response, Vlas (the agency’s manager of policy development) wrote some stuff for internal consumption you might want to know about:

• “Canada is not immune. Just because nothing happened in Canada in 2008 does not mean that Canada is not vulnerable to a housing correction now.”
• “The market may break because the fundamentals are not sound (ie. overvaluation of homes), not because of OSFI guidance.”
• Mortgage arrears, “can change fast. Are the banks equipped to handle a 40% drop (what occurred in Toronto market in early 1990’s)? Need to stress test to find out.”
• HELOCS “have contributed significantly to growing overall household debt. This is not sustainable. If (or when) housing prices drop, households will be vulnerable.”

What this means, simply, is the banks’ regulator is serious. As McLister says, the changes coming down the pipe could have a dramatic impact on the market, slowing lending, restricting credit, eliminating many horny yet cashless newbie buyers and setting the stage for how the banks deal with the day prices plop.

Like now.

The latest numbers show what this miserable blog has been bleating about for months. Vancouver – the most oversexed market on the planet a year ago – is out of juice. The average selling price has plopped just a shade under 10% in the past year, down to $735,315. Sales have plunged in many hoods – and this is even before lending regs tighten, rates rise or Global TV leaves the Ladies Room  and discovers it.

Face it, the inevitable has commenced. Governments will not support a further bloating of the credit bubble. People without a load of equity in their homes are materially at risk. And, as I discussed yesterday, Boomers will soon be delivering their final, hideous, wrinkly revenge.

This will not be evident to your brother-in-law until he hears on TV the market’s tanked, tries to sell, and can’t. The condo collapse in Toronto will go unknown until no recovery’s possible. People will still be strutting around Calgary talking about the next housing boom, when it’s already over. And poor Saskatoon might get it by the time pelicans return to the weir.

People are so hard to train.

Casey watches the house across the street in her upscale neighbourhood populated with Land Rover-driving moms in designer shades. The neighbours bought the lot for $1 million, then built a McMansion. It hit the market last September at $3.8 million. These days it’s priced at half a million less, the cheapest house in the hood. But after three reductions, it’s still for sale. And so are the other 25.

“There is no way I’m buying again until houses come down 40%,” she says (Casey pocketed $1.2 million by selling a year ago, and rents). “I see friends moving further out so they can have bigger places. The people I know aren’t rich, but they certainly aren’t poor.  Household incomes around $200k or more.  If these people are struggling to buy, it doesn’t make any sense.”

What does, Casey?

Yesterday’s blog post about looming changes to bank mortgage lending practices brought a howl of denial (you should have seen the posts I didn’t publish) from realtors, mortgage floggers and people with mortgages the size of regret. Cheap, ever-available money has created a weird moment in social history. A house is now a right. So’s a mortgage. Someone actually posted that if a home loan were refused renewal under the new rules, forcing someone to sell, “they would then be homeless.” Coffee came out my nose.

Real estate is a mania. Exactly why it’s so dangerous. People do crazy things when smitten, like assuming the world today (rising prices, cheap money, easy bankers) will last without end. Because housing is so emotionally-driven, the volatility ahead will likely be intense – just as it’s proven to be in the US – making stock markets look prudish. As the market turns, we know from experience that listings swell, then prices crumble. It’s already happening in many cities. None will be spared.

Capital Economics has it right. In a note to clients this week the Toronto-based company warned that housing-fueled growth can’t last. “Interestingly, the shape of the rapid rise in Canadian house prices looks fairly similar to what happened to US house prices before the bubble burst there. From 1995 to its respective peak, US house prices increased by just over 140 per cent. Since that same time Canada’s house prices have risen by 130 per cent.”

In doing so, Canadians have also managed to accumulate more debt than did Americans. And you wonder why F and the federal peckerettes are so keen to jack mortgage regs and turn off the borrowing. Not doing so will lead to an obvious result. Which is coming anyway.

BTW, Capital Economics is on record as forecasting a 25% decline in national housing prices over the next three years. You can assume that means 15% or so in the GTA and a hulking hole in the Lower Mainland.

But this is not the big news today.

It’s time to crack another myth held closely by legions of deluded people who come here for god-only-knows-what reason. As shown, the myth that Ottawa would never do nothing to prick the bubble is kaput. OSFI and the overhaul of CMHC murdered that one. Also paws-up is the argument that high-ratio, high-risk borrowers form too small a group to shiv the market. Did you see that Kelowna graph yesterday? Yikes.

The third big lie au courant among greater fools is that Boomers would rather gum drywall in abject retirement poverty than give up their homes. You’ve seen it said often on this pathetic blog by the house pumpers that the threat posed to real estate by nine million members of the Depends cult is minimal. No big flood of listings in the years to come, they say. The wrinklies will not sell.

Of course, it’s bunk. The single most troubling aspect of real estate’s future (and the most inescapable) is demographics.

Need proof? Here’s a new survey by RBC, asking people about their retirement plan. The results are brutal. Forty per cent say they’re worried about not having enough money to finance a retirement, and another 30% say they’ll have to work past 65 to make ends meets. How could we get to a point where three-quarters of people have no money? RBC also learned six in ten of us don’t save for retirement, while four in ten expect they’ll do worse than their parents.

So what? Are we supposed to feel sorry for Boomers who rotated for five decades, doing little more than producing mean little offspring who now own minivans, attitudes and hate their parents?

That’s your choice. But at least understand where this is going. The survey found almost half – about 45% – of people said they plan on financing their retirements (as meagre as they may be) by selling their homes.

Hmm. Nine million boomers owning about three million houses, so half of that is 1,500,000 units, or a four-year supply if nobody else in the whole country moved. But it’s safe to say this deluge will largely be in addition to the normal listings, since people in retirement have typically stayed in their homes for significant periods of time.

Now, imagine a few years hence. Rates higher. Mortgages dearer. Bankers tougher. And a million desperate Boomers trying to turn their illiquid suburban barns into cash flow. Supply washes over demand already weakened by new lending standards, chasing valuations lower in a vicious circle. Is this really where you want to have the bulk of your net worth?

Maybe it’s time more people learned a few lessons from the Boomer experience instead of just being prickish and resentful. (Of what?)

There’s never one safe place to put your money. Having wealth beats owning a house ten out of ten. If you don’t save and invest, you fail. Nobody who matters, cares where you live. Diversify. Don’t be a financial illiterate.

Or, just get a reverse mortgage and prove to your kids you actually have a sense of humour.