As my recent ‘Bubble Busting’ posts underscore, sellers are gods.

Despite the bleats of protests from the over-extended, the newly-bought, the lenders and the agents, current real estate conditions have a short shelf life. As a medium-term hold, residential housing is in the process of peaking and, in some markets, is past the summit. But you know that. It’s just common sense. Reality awaits.

Thus, selling beats buying. In fact, homeowners who missed cashing in their chips in late 2007 have been given a rare second chance at bubblenomics, thanks to the inflationary Mark Carney. I’d say this might be the last one for years to come.

Hence, my encouragement to ‘short’ the market with the Bubble Busters. (I know these are not true shorting strategies, but to follow one you’d have to borrow a house and then sell it. Apparently that’s still illegal.)

Think dot-coms. When the share prices of companies without track records, profits or the prospect of earnings soared just cuz everybody wanted some, the jig was up. There was little true value in those equities, and yet their innate sexiness drained off billions of investment dollars from more sensible investments.

Real estate carries a similar premium now.  It worries me that we have over 80% of our family net worth in homes. It worries me more that housing myopia has once again blinded people to the options before them.

Cue Dennis:

Garth,    five years ago I bought a new condo in Vancouver. I found out from a realtor that I can list a place for sale to investors only. Well i just listed it that way and it sold in a day for about $12,000 less than what the height of the market was. I got what I wanted. I am so happy cause i now rent it back from the investor, and I stay living here, and i have all my money. What would you now do with the money from the condo?????? One idea i have is to buy a cheaper house for cash in a cheaper part of Canada and then rent that out and use that money to pay my rent here. Thus i would be living in my same condo that i love here in Vancouver for free. Would you do that or what would you do?

You get half marks, dude. Selling your condo to a greater fool investor was a great move, especially in Vancouver where the premier can’t count and you can now take a fast train to Richmond. (And how many of us have dreamed about that?)

Yes, just as people lined up to snap Nortel at $130 a share, so they’re eager now to grab overpriced boxes in the sky with dank parking garages at near-record prices. Thank God for such investors. They save us from consequences.

But when it comes to your idea to buy a cheaper house to rent out for income to pay for the rent on the apartment you still occupy, is that just the drugs asking? The best you could hope for is to tie up all of your capital in a home someplace beyond your ability to care for it, to subsidize your living expenses. Why go through all that hassle and expense, instead of investing the money in liquid assets to accomplish the same thing?

As I’ve spelled out here before, it’s no big deal to get a steady and virtually risk-free 5-7% on your money these days, which is a decent real rate of return. You can even earn it in tax-advantaged ways, through dividends or capital gains. Or invest through a tax shelter, wiping out current year’s income taxes while you buy income-producing assets. If you haven’t heard of preferred shares, ETFs, real return bonds, funds, TFSAs, options or RRSPs, then it’s time to start.

You need to get out more, Denny. Way out. Even past Richmond.