The thing about wealth in Canada is its relationship with houses. One minute, cuddles. The next, jaws.

Surveys consistently show about 85% of all the family net worth in the country sits in residential real estate. When house prices are going up, that number rises even more. And lord knows what it is right now, as governments busily pimp property with the rock cocaine of cheap money.

So what? I hear the real estate bulls cry.

So, this: If 59% of Canadians missed one single paycheque, by a single week, they wouldn’t be able to make ends meet. Worse, half of Canadians can’t even save 5% of their income. Even worse, a majority of our friends and neighbours have no retirement savings and don’t expect to get any.

At the same time, when the Canadian Payroll Association asked folks how much cash they thought they’d need for retirement, 52% of people said between $750K and $3 million.

Said CPA chairman Janice MacLellan “We were shocked… So many Canadians are now living so close to the line that if they miss a single paycheque, the majority will find themselves in financial difficulty.”

Okay, summary: People have assets, but no money. They may lead affluent middle-class lifestyles, but have no savings. They may own houses, but possess no reserves. They may know what they need, but have no way to get there.

Except one.

Now, see the problem?

The concentration of personal wealth in one single asset is a financial timebomb. While Canadians should have at least three months’ worth of cash to live on (and two years would be better), we have two-thirds of the population unable to survive seven days. But that’s just the start of our problems. Fast forward ten or fifteen years, when nine million Boomers are chewing cud and today’s Gen Xers have only a decade and a half to secure their financial futures and you can see the writing on the way. It says, ‘Screwed.’

This is one good reason why entrusting all of your wealth to real estate is a really, really bad idea. By buying houses at the top of the price cycle and taking on lifetime mortgages (what else would you call a 35-year am?), people are pretty much guaranteeing they’ll never be diversified. Even if they do pay down debt, build equity and see rising house prices – adding to their net worth – they’ll still have to convert this into actual money to live on.

Imagine what happens in five years as the mass of the boomers hits 65. Just think about the imbalance of listings over demand that could wash over the country for decade or more as millions of house-rich and cash-poor people scramble to get out. Now contemplate what that’ll do to the value of everybody else’s home.

I’ve said many times that real estate is cool with me. I own a few pieces myself. And we all need a place to live. But if you’re a boomer who still has a mortgage, or more than 40% of your net worth in a house, you’re probably in trouble. If you’re in your forties and don’t have a third of your net worth in financial assets, or at least $250,000 earmarked for retirement, watch out. If you’re a slave to your mortgage in your thirties, then what possible plan do you have to get financially secure?

I doubt many among us have any idea the toll house lust will take.

Or can see the bite already taken.

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