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A conference of real estate poohbahs, bankers and economists in Toronto this week concluded there’s no real estate bubble. In the quixotic Lower Mainland banker Helmut Pastrick told reporters the housing market is “not skyrocketing away from us. Nor is it likely to fall into the tank either.”

TD econo guy Francis Fong said yesterday home prices are cooling so, “the pace of growth in household credit is no longer a reason for the Bank of Canada to move from the sidelines any time soon.” No mortgage hikes to worry about, kids. CMHC, ever a credible source, reports, “clear evidence of a bubble is lacking.” A Canada.com column concludes that, “big city condo values will continue to rise in general.” No bust there.

And the CEO of the Royal Bank (with a mortgage portfolio of $165 billion), Gord Nixon, has just uttered this: “When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable. Frankly, I’d like to see the rhetoric come down a little bit.”

So, see? It’s okay. The enemy is not runaway household debt, banks lending wads to people without the discipline to save, unrepayable mortgages, the Boomer bomb, teaser rates, cash-back bribe loans, HGTV horny granititus, credit-fueled bidding wars or houses families can no longer afford.

Nope. It’s rhetoric.

Damn all those words, phrases and sentences. That paragraphing and devious punctuation. Clearly contrarian ideas and warnings have no place in a decent and safe society. It’s hard to imagine what might happen if they morphed into thought. Obviously, you are with the realtors, or with the terrorists.

Meanwhile most people go on with their lives. Corks on an ocean of change. A few wash up on the shores of this pathetic and subversive, rhetoric-drenched blog.

“Hi Garth. I am a loyal blog dog and would like some advice. My husband and I are late starters – he just completed his PhD and got a solid job that starts in August. Combined we’ll $165k annual. Savings $35k. Modest car. We rent. No children. Two great cats. We have no other assets as we are starting out late (both in mid-thirties and have moved around and kept it fairly buddhist like).

“I have wanted a house for close to forever. Most women want babies. I want my own space to design and be creative. We are approved now for $600k (on one wage) so who knows how much we would be approved for come August (that is scary to think of it).

“I think that the market is bobbing its last bobs before going down but I think it will be a slow and painful process to watch. I don’t want to spend the next five years renting with my popcorn on the sidelines. There is one place that I think has great potential, and still has homes that will be protected from the death spiral- Hamilton. The city has lots going on, I love the history, the walkability, and I am a sucker for an underdog. I am thinking we should get a place in the $120-150k range with the aim of paying it off in five years and living comfortably. I have checked out the market and there are plenty of homes in that range that I would live in (and yes, I know Hamilton, and no I am not scared).

“My question is this – for those of us sitting on the sidelines how long should we wait? Am I crazy for routing for Hamilton? Are there some places that won’t fall as badly as others? – Natalie.”

The good news is that Hamilton has some truly cool areas, great houses and an affordability which will never return to the godless GTA. The bad news is, it’s still Hamilton, which means you have to lie, or slur heavily, when visiting friends in Toronto.

If your work allows you, this is a great choice since any real estate correction will have a marginal impact on $200,000 houses located a one-hour ride from Bay Street. Go for it, Nat. You are one sensible woman. Is there anything hotter than a Buddhist babe with fully achievable expectations? And six hundred thousand. Did Gord give you that?

Here’s Steven. Come for a rhetoric refill.

“Love your blog. Yeah, renters like me always say that. Anyway, I have noticed a couple of things out here in the west coast. And that’s that while there was a ‘Groupon’ style condo sale, condo king Bob Rennie sold out a new building in a half day two weeks ago to primarily Asian (though we don’t know if they are offshore) buyers.

“This can truly only mean one thing – ‘flippers’ are back in the game. Not everywhere, and I’m not sure what kind of jungle telegraph people use to buy these places, but there is no way that people are purchasing these units to actually live in. How does that whole Ponzi scheme of condo buying work – are the contracts like futures contracts on real estate??”

Steve, forget it. There is no condo craze. No speculators. No ponzi. No jungle telegraph broadcasting messages of hormonal greed. No flippers. There is no Bob Rennie. You have just been reading this blog too much, which makes hair grow on your hands. You must stop now. And, for the love of Gord, buy something.

“Hi Garth. I am a reasonable Chinese person. My in-laws have been putting constant pressure on me to buy a house for my wife and I.  Even though I recognize that this is not financially wise, I have given in to their demands.  I live in Kitchener-Waterloo.  I have been working for 2 years and make $75K.  Here are 3 options:

“1. Buy a new $260K townhouse with $100/month maintenance near downtown Kitchener.
2. Buy a new $250K condo with $400/month maintenance in a desirable area of Waterloo.
3. Buy a 5-year-old $325K detached house in the same desirable area of Waterloo.

“I believe that housing prices are too high, but which one of  these seems like the least brilliant investment?  Is the Kitchener-Waterloo housing price unusually high among small cities because of the large Chinese population?”

No, Jimmy, it’s because there are more than 70 Royal Bank branches in the K-W area, all of them rhetoric-free and filled with mortgage money at extremely reasonable rates. You should visit, and indulge!

Once you do, forget the idea of the condo with monthly fees and property taxes so high you might as well stay renting. If the bank is cheap with the funds  (RCP are not as welcome as HAM) then the downtown townhouse sounds like the best option – lower recurring costs, walkable location and a price low enough you’ll still be okay when RIM implodes. This is probably the most cost-effective way of getting your inlaws out of your face.

Oh, and Jimmy, when you’re at the bank don’t mention me. Deadly force awaits.

“I read your blog daily,” says Paul, which certainly raises questions about his mental stability. “Occasionally I see you answer emails that have been sent to you. I’m wondering if you’d lend your perspective on my own situation.” Of course. I was running short of victims.

Turns out Paul is 38, wife’s 36, kid is 3. They make big bucks – $225,000 between them – have about $200,000 in registered investments (RSPs, RESP, TFSA), no debt and a nice car ($20,000 owing). “It’s my one indulgence,” he says, not being entirely truthful.

They live in an urban semi, now worth $600,000, in a good Toronto hood, with $170,000 owing on it. But house horniness has struck their perfect lives. And, shamelessly, Paul is using the infamous Kid Defence.

“My daughter is approaching school age,” he opines, “and we’d like to get her into a better catchment area. If we lived a few streets south we’d be in one of the best in the city, but those houses carry a significant premium. A detached house would be nice too. I’ve crunched the numbers a bunch of times. With agent fees and land transfer taxes it’ll run me about $60k to move. All told I’ll end up with about $340k cash in hand if I sell. Any house we are considering would cost at least $800-900k. Let’s say this puts my new mortgage at $500k. I can carry that with almost no difference in cash flow, but something doesn’t seem right. I’ll be free of my current mortgage in about 8 years if I stick with it. If we move, I’ll have that noose around my neck for a long, long time.

“What do you think? We’d be putting a large downpayment down on a new house (even if the market corrects we are unlikely to ever be upside-down on it). I can afford it.  But I don’t need it. I think we just want it.  My rational side (which usually wins) is saying stand pat. You’re fond of saying, Canada is no different. I’m no different either, right?”

See what I mean? In this email the kid gets 11 words and the rest is all about money, desire, lust and guilt. Paul and his wife want more, have the cash flow to get more, but are still sentient enough to smell danger. Damn good thing. Houses have messed with their heads.

For example, how do you carry a $500,000 mortgage “with almost no difference in cash flow” from one sitting at $170,000? Probably by taking advantage of lower current rates, and plugging in to a 30-year amortization. This is short-term thinking, since mortgage rates are destined to be higher in five years when the loan comes up for renewal.

By the way, with a current VRM at 3.2% this loan would cost about $2,200 a month on a 30-year mortgage. After 60 months Paul would have shelled out $75,881 in pure interest, and still owe $446,141. Isn’t amortization fun? Instead of being mortgage-free within a decade, they’ll owe close to $400,000. With luck it will be gone by retirement.

Paul and Mrs. will have bigger property taxes on a SFH than a semi, as well as higher insurance and maintenance. The kid will also get more expensive. And they’ll need a designer dog. BTW, how much better could public schools be from a hood of expensive semis to one of average singles? When you use your daughter to justify tripling family debt, is this child abuse?

Of course the big danger is buying at the top of a market destined to correct. If history were to repeat, that $900K house could end up dipping to $650K and stay there for years. That’s a loss of $150,000 in equity, or 44% of the money invested – but the full debt would remain. If it were a financial portfolio, instead of a house, Paul would probably moult.

So it comes down to assessing the odds of this happening – this correction. Either the Toronto real estate market acts like every other market on earth during all of time, or it’s different and rises without end. Hmm. Hard to know.

But here are two new clues.

Building starts numbers came out this week, and they were fat. More construction than at any time in almost six years, and the bulk of it is condos, most of them in the GTA. There are now 85,000 units being planned, built, pre-sold or marketed. But at the same time (as I mentioned here previously), 15,000 of those which are already constructed sit empty. Unsold inventory. Up 27% in a year. One bank economist were so far today as to say, “This is the ghost city phenomenon.”

Even F bitched and moaned a little two weeks ago, dissing builders who keep selling unbuilt units and dumping supply into a market which will soon be unable to absorb it. “I do worry about the last person buying a condo in Toronto,” the caring little pecker said, “and people getting caught.”

Speaking of the feds, here’s the week’s second new warning sign: reports today that Ottawa  has been mulling selling CMHC and getting the hell out of the mortgage insurance business.

According to the ex-chairman, Dion Chiesa, the agency’s board has already debated the move, as housing prices surge into bubble territory and CMHC holds almost $550 billion in insurance, much of it on high-ratio, high-risk mortgages. This equals a stunning 31% of the entire Canadian economy – much of it borrowed by horny people without experience or personal savings who wanted granite countertops, bought high, never read their loan docs and worry a lot about colour palettes.

Maybe it’s just me. But I wonder what those board members know.

So, Paul baby, make your choice. It’s real simple. Stay in your perfectly fine house and be financially and emotionally secure. Or man up and roll the dice.

Be mindful your daughter’s watching.