Three years ago it was worth $520,000. Just days ago the house in Langley sold for $699,000. Big fat windfall for the owners?

“They won’t come out with anything,” says Suzanne the realtor. “Too many homes have been used at ATM’s. It’s sad. And when the commission is calculated, the $21,000 owing will make them claim bankruptcy if they can’t sell it on their own. And with what’s coming, there won’t be much chance of that. It has already begun.”

In a note to me she continues: “It’s the ’80s all over again, but with mortgages at 5%, 6%, 7% – not 22% and the lower debts and home prices we used to have.”

So if real estate values have soared over the last few years in the Lower Mainland, Toronto, Calgary, Winnipeg, Edmonton, Saskatoon and Vancouver, where’s the money? Why aren’t people rich?

Easy answer. So many owners now ensconced in their particle board and face brick castles have traded up without ever adding much to their equity. Every move meant a bigger mortgage, not to mention tens of thousands burned off in closing costs and commissions. The house grew more grand, but the net worth did not. Galloping markets fuelled a wealth effect, without actual wealth.

Now with fat mortgages at low rates, no wonder sellers are sticking with high prices, mooning reality. They’re trapped.

Today (Monday) the Canadian Real Estate Association will announce July stats. The tale they tell will be predictable, and reflect as much human angst and emotion as market data. First, sales will be down again, big time. After dropping 8.2% in June from the month before and about 20% from the same month in 2009, in July they could be off 30% to 40% from last year’s levels.

(Update: The numbers are out. Sales plunged 30% in July; the average price dipped 3.5% from June and is 1% above 7/09 levels.)

And while this will be the worst housing market performance in about a decade, don’t look for the price slide to start in earnest just yet. It may be a buyer’s market, but the sellers are still blinkered – some market dumb, some in denial, lots unable to sell for less. I mean, if you’ve precious little equity and must cough up tens of thousands to break a mortgage, pay the realtor, move and cover closing costs for a new house, the last thing you need is a vulture pecking out your orbs. After all, prices and sales are going up in September, right?

Yeah, and CREA’s designing my statue.

Fact is vendors will not capitulate until they’ve no other choice. That might come after 90 bleak days of lonely open houses and a drought of offers. It might be because of divorce or unemployment or job offer in Weyburn – three devastating life events. It might even be after some homeowning fool makes a firm offer on a new house, and must bail. Whatever.

Real estate board stats from across the country are confirming this. Sales may have crashed, but prices have not. Predictably. Listings have taken a tumble as scores of deluded owners decide to ‘wait it out’ and re-list their homes this autumn or next Spring. Of course, they could be in for one mamma of a 2011 surprise. Sadly, many of these souls are being led stray by realtors like this one in Toronto, who are telling clients: “We believe the market is near the bottom, and will see a moderate upswing this fall. For some time thereafter we expect to see a balanced market where buyers have time to compare properties, and sellers still obtain fair market value in a reasonable amount of time.”

Yes, a balanced market. Like in BC, where late last week came word of a withering dump in housing activity. Sales in Vancouver crumbled 45% from a year ago and in the Fraser Valley’s they swooned fell 48%. Victoria and were hotbeds of activity with only 30% declines.

And in Calgary, where both sales and prices are heading lower – along with the population of cowpokes – people with houses to sell are being told to chill. Nothing to worry about here. “A gradual return to moderate interest rates will not trigger any kind of steep decline in prices in our housing market,” says head realtor Sano Stante. “Prices will soften in select markets where inventory has bulked up — but for the most part, they will remain relatively sticky as the economy improves.”

Of course, many sellers will believe these industry “experts”. Buyers, on the other hand, understand what’s happening. This isn’t the bottom of a housing trough, but the early stages of a corrective dump. We all richly deserved this deflationary bout after borrowing our buns off, running house prices into orbit, throwing net worth into one risky asset and equating a mortgaged McMansion with actual wealth.

As I’ve said so often, it’s all about liquidity and net worth. Not stainless and granite. And this story is just commencing.

Says agent Suzanne: “There are many realistic realtors who very much appreciate your market insight and great knowledge. If you want, I can get the word out about your coming visit to Vancouver and fill the place with real estate people.”

OMG, that does it. I’m taking the Hummer.