Students of economic history learn about tulips.
In 1637 in Holland, tulip mania was in full swing with flower bulbs selling for incredible prices, more than the average citizen's annual income (or so the story goes - modern historians question the details).
The accuracy is irrelevant, however, because it's the story of an economic bubble, the artificially high price of a commodity, driven by profit speculation and other market conditions.
There have been numerous modern equivalents, most recently the housing sector collapse in the U.S. in 2007 and 2008 that nearly led to a global economic meltdown. For a variety of reasons, real estate prices in Canada were largely spared. While they softened for a time in Prince George, both prices and home construction starts picked up again. Meanwhile, in places like Vancouver, Calgary and Toronto, prices and building activity soared.
While affordable housing isn't much of an election issue so far, The Citizen's Charelle Evelyn made a strong case in Thursday's paper that maybe it should be. Government spending on social housing development for low-income and homeless residents continues to decline, low vacancy rates are pushing rental prices way up, subsidies have disappeared for non-profit housing associations and buildings and neighbourhoods previously occupied by lower-income families are being scooped up for cheap, bulldozed and redeveloped with pricey new homes.
It is here where the vulnerability of Canada's housing sector appears clear.
A growing segment of the population simply has no chance of owning their own home, even in places like Prince George, never mind Vancouver or Kelowna.
The numbers of the working poor are growing and fewer and fewer people are leaving this economic class once they find themselves in it.
Meanwhile, young, middle class Canadians are finding the idea of owning their own home not much more than a pipe dream.
In previous generations, these young people stayed with their parents while going to school. The current generation stays at home much longer because even after they graduate and get started on their careers, their students loans make renting difficult, never mind becoming a homeowner. As the 2011 Canadian National Household Survey showed, more than 42 per cent of young adults between 20 and 29 are still living at home. A generation ago, back in 1980, it was just 26 per cent, at a time when soaring inflation and commodity prices were causing economic havoc.
In short, home prices keep going up but the number of available of buyers keeps going down. Whether it's tulips or houses, these two numbers can't keep going in opposite directions forever.
The baby boomer generation bought low but now expects to sell high when it comes to their homes. Many of them have built their retirement plans around being able to cash out of their family homes, getting as much as five to 10 times what they paid for it back in the day, to downsize into smaller, more affordable housing. The problem is most of their kids can't afford those current prices and the ones that can want something big and new, crammed with all the modern amenities.
The affordable housing isn't there for the people who need it, never mind for the people who want it to subsidize their golden years. That means affordable housing isn't just an issue for the working poor, the young and the permanent renters. It's also a serious concern for an increasing number of baby boomers who have little saved for retirement beyond the assessed value of the home they live in.
Most of the generation prior to the baby boomers left Prince George for warmer climates when they retired. They could afford it because it was a sellers market - lots of new, young and willing buyers, most of them independent and making good money. Fast forward to today. The baby boomers (now the sellers) outnumber their children (the buyers), who are less wealthy, with fewer long-term prospects and more saddled with debt at a young age than their parents ever were.
The entire Canadian economy is in danger from a serious correction in home prices, brought on by artificially low borrowing rates, collapsing natural resource prices on the world markets, a falling Canadian dollar and too much inventory for too few people who can afford to buy.
The sky isn't falling yet but those black clouds in the sky don't look friendly.
-- Managing editor Neil Godbout
