Real estate points to ponder

Readers are pulled into newspaper stories by the headlines, particularly if they are provocative. There is no way you could resist reading the story below this gem from the New York Post front page in 1982: "Headless body in topless bar." The gutsy tabloid reported the decapitation of a barkeeper.

Still on topless topics, when I was an ink-stained newspaper wretch during the '80s, I edited a Walter Stewart column about a trip he and his wife took to the south of France, where they sat on a boardwalk bench and watched the passing parade, including women who preferred to stroll topless.

Stewart's column was amusing, so I wrote what I believed was a fitting headline,"Stroll down mammary lane." Well, the managing editor did not share my sense of amusement and changed the headline, ruling it was of questionable taste. Looking back from today's vantage spot, he was right. I did, however, fall back into favour later that week with a headline describing a new Swedish tax system that was progressive yet unpopular with taxpayers: "Swede and sour taxation." The editor, who was likely feeling a tad hungry towards the end of his long shift, appreciated the yummy head.

Here are some other newspaper headlines: "Global recession deepens; Jobless rate hits three-year high; Recession hits auto plants; U.S. economy flashes new distress signals; Gloomy jobless rate."

Do those demoralizing headlines sound familiar? Most of you are likely nodding your heads in agreement, thinking I am referencing recent news reports. Well, here's the thing, those headlines don't reflect current goings-on, they accompanied newspaper stories published 35 years ago.

I stumbled onto them while researching key events in 1974, the year the Greater Vancouver Home Builders' Association was incorporated under the B.C. Societies Act.

Families and businesses survived the '70s, '80s and '90s, and we will rebound even stronger from the current economic malaise. By the way, the average price of a detached home in the Fraser Valley in the mid 1970s was $53,525. Today it is just above $500,000 -- a whopping 834 per-cent increase!

During economic downturns, history is a great teacher, but it is important to focus on current facts.

The homebuilding industry experienced many years of growth and rising prices. There are those who believe that the overheated market was unsustainable, that a cyclical downturn was a matter of when, not if, and, to use a baseball analogy, that the industry was playing in extra innings during 2008.

That said, Canada's housing sector, particularly Metro Vancouver, remains resilient, is significantly different than elsewhere in the world, and the commonly held belief, according to the Ottawa-based Canadian Home Builders' Association, is that we are not experiencing a U.S.-style housing slump.

The following are some points to ponder:

- Canadian lenders use prudent standards for qualifying mortgage borrowers. There are very few sub-prime mortgages in Canada, unlike in the U.S., where 20 to 25 per cent of mortgages issued from 2004-2006 went to low-income people with few assets and woefully little or no credit history.

- There is no glut of unsold new homes in Canada, as most builders pre-sell homes here. Yes, inventories here have gone up during the past six months, but they are still small and manageable. By comparison, U.S. inventories of complete and unsold homes remain high.

- Canadians typically have far less household debt and greater equity in their homes than Americans. Because of this, Canadians generally have much less risk of mortgage default.

- Only 0.3 per cent of Canadian mortgages are in arrears, compared to more than six per cent in the U.S. If Canadian borrowers have difficulties repaying their mortgages, lenders and mortgage insurers will work with them to try to find manageable solutions.

- Canadian banks are rock solid, among the strongest in the world, and they continue to approve mortgages for credit-worthy home buyers.

- Mortgage rates are at historical lows. Lower interest rates mean lower monthly payments, which in turn means more people can qualify for a mortgage and buy a home.

- The current drop in home prices is much less than generally reported, as declining prices and sales at the high end of the market have a disproportional impact on the overall numbers.

- Canada's home ownership rate remains high, an enviable status achieved without relaxing the standards for qualifying mortgage borrowers.

One headline is sure to be written again and again, by generation after generation of journalists -- "Real-estate prices rise." Bet on it.

("We've seen those gloomy recession headlines before" prepared by Peter Simpson/Vancouver Sun)