Big bubbles don’t always have to pop, big balloons don’t always have to burst. And as you watch one being blow up, there are always 2 camps of people eagerly awaiting the outcome. Is that next breath going to be “the one”, or will it keep going?

This past month, I have been eyeing various real estate headlines from a Canadian newspaper, The Globe & Mail. They hide their articles behind a wall of registration, so I won’t be able to link directly to the articles. But take a look at the headlines, what do you see?

• Bidding wars disappearing in Vancouver
• U.S. housing slump deepens, spreads
• Housing boom fizzles in Calgary
• White House lowers growth outlook amid housing slump

Most readers would have already read about the American stories this month. Seems anywhere you are, you can’t escape the influence of the real estate market south of the border. But there were also some harsh observations on the booming Western Canada housing scene.

” If buyers are not rushing, it may be because they don’t have to. The frenzy that characterized the Vancouver housing market since 2004 is disappearing, replaced by one in which buyers have more than mere hours to make a decision. Instead of multiple offers, bidding wars and homes being snapped up virtually overnight, the current market is characterized by growing number of listings, a slower rate of price increases and even price cuts. “

” Nobody is talking about a crash. [...] But there is a sense the air is leaking out of what had become an overinflated market. “

” Over the past two months, 15 per cent of sellers have reduced the price of their homes in order to spur a sale, compared with roughly 2 per cent of sellers earlier in the year “

Hmm, that’s a new way to think at the real estate bubble ain’t it? It’s like we’ve got our finger squeezed on the balloon’s air-hole, pausing for a breath. There isn’t a real catalyst that can tip the scales either way. But deflating rate of growth has popped up in more regions than there are robust ones. There isn’t a central real estate market, but it’s more like a majority rules kinda thing. During the rise, there were also regions of slow or negative growth, but those were in the minority. Now slowdowns are being written up in newspaper stories, which traditionally are slow to react with such editorials.

Can there be a drastic drop in price? Not very likely in the next 2 years. Not when governments are vowing to pare down interest rates slightly in the foreseeable short term. Not when the unemployment rate remains low. Despite the price reductions, many sellers are still comforted by the fact that the selling price is still well above asking price of the last few years.

” But anybody hoping that prices may come back within reach for first-time buyers is likely to be disappointed. Slowdown or no, Vancouver real estate remains too expensive for many. “

However, the good news is home buying consumers are really smartening up to the fact that they won’t be able to count on housing price appreciations to buffer their hefty investment. Eventually, it’s all in the mind but who wants to suffer sleepless night thinking about “what could be”, and second guessing your decision?

What About Calgary?
The Calgary market is a different beast altogether. The real estate market has been propped up by the meteoric rise in employment. Workers are relocating due to job prospects, and settling down means you need a home. When demand outstrips supply, the real estate agents are raking in their commissions. Housing prices have risen tremendously because of the job boom but the article reports that the fizzle has gone out as well as “price reductions of $40,000 or $50,000 have become common”.

Truly is it a case of mass populus denial? If interest rates continue to rise, what would happen? Foreclosure rates are creeping up as well, how well fear factor into the minds of home owners / buyers? Guess we’ll have to pavlovically wait for that next breath with eager anticipation.