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A follow-up to the last post on the future of suburbia: Last summer, on my political blog, I said the big story, then on nobody’s radar, would be real estate. My bleatings continued with little effect, so I decided to write a book about it. “Greater Fool” was published three months ago and is now into its second printing. My premise was simply that the US real estate correction would come to Canada, and it took me 200 pages to explain why. Trust me, subprime mortgages have little to do with it.

But, it’s academic now. Because it’s arrived. At least the start of the beginning has arrived. And I will say it again: This is the biggest story to impact the middle class, especially combined with our current, and mounting, energy crisis. In fact, the political party which comes up with an agenda of action for that beleaguered middle class will have a potent advantage in the next federal election.

Remember, after all, that it was the housing collapse in the US which brought that economy to its knees, devalued the greenback, goosed oil prices, created a global financial crisis, and cost Canadian banks about $10 billion. This, of course, is not over yet. American real estate prices have declined every month for 16 months; year-over-year values are down 15% nation-wide with some markets off 40%; and it’s estimated the bottom is at least a year away. Over 3,000,000 families have negative equity and there are over a thousand foreclosures a day. This is the worst housing crisis since the Depression, and it has spurred similar retreats from Europe to Australia.

Canada is not immune from this contagion. For a year I’ve been warning the policies of the federal government would exacerbate this situation, and it’s happened. Ottawa has continued to milk stressed-out middle-class families, refusing to cut income taxes. Government spending’s been out of control, and we’re perilously close once again to deficit. Over 400,000 manufacturing jobs have been erased, some because of the hollowing-out of national industry, others because Ottawa helped talk up the dollar and smash our competitiveness. The income trust decision wiped out much-needed private savings and nuked too much investment in oil and gas. And, of course, the government paved the way for 40-year mortgages which have coaxed so many young couples into buying too much house with too much debt.

But don’t just take my word for it. The pattern is always the same. First, sales volumes drop for resales homes, and months later prices start to tumble. Right now, as has been pointed out on this blog, Calgary and Edmonton are in the price-decline stage, with the average home in the Albertan capital down 11% over the past year, or a whopping $44,000.

In Toronto and Vancouver, sales are falling off a cliff, which likely means prices will deteriorate by the end of the year. Home sales in the GTA are down 18% over this time last year, and crashed 9% last month alone. In Vancouver, despite the hype of the 2010 Olympics, the situation is even more dire. Sales have crumbed by 43% in a year, and the number of people trying to bail has grown steadily, with listings up 18%.

Again, don’t take my word for it. Talk to a neighbour or a friend about home sales in their communities. You will find selling a home right now is a nightmare in most places, an impossibility in some. Too many young couples who bought at the limit of their financial ability, and thought they could always sell for a profit in a weekend, are devastated. I spoke with a realtor friend two days ago – a guy I’d warned about this last December – and he was in shock. “It’s like a light switch was flicked off,” he said. “Suddenly people who need to sell are asking me how cheap they have to go, and people who wanted to buy two months ago are too afraid to make an offer.There is no market.” He specializes in cottage properties, and swears the value of an average $400,000 property dropped by a hundred grand last month.

Don’t be fooled. This is not just an economic story. It’s not about a natural cycle in the housing market. This is a societal tidal wave, since over 80% of entire family net worth is in residential real estate.

We’ve all had three years to watch this unfold in slow-motion south of the border. Now it’s here.