We’ve seen housing pricing fall in Canada by 5% over a year ago. We won’t even talk about the U.S.; it’s just toooo depressing. Now Meryll Lynch is saying that Canada’s housing market is in for a severe beating.

Scotiabank says it’ll be a steady decline. This from the Smarty Pants who touted the Great Idea of leveraging out homes 100%. Hmmmm.

The Globe and Mail ran an article that listing a b’zillion reasons why we won’t experience what the U.S. has: we’re less exposed, we have better lending policies, and myriad others. Sounds like the hero cheering himself up to me.

As someone who sees people’s budgets all the time I know there are lots of people out there with way more house than they can reasonably afford. If your housing costs exceed 35% of your net income, where are you going to find the money to pay for gas, by your kids some food, pay down your debt (and, believe me, there’s plenty of debt) AND save? But people who wanted to believe that they could get something for nothing — that they could own a home without doing any of the hard work involved in saving a downpayment — barralled ahead and listened to the Idiots who said, “The Fundamentals Have Changed” (in a booming baratone.)

Now the experts, in an attempt to avert a panic that would have housing sales go deeply into the tank, are suggesting that here in Canada, we’re okie dokie. Tell that to the guys who have already lost their jobs because plants are closing this way and that. And tell it to the ill-advised Believers who bought the story they could afford a home that pushed their budgets past a reasonable limit. Come time to renew them thar mortgages, we’re going to have a more than a few homeowners walking the plank.

The TRUTH is that we haven’t had a stong economy. We’ve had an economy buoyed by the fact that we’re spending money we haven’t yet earned. Yup, we’ve been using credit to gas up our economic machine and the fuel is running out fast. We’ve never had any experience with the kind of decline in purchasing — a major economic driver — we’ll see when people stop spending on credit. Restaurant sales are already down as people stay home to eat. Car sales are in the tank, and many car companies are out of the business of leasing because they just can’t make it work anymore. Can home-renovation shops, big-screen-tv sales, and new housing builds be far behind?

It’s time to stop trying to make things sound better. Things are down-right UGLY. The thing we need to do is to recognize the mistakes we’ve made and take our best shot at protecting ourselves and planning for the future. This We-Can-Have-It-All-At-The-Same-Time crap has to stop.

We can have it all… but not ALL at the same time. We have to make choices.

If we want to own a home, we have to stop spending all our money on STUFF and save enough to make sure that home is safely ours, and not subject to the winds of economic change. That means saving a good downpayment. It means having our closing costs in an account so we’re not adding them to our mortgage. It means buying a home we can afford, instead of one that’s too big, too fancy, too too.

If we want to be debt free — so many of us say we do, just as we’re handing over some perfectly good debt-repayment moolah for a new pair of shoes — we have to make choices. We can set the goal and then work our buns off to make it so. Or we can PRETEND we want to be debt free, whine about how hard it is to get out of debt, and then head off on a cruise.

If we want to have an emergency fund, we have to choose to save rather than spend. And we won’t ever successfully build an emergency fund by trying to trick ourselves into saving. Rounding up at buck a shot just isn’t going to get y’all there, my friends. It has to be a conscious decision to take money out of cash flow and set it aside for the time when there is no cash flowing.

You can listen to all the fear mongers and panic. You can listen to all the guys saying, “It isn’t really so bad” and ignore what’s going on around you. Or you can be a grown up and recognize that there are some basic rules you just shouldn’t break:

know how much money you have to work with, to the penny

don’t spend more money than you make (you’ll need a budget to track your spending)

if you need more money to make IT happen (whatever IT may be), then get another job, get a better job, find a way to Make More Money

take care of the What Ifs: have an emergency fund, some insurance, and your estate plan in order

save at least 10% of your net income

No rocket-science there, right? Just some Plain Ole Common Sense. (Where did our Common Sense go?)

Money, like life, isn’t just about where we are RIGHT NOW. It’s about the big picture. In life you can have a shitty day, a crappy month, even a horrible year. And the economy is just the same. If you ignore The Right Thing to Do and panic, or convince yourself that it will all be fine and you can just keep on truckin’ as you have been, then you’re thinking too small.

And if you’re dumb enough to buy the crap that everything is fine, just fine, then you’re a SUCKER! Things aren’t fine. Things are crappy, and getting crappier. But it won’t always be thus. You’re being tested. Will you PASS or FAIL?

BTW, one of the biggest signs in the U.S. that things were ass-backwards was the fact that people were paying their credit card bills, but not their mortgages. I blogged about this back in March. A total anomoly that the Smarty Pants running the show ignored. If we see people in Canada choosing to make their minimum payments on their credit cards while they negotiate away a mortgage payment or two, then you’ll know we’re in REALLY BIG TROUBLE!

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