So what happens if the feds get spooked by raunchy house values and up the minimum down payment? Will that let some gas out of the bubble before it implodes? After all, this is the current solution being proposed now by two bank CEOs. Will it work?

Forget it, says Andy Charles. Seriously.

Charles heads Canada Guaranty, a mortgage insurance company. He’s an industry lifer. I hung with him when he was president of Home Loans Canada, a rapidly-growing division of CIBC, where all the ‘alt’ borrowers the regular bank didn’t want (too much risk) ended up with mortgages from the same bank, but with a different label on them. Cute.

Anyway, this is why Charles says higher downs are dumb (as he told an industry publication):

“Raising the minimum down payment to 10% would have the unintended consequence of negatively impacting housing markets in almost all other areas of the country. Home prices are soft and either flat or moderately decreasing in almost every city in Canada other than Toronto/Hamilton and Vancouver/Victoria. Housing markets and first-time homebuyers in Montreal, Halifax, Calgary, Edmonton, Winnipeg, Regina, and Saskatoon, not to mention other smaller cities, would very likely experience negative economic impacts due to increasing the minimum down payment at a national level.”

Asking first-time buyers to cough up an extra 10% would probably change nothing. Charles is right there. Remember that the new rule boosting minimums for houses costing more than $500,000, which came into effect last winter, did diddly. The real problem is with listings over $1 million, which don’t qualify for CMHC insurance (thanks to old F). Buyers there need 20% down, which is now fueling the subprime segment of the lending business – since many buyers don’t have that kind of cas

After all, to purchase a typical $1.8 million faux baronial stone-over-plywood skinny house in Leaside requires at least $360,000 down, plus $64,000 in land transfer tax and the usual closing costs. That’s almost $430,000 in cash. Gulp. To get it an increasing number of people borrow off the grid, paying rates that range from 8-10%, then taking a 30-year am on the big loan in order to manage cash flow. For that you need titanium orbs or blissful ignorance. Both can be fatal.

So the enemy of reasonable real estate prices is probably not the dewy couple with the hots for a starter home, but speculators. One of Bay Street’s major bank economists this week fingered speckers as being far more consequential than the elusive foreign buyers, adding weight to Van mayor Gregor Robertson’s call for a flipping tax in BC. In other words, those people who only buy houses because they go up in value and may yield a capital gain are the ones deserving of torture, rather than the kids.

The trouble is, in some markets (guess) everyone’s now a specker. In YVR, it’s an industry. So shame on BlueShore Financial (formerly North Shore Credit Union), the ones running a nauseating Bank of Mom ad, for peddling a media release seeking to build guilt within families not playing the game. Ugh.

Check out this widely-reprinted story:

The bank of mom and dad has skipped a generation, with parents now buying houses or condos for their school-aged children or grandchildren. Nervous upper-middle-class homeowners are hoping that the strategy will help younger generations gain a foothold in Vancouver.

“At the rate things are going people are afraid,” said Kristine Skinner, a financial adviser with North Vancouver-based credit union BlueShore Financial, referring to recent rapid price gains in residential real estate.

“I have people coming to me, saying, ‘Are my children or my grandchildren going to be able to afford a home when they’re an adult?’” Skinner said. “They’re actually buying revenue properties today with the intent that the values will appreciate and those properties will be transferred to their children as adults.” Skinner said it’s common for her clients to help their adult children with either a gift or a loan of between $200,000 to $500,000 to help with buying a home, often in the same neighbourhood.

It’s hard to make this stuff up. Grandparents panic-buying condos with newly-minted equity from their bloated houses, doubling down on real estate to ensure that the generations to come will be as myopic, obsessed, materialistic and speculative as they. What a great social usage of hundreds of thousands of windfall dollars.

Thus, it’s time to stop worrying about Chinese dudes. Worry about us. Things are getting out of control.

Upping the down may be the wrong direction. Instead, tax housing gains as we tax everything else. Only fair. Sorry, mom.