Canadians love to buy houses.
Not only does the rate of home ownership surpass that of the United States, Canada seems to have dodged the crisis that so vexes the U.S. Sales are up, and property values keep appreciating as U.S. prices have fallen 30 per cent or more.
As an investment, home ownership seems to match Canada's national character: it's responsible, practical and risk-averse.
Or at least it has been.
This week, financial analysts at Edward Jones rained on the real-estate parade warning that current conditions - prices that are too high, easy credit and lax government policy - could lead to a big downturn in the market.
Which may not be such a terrible thing because home ownership is an impediment to Canada's long-term prosperity.
Historically, a house has been like a savings account that keeps on growing. Keep it 20 or 30 years, and you can finance your retirement.
And yet, except for some exceptional booms, housing has never been that good an investment. Yale University's Robert Shiller, a keen student of economic bubbles, found that, in the U.S., from "1890 to 1990, the rate of return on residential real estate was just about zero after inflation."
There are some important social benefits - home ownership generally instills in people a deeper commitment to their community. But it also can be very costly to the economy.
A study by the Federal Reserve Bank of Dallas in 1998, well before the boom and bust, found the U.S. had over-invested in housing relative to other forms of capital since 1929. It has drained off capital from productivity improvement, innovation, medical technology, software or alternative energy: sectors that could drive growth well into the future.
Here as well, housing sucks up a huge share of national capital that should go to support innovation and new industries. Canadians actually carry more mortgage debt as a percentage of their disposable incomes than Americans do.
British economist Andrew Oswald has found that cities with higher rates of home ownership also have higher unemployment - in Europe, a 10-per-cent rise in the former corresponds with a 2-per-cent rise in the latter.
What's the link? The simple fact that anyone who has invested in a house is less likely to pack up and leave when times get tough.
In 2008, fewer Americans moved, as a percentage of the population, than in any year since the U.S. Census Bureau started tracking changes of address in the late 1940s: less than 12 per cent versus more than 20 during suburbia's golden years.
By the same token, laid-off workers who can't sell a home in Windsor aren't about to move to Toronto, Vancouver or Calgary where jobs are easier to find.
Yet this is the absolute worst time for people to lose the ability to move around. The economy is going through a broad structural shift. This is a moment of significant creative destruction; old industries are giving way to new ones. It's much harder for workers to find jobs where they live.
But the U.S. has shown an uncanny ability to use crisis to remake its economy, and it has remade its housing system more than once, most recently ushering in the suburban age and mass home ownership after the Second World War.
It may be doing so again. Because of the economic crisis, fewer Americans are buying houses, a decline likely to continue as young people choose to save money and guard their options by renting. Sure, the social costs are considerable, but they can be more than offset by the broader gains to the economy provided by a more flexible, 21st-century housing system.
As a result, Americans may already be restoring the flexibility and mobility at the heart of their resilience, adaptability and innovativeness. Rahm Emmanuel, who is chief of staff to U.S. President Barack Obama, likes to say that "a crisis is a terrible thing to waste." In the end, Canada may face a bigger challenge even if its bubble doesn't burst: If times are good, why bother changing
Richard Florida is director of the Martin Prosperity Institute at the University of Toronto's Rotman School of Management. This article is adapted from his new book, The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity, published today by Random House Canada.