You have to forgive realtors.

They are relentlessly optimistic.

The economy is dropping like a rock. A great time to buy!

The economy is sizzling red-hot. A great time to sell!

I was impressed with the reasonably objective research and conclusions of Edmonton realtor (and ex-accountant) Kathy Schmidt, in her monthly The Schmidt Report.

The sky is not falling, she argues, not in Edmonton’s housing market.

It has crashed down in Fort McMurray, it’s falling in Calgary, but here, we’re just a little overcast.

Median house prices are down – about 3% — in most of Metropolitan Edmonton, a median price of about $340,000 compared to $350,000 at this time last year.

(“Median” excludes the very top and very bottom ends of the housing market. At the top end, Edmonton houses listed at $600,000 or more are down more than 3%.)

But the market, Schmidt says, is busy. More homes (houses and condos) were sold last month than were sold in January a year ago. They’re just taking longer to sell.

Schmidt’s analysis is borne out by the Edmonton Real Estate Board’s housing reports. But – like every analyst and economist in the city – Schmidt and her fellow realtors are ignoring the gorilla in the closet, the elephant in the bathroom.

But first, their argument: Metropolitan Edmonton’s economy is still growing. Maybe at 1%, compared to 2% to 3% in the recent past, but still, it’s growth.

The region still anticipates net population growth this coming year: More people, more housing needed.

With today’s 3% or lower mortgage rates, buying a home is very attractive compared to renting.

Sure, there have been layoffs around town, but few foreclosures. You may have lost your Fort McMurray welding job, but your spouse still gets a paycheque and benefits. There’s still work, at way less money and not requiring your full skill set.

Anecdotally, of my daughters and their friends — millennials starting professional careers – at least half have bought or are buying their first houses and condos. “Ask any real estate office,” says Schmidt, “They will tell you they’re busy.”

Here’s my gorilla and elephant, hiding in the house.

Edmonton’s consumer confidence comes from one unassailable fact.

One out of every four jobs in Edmonton is directly or indirectly funded from the public purse, be it in government, health or education.

When Alberta’s New Democrats was elected last May, the public/quasi-public sectors breathed a huge sigh of relief. New Democrats believe in a strong public sector, i.e. no wage cuts, no layoffs.

But, this government, at this very moment, is confronting a grim reality.

They cannot avoid layoffs. With diminishing renewable energy royalties and land-sale resources, lower corporate income tax revenue and the flat-lining of personal income tax revenues, the money is fast running out.

It won’t be a $5 or $6 billion deficit Finance Minister Joe Ceci will be looking at come the spring budget. It will be billions higher.

As I write this column, the top brass at Alberta Health and all the other big-spending ministries - Alberta Education, Advanced Education, Treasury Board and Finance – are in prolonged huddles.

Their ministers have instructed them to cut billions from their budgets, especially in health.

But, hey, don’t cut services!

The other shoe has to drop. The government has no choice. It cannot borrow forever. Even lenders get nervous.

Cutbacks will have to happen. Public service layoffs and downsizing will have to happen.

When government jobs are no longer bullet-proof, consumer confidence in Edmonton will evaporate. If both mom and dad are laid off, then we’re in trouble.

That’s when house values in Edmonton will plummet.

Since 1980, the worst housing downturns in this city were not caused by the price of oil, but by layoffs caused by the downsizing of government and government-funded services. Prices declined or stagnated through the ‘90s for that very reason.

This is the gorilla in the closet, the elephant in the bathroom. Provincial government cutbacks will happen, layoffs will happen. And that’s when Edmonton’s home prices will, once again, go into free fall.

Factoids:

Historical average Metropolitan Edmonton house price, 1981 to 2016, rounded-off

1981 $91,000

1986 $74,000

1989 $89,000

1990 $101,000

2005 $193,000

2007 $338,000

2012 $334,000

2014 $360,000

2015 $374,000

2016 to date: $340,000

(Source: Edmonton Real Estate Board)