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With the state of the U.S. economy steadily growing more desperate, market analysts and economists are increasingly contemplating the possibility of Southern Ontario's economy being dragged into a recession.

The recession south of the border has been caused primarily by the suicidal dispensation of billions of dollars worth of mortgages to people with no hope of paying them back — known as "subprime" lendees for their lack of down payments, stable incomes or decent credit ratings.

Apparently, it came as a great surprise to the lenders and mortgage brokers who flooded the housing market with these loans that subprime clients would: a) create a housing bubble by buying homes they couldn't afford, then b) default in short order, leading to a spectacular crash of housing prices as well as the collapse of the institutions that got stuck holding the bad debts.

Throughout Southern Ontario, the bad economic news from the United States, along with skyrocketing oil prices, has the housing industry holding its breath, waiting for the ripple effect to wash over the subdivisions of the Golden Horseshoe. Some think the other shoe could drop this year.

Most of the region has withstood the sting of a market downturn. It's true that sales of new and resale low-rise homes have slowed down in 2008, but anyone who thought that sales records could be broken in perpetuity — and they are more numerous than you think — didn't understand how markets work.

The one submarket near Greater Toronto that could be facing price declines is Oshawa. The gritty city on Lake Ontario in Durham Region is not as dependent on the auto-manufacturing jobs as it once was. But when General Motors announced last month it would cut 2,600 jobs, it was hard to maintain the belief that the housing market wouldn't be affected.

So far this year, the average price of a new detached home in Oshawa has been holding steady at $333,551, an 11.7-per-cent increase from the same period last year ($298,686), according to Canada Mortgage and Housing Corp.

Construction starts also have remained brisk, especially for detached houses. In fact, Oshawa led the way in Durham Region with 223 detached-home starts in the first five months of 2008, slightly ahead of the 212 reported in the same period of last year.

Warning signs emerge, however, when you consider sales figures. In the January-May period this year, a total of 251 low-rise homes (including semi-detached and freehold townhouses) were sold in Oshawa, down by nearly half from the 428 in the same period of 2007, according to data collected by RealNet Canada.

So if you're actively seeking a low-rise dwelling on the eastern edge of Greater Toronto, Oshawa will yield bargains at a 30-per-cent discount compared with similar houses closer to central Toronto or in the more sought-after communities on the western edge or in York Region.

On the upper end of the market, there are a fair number of communities similar to Midhaven Homes' Forest Hills project near Taunton and Harmony roads in Oshawa's east end.

Active since 2003, this community is fairly small. Thirteen lots with frontages of 50 and 60 feet remain. On the larger lots, dwellings can yield up to five bedrooms, and feature pillared entrances and elegant pitched roofs layered over different heights. Prices range from $342,963 for 1,934 square feet to $431,145 for 4,000 square feet.

Great Gulf Homes' Stonecrest is in the same general area and has a larger selection of designs — from townhouses to detached houses on 40-foot-wide lots. Approximately 50 remain for sale, including 31 detached houses ranging from $272,000 to $318,000 for between 1,675 and 2,425 square feet.

Lying between these two communities on the price scale is the Ravines of Greenhill by Baywood Homes, located off Wilson Road, just south of Conlin Road East.

Greenhill has been active since 2004 as a new detached-house community, but a new phase of 24 new lots was released earlier this spring. A total of 109 lots for detached homes are still for sale, ranging from $287,000 to $374,000 for between 1,315 to 3,188 square feet.