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How does your Toronto neighbourhood rate, in a city where the housing market has gone up, up and up again in the past few years? Are you watching while your neighbours making a killing on the ramshackle fixer-upper they bought a few months ago, and thinking you should act now to cash in on the hot market that everybody's talking about?

In some neighbourhoods, bidding wars add $50,000 to $100,000 or more to the final selling price, leaving buyers to speculate on how much they should offer on homes they want to purchase. First time buyers often learn through trial and error that they have to bring a significant amount of money to the table if they want to get into the most desirable areas. Other regions aren't quite as hot, but their average prices have still made steady gains in recent years.

With the mortgage crisis creating huge problems in the United States, there is speculation that the housing boom is fizzling in Canada. Some agents are suggesting that the end is near for the dizzying bidding frenzy that has become common. Recent statistics have shown small increases in many areas of Toronto, and decreases in some. The GTA resale housing market saw 3,955 homes change hands in the first half of April, down 5 per cent from the same period last year, the Toronto Real Estate Board reported.

How does a home buyer make sense of it all? Toronto Real estate expert John Pasalis was online earlier for a discussion on the state of the housing market in Toronto.

John Pasalis is the founder of, a Toronto-area real estate information and services company. A graduate of the University of Toronto, he holds a B.Sc. in Economics. Mr. Pasalis began his career in real estate 10 years ago, first working as a portfolio investment manger and then moving into sales. He is a sales associate with Prudential Properties Plus in Toronto and a frequent contributor to , a prominent Toronto real estate and neighbourhoods blog.

Founded in 2006 by four friends around a kitchen table, brings consumer-focused real estate education together with cutting-edge technology solutions to serve the needs of home buyers and sellers. The website is quickly growing popular with consumers and real estate industry professionals alike. Among its service offerings is the Toronto and GTA Neighbourhood Profiler, a comprehensive resource on average home prices, school performance and transit routes for over 180 neighbourhoods.

Editor's Note: editors will read and allow or reject each question/comment. Comments/questions may be edited for length or clarity. We will not publish questions/comments that include personal attacks on participants in these discussions, that make false or unsubstantiated allegations, that purport to quote people or reports where the purported quote or fact cannot be easily verified, or questions/comments that include vulgar language or libellous statements. Preference will be given to readers who submit questions/comments using their full name and home town, rather than a pseudonym.

Danielle Boudreau, writes: Hi John. Thank you so much for taking the time to answer our questions about Toronto's real estate market today. What do you think are the next up and coming neighbourhoods in Toronto, and do you find that it's better for buyers to take a chance on them, or stick to more established areas?

John Pasalis writes: Hi Danielle, I am glad to be here and am looking forward to our discussion.

Up and comers Leslieville, Mimico and Hillcrest have been popular with my clients - once they learned of them. To spot up and comers, we often need to unlearn the way we think about neighbourhoods. To look at, Woodbine Lumsden may not spark the imagination - but if you look closely, some telltale things are happening: newer or recently renovated homes are starting to appear. Next, we look for trend-setting bars or cafes to move in, followed by the big chains (the so-called Starbucks factor).

To mitigate the risk of the up and coming neighbourhoods means understanding your concerns. Are you worried that the place won't clean up quickly enough for your lifestyle? This one is tricky - many residents of Leslieville would probably like the "exotica" of Jilly's Adult Entertainment to disappear, but they may have to wait. If you are worried about price stability, it is important to understand what it is that makes nearby established neighbourhoods popular - and to understand whether the emerging area shares these features. Our work featured in today's Globe and Mail real estate centre section, shows that proximity to the subway network, particularly when it comes to condos, correlates to appreciation. This is what makes lesser knowns like Woodbine Lumsden a more likely winner.

Mike Constantine from Canada writes: Hi John, Given you are a Real Estate Agent who has a vested interest in a strong Real Estate Market. Why should we believe anything you have to say since in the end your comments are self-serving and biased.

John Pasalis writes: That's a great question and one I often get on our blog. I often think that my mechanic is into predicting doomsday scenarios no matter what. I presume you believe the opposite - that I will say that things are great even when they are not. The reality is that I'm not saying that things are great. Things are slowing down. I don't think it's the right time to buy for all home buyers and the advice I give reflects this. There are a lot of factors that home buyers need to take into consideration before buying in this market. One thing I strongly discourage is buying with zero down. This is a bad idea in the best of markets and a foolish idea in a market that is close to or at its peak.

Marg MacKinnon of Brampton, Canada writes: Hello John, I've noticed that each year now for a few years, real estate agents and "experts" say that the housing market is up again and that's going to slow down very soon, but then the next year, the market has gone up again. Do you think that the end of the "housing boom" in Toronto is coming soon, and if so, why? Thanks, Marg.

John Pasalis writes: Hi Marg, you make a very good observation. Part of the reason that real estate observers and economists have trouble predicting the market (myself included) is due to unforeseen developments which impact home buying and selling decisions, such as CMHC introducing 40-year mortgages in 2006 and Toronto approving a land transfer tax in 2007. You are also right in saying that experts have (erroneously) predicted slowdowns during the run of appreciation we have just experienced.

However, if by boom we mean the appreciation we've seen in Toronto over the past 11 years - a historic high, then yes, I believe that the boom is over.

I am not predicting a collapse, but rather little to no growth in sales and prices over the next few years, similar to what we saw from 1992 to 1998. Part of this involves a needed correction in the market, evening up supply and demand, but the downturn in the US and the accompanying loss of consumer confidence is a strong contributor to this slackening trend.

Paul from Mississauga, Canada writes: I watch a lot of the TV shows where people flip homes for a profit, and I think it's a good idea. I'm pretty handy and am interested in making a few dollars fixing up a place. Do you think there's still a way to make money in the current market in Toronto or Mississauga doing this or have I waited too long. If so, are there good areas to try to find a home for this, and would you recommend a condo or a house? Thanks, Paul.

John Pasalis writes: I think there is still room to make money flipping in this market, but with most economists predicting a slow down in Toronto's housing market, there are a few things you need to be mindful of to mitigate your risks. Firstly, over-leveraging yourself - rushing to invest in a market before it cools without saving up a sufficient down payment - is very risky. Because of the extra costs - and risks - you take on as an investor (renovating and needing to sell quickly) - you need to think of putting down more money than a regular home buyer would.

Secondly, pick a project that you can complete in a short period of time - be strict about this. Make sure you don't bite off more than you can chew. Avoid projects that are going to take up to a year to complete, leaving you vulnerable should prices drop next year. Avoid condos and stick to a more affordable house in an up and coming area. Ask yourself if you can keep an open mind about your end goal - it may be a better market to rent rather than sell when the time comes.

Andrew MacKinnon from Toronto Canada writes: How much impact do you believe Toronto's new land transfer tax is having on real estate sales? Do you think that the recent sales slump is only temporary as many people bought before the tax took effect, or will it cause a more permanent reduction particularly in real estate speculation?

John Pasalis writes: The land transfer doesn't affect most first time home buyers. So the real question is, do we expect this tax to impact 2nd or 3rd time buyers who are looking to upgrade or downsize. There is no doubt that that there was a rush of people trying to beat the tax towards the end of 2007, but that was the bulk of the effect.

I don't expect the tax to have a material impact on regular home buyers who are likely to base their decisions on their personal situations and current conditions in the market. You raise a great point when it comes to speculators. Any extra cost increases their risk and may dampen the flipping trend.

Bob Macdonald from Liverpool United Kingdom writes: In what way is Canada unique and special in the world and able to transcend global forces much bigger than one country? I just think the housing market will crash because credit is drying up everywhere, and most Toronto houses are not worth it.

John Pasalis writes: In assessing the Canadian situation, it's important to take note of what's happened around the globe. A recent IMF report noted that rapid housing price appreciation has been a global trend. What is interesting is that countries differ when it comes to how much of the heat has been due to market fundamentals and how much is unexplained and thus more likely due to speculation and other unsustainable factors. Here the IMF finds that the UK is among the most suspect, the US is in the middle (probably because prices have already come down somewhat) and Canada is at the most rational end of the scale.

I think that this accords with my evaluation of the Toronto market. Demand was driven in large part by people choosing to live closer to work, closer to transit and closer to entertainment - ensuring the popularity of these areas for some time. On the other hand, some markets, for example, the condo market, may have involved more speculation - buying to flip - that may result in instability over the next few years.

Marina G. from Canada writes: Good morning John. Do you think in a wake of steady rising gasoline prices those who commute from suburbs will eventually start moving back to Toronto driving housing prices up?

John Pasalis writes: Hi Marina, thanks for your question. There is no doubt that there is a huge trend in terms of buyers flocking to urban living - anecdotally, the frustration of the long commute and rising gas prices have played a role here. Affordability has already diminished in some parts of the urban core as a result. However, I think that one part of the "suburbia is dead" thesis - often espoused by urban dwellers - that is flawed is the analysis of "what everyone likes," or rather the trade-offs that people are willing to accept. There are important segments of the market that may not be buying into the core. Research suggests that baby-boomers do not plan to downsize at the rates often predicted. Equally important is the impact of immigration in Toronto. Immigrants make up a significant portion of demand in Toronto's housing market, and Stats Canada 2006 Census data shows that recent immigrants have settled in the suburbs of the GTA, bypassing the city core. Of course, these trends are all subject to future changes in housing affordability and gas prices.

Tyler Curtis from Toronto Canada writes: Thank you for taking my question Mr Pasalis. It pertains to the condo market in Toronto. There has been a noticeable boom in the building of condo towers throughout the downtown area in recent years. I'm wondering if immigration and population statistics bear out the demand for all of these units, or do you feel that there is a significant amount of speculation occurring in the condo market here? I have read several articles that suggest other cities' condo markets have become bubbles, on the backs of speculators, and could 'turn on a dime' if prices start to fall according to observers like Garth Turner. Is Toronto in the same situation or do its market fundamentals and affordability differ enough from other centers to protect it from a downturn?

John Pasalis writes: Good afternoon Tyler. Last year was the first year in Toronto where sales of new condominiums surpassed sales of new freehold homes. While affordability concerns have played a role in the rise of the condo market, as I mentioned in my reply to Bob above, a lot of the underlying demand has to do with consumers choosing to live downtown. However, the experts are right in suggesting that speculation is a threat to home buyers, so your concern is a valid one, but here the stats are really uncertain. One way to protect yourself as a condo buyer is to get to know a lot about who makes up the demand in the building you are considering - residents or speculators? This info isn't easy to find as a consumer -often you need a very shrewd agent to call up his or her colleagues and dig up information on these projects. Another approach is to talk to other potential buyers who are looking at the same units - try this the next time you're in a sales room.

James Johnson from Toronto Canada writes: In discussions about real estate markets, I often feel that certain key indicators are lost in discussions that concentrate on general topics like 'is the Toronto boom over?'. For example, economic times have been made more difficult by increased fuel prices (affecting commuters and large home owners) and by issuing poor credit. In turn, it seems to me that home prices in central (and predominantly professional) Toronto areas will stay strong, while the prices will weaken in the 905 commuter belt, especially in areas not served by GO or some other form of public transit. Would you agree with this analysis?

John Pasalis writes: Thanks for joining the discussion James. I think your comments touch upon the points raised by Marina above.

You are correct in suggesting that it is very hard to put together accurate models to predict demand. I often say that economists get their numbers right but their sociology wrong. However, as I point out above it is important to consider all factors on both sides of the urban vs. suburb debate. I suggest that it's more about features, not the great divide, since both areas appeal to particular segments of the population. Our data shows that urban neighbourhoods with proximity to the subway network have higher rates of appreciation. Golf courses may be a feature to look at in the suburbs. As you note, it's tricky, and we are currently working to improve research in this area.

Walter Kie from Toronto Canada writes: Is there a way to get daily transactions statistics?

John Pasalis writes: I don't know of any publicly accessible source for daily real estate statistics. If you are looking to spot trends in the housing market, I would caution against looking at statistics at such a micro level. You're better off looking at good sources that produce longer term trend analysis from a variety of angles (our company is one of several).

Danielle Boudreau, writes: John, thanks for taking the time to answer these questions today. Do you have any final words of advice for our readers?

John Pasalis writes: It's been a great discussion, thank you. I have some final thoughts, particularly for home buyers, as we move into a slower market. Buyers need to be asking themselves critical questions. Are you thinking of buying with zero down? Within the next five years can you see yourself outgrowing the small condo you can afford today? Is your job, or your partner's job, vulnerable to a downturn in the US economy? If you answered yes to any of the above, you might want to think twice before buying in this market.

You should discuss these issues with your financial advisor and then an agent - in that order. Don't fall prey to wishful thinking - understand where you are at right now.

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