Is Toronto's housing market on the cusp of a late-80s-style bubble?

Toronto's current real estate boom shares one thing in common with the red-hot housing market in the late 1980s, recalls real estate veteran Karen Millar.

"Prices were escalating and everybody was worrying how were they going to afford it, how were their kids going to afford it," said Millar, now a senior real estate specialist with Royal LePageSignature Realty.

She also recalls selling houses once the bubble burst. "There was no champagne," said Millar in an interview with CBC Toronto. "It was sad."

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The rapid rise in the price of the average Toronto-area house up 27 per cent from last year is evoking memories of the way prices skyrocketed three decadesago. During the late 1980s, the average GTA house price more than doubled in just three years.

After 1989, prices dropped for seven straight years and didn't reach thatlevelagain until 2002.

While one senior bank economist is warning the Toronto housing market is again in a bubble, others are stopping short of using that term.

That's because these economists believe the "fundamentals" of the Toronto market the economy, interest rates, population growth and the sources of demand for housing are far more solid than they were in the late 1980s.

Dana Senagama, ananalyst with Canada Mortgage and Housing Corporation specializing in the GTA market, cautions people against drawing parallels to the previous bubble.

"I would saydon'tcompare," Senagama said in an interviewTuesday withCBCToronto. "It's a very different time period, very different economies.The housingmarket has very different fundamentals at play."

"The only similarity that I see has been the rapid increase in price growth," saidSenagama.

In the late 1980s, interest rates were high, some ofthe rules about qualifying for a mortgage were less strict, developers started building vast amounts of new homes without purchasers lined up and the province was about to get hit with a deeprecession.

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Sherry Cooper, chief economist for Dominion Lending Centres,describes another housing bubble bursting in the U.S. in2008 as"absolute collapse, massiveforeclosures, underwater mortgages. If that's the definition, then no, we are not in a bubble."

The fundamentals of Toronto's current boom "are very strong in comparison," Cooper said Tuesday in an interviewwithCBCToronto. "We are not seeing a situationwhere households are so overextended that they're going to walk away from their homes."

But Cooper is concerned about the growing unaffordability of homes in the GTA and worries the sharp risein prices is in danger of becoming "self-perpetuating."

"Everyone thinks you can't lose money inhousingand that spurs all sorts of activity beyond owner-occupied house purchases," said Cooper.

'I was in shock'

Both Cooper and Millar recall how the bubble affected them personally.

After it burst,MIllarhad to carry two homes for six months because she couldn't get a buyer. "We lost our shirt," she said.

Cooper arrived in Toronto in themid-80sfrom Washington D.C., where $250,000bought a good-sized house with a yard. In Toronto, north ofEglinton, she bought a "small house, no lot, $425,000. I was in shock."

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Then came the collapse. Cooper says the drop in prices benefitedpeople who wanted to move up in the market.

"Everyone thinks it's the end of the world if the bubble bursts," said Cooper. "A lot of people took advantage of it and were able to move into what were formerly very expensivepropertiesfor significantly less than what they otherwise would have had to pay."

The Toronto Real Estate Board is predictingthe average selling price of GTA homes will grow between 10 and 16 per cent in 2017.

Ontario FinanceMinister CharlesSousais promisinga slate of measures tocoolhousing prices in his upcoming budget. Thedateis yet to bereleased.