July was another month of red-hot housing starts in the Greater Toronto Area, reports the Toronto Star. But then there's this cheery bit of news:

An excerpt:

Housing starts climbed to a seasonally adjusted annual rate of 69,600 units in July, up 27 per cent from June.

Condominium starts were the major driver of building activity, accounting for 57 per cent of the starts.

"Those numbers seem unreal, and when something seems unreal, it usually is," Frank Clayton, one of Canada's top housing economists, said in an interview.

"I think the day of reckoning has yet to come. The market is out of whack."

Over the past three years, an average of more than 10,000 condos each year have been completed in the Toronto area, and another 12,000 are expected this year.

Next year, another 17,000 units are forecast to be completed. That compares with 4,000 condominiums built in 1995.

"As an economist, you just have to look at the market and see that it can't continue at this pace," said Clayton. "As units get completed, there will be an oversupply."

There seems to be no let-up in the buying frenzy for condominiums so far. While condo starts for July reflect sales from a year ago or even more, current sales are even higher.

According to Clayton, condo apartment sales are up 31 per cent for the first six months of the year, comprising 37 per cent of all new housing sales.

"That's just way too much," said Clayton.

Condos normally account for about 20 to 25 per cent of the market, he said.

And about one in three condos are being purchased by investors -- not people who plan to live in them.

Nationally, single-unit housing starts are down nine per cent.

What this article didn't mention, but an Aug. 8 Star article on suburban homelessness did, is that many families who buy new homes are often leveraged to the hilt to do so.

If they hit a rough patch -- one partner loses his or her job, and can't find another one of equal pay -- the family's grip on their home becomes very tenuous.

If interest rates go up and we see an economic downturn, we might find out that house prices aren't destined to keep rising infinitely.

See this posting on a Paul Krugman column for a U.S. perspective.