Our real estate market will be affected by the U.S. economy

There's no doubt about it - the GTA real estate market is going to feel the effects of the woes in the U.S. financial sector (if it's not already starting to feel the efffects!)

In extremely simplistic terms, you could use today's plunge in the stock market as an example scenario (one of many)

• Two very large U.S. banks collapsed today. One went bankrupt and the other was bought by Bank of America. So the stock markets, including the Toronto TSX went into a tailspin, losing over 500 points
• A lot of money was lost in the stock markets as a result
  
• Stockholders lose money, some of it was borrowed
• Some of it can't be repaid to the lenders
• The lenders tighten their credit criteria or even raise rates to compensate
  
• It now becomes tougher to get financing or even increased financing for that newer, bigger home you wanted to buy
• That means fewer home buyers in the real estate market
  
• Less buyers means more seller-competition for those buyers
• Highly motivated sellers (I.e. those who lost big money in the stock market) will aggressively reduce the price of their home to get it sold to those fewer buyers
• House prices stop rising, level off, and could even start declining

and so it goes.

So while the exact same thing might not happen here, we're still going to feel the effects.