Bubble talk’s gone mainstream. No wonder. Real estate resales in the GTA tumbled 21 per cent in September while new home sales were slaughtered — down a withering 64 per cent. Downtown condos are finding 37 per cent fewer buyers, and the media’s awoken to the fact housing won’t go up forever, amen.

What happened? After all, the economy’s still inching ahead. Interest rates are still near rock- bottom. Why the GTA-wide plop in real estate deals?

First, any downturn is Ottawa’s handiwork. Of course, the run up in real estate values has been historic and unsupported by a commensurate increase in household income, employment or economic expansion. But the feds changed everything when they killed off 30-year home loans, trashed cash-back mortgages and raised the income qualifications of borrowers. In virtually every market in Canada, sales have tumbled since the new regs started to be implemented.

Second, as this column correctly pointed out months ago, it’s not universal. The GTA is not a monolithic market, but rather a collection of dozens of micro-markets, where the forces of supply and demand reign supreme. The rarefied earth covered by Post City Magazines, for example, is just that — turf where supply has remained tight and demand has held firm.

So far this fall, according to veteran North Toronto realtor George Klump, the numbers bear this out.

But there is another change. Activity at both ends of the market — condos and properties listed for more than $2 million — has peeled off. Legions of young buyers with cash flow but not much in the way of savings have decided to stay renters until the negative headlines blow over. Meanwhile, Canada Mortgage and Housing Corporation (CMHC)’s sudden refusal to extend mortgage insurance to any property selling for more than a million may be having an impact on higher-end sales where leveraging up on cheap money is seen as a financial virtue.

So, what comes next?

People like Klump think more of the same. After all, if this micro-market can withstand a 20 per cent region-wide drop in sales, with the days-on-market numbers actually falling to single digits in many ’hoods, then how can the spring not be bountiful?

That’s logical. But real estate seldom is. This is the most emotional of investment assets, with buyers heavily influenced by public sentiment. With the feds determined to let a whoosh of air out of the urban real estate bubble, there’s probably a spate of more negative headlines to come.

Can area prices continue to climb, even when the average detached house already sells for double the GTA average? Unless there’s a flood of listings in March, get used to the status quo: more buyers. More sales. It’s why these homeowners possess the one thing so many others crave — liquidity.

Post City Magazines’ real estate columnist, Garth Turner, is a financial author, investment advisor and former MP. His daily blog is greaterfool.ca.