If you really want to know how any type of market is doing, you really have to get your hands dirty and find out for yourself. Ever the enquirer, I enjoy seeing events happen first-hand.

About two weeks ago, I was scheduled to be in downtown Toronto, and I decided to check out how the real estate market was doing, first-hand. Why Toronto? Toronto has about three million people with an average family income of about $60,000. Crime is low, the city is growing, and it has a vibrant construction economy. To me, Toronto is to Canada what New York is to the U.S.

Anyhow, I called up a couple of real estate agents the week before and made appointments to see several condominiums in downtown Toronto. I had read that thousands of condominium units were popping up in Toronto's financial core and its waterfront area. And I had also heard that investors were buying these units to rent out.

My findings were quite interesting. Of the four condominium units I saw, which sell for about US$250 per square foot, all four owners were prepared to take a "haircut" to sell their units. Now, these are not people who are financially desperate to sell; rather they need to sell because of job shifting or for family reasons. And they've encountered a soft market. All the units were bought one to two years ago, and these four owners, all in different buildings, were willing to take a 10% to 15% loss to get out.

Here's what happened. The condo market in Toronto was dead for years. Then interest rates collapsed and renters started buying. This pushed up demand, and builders started building big condo buildings again. But like everything else, supply (too many new buildings) eventually overcame demand.

In this particular situation, because so many apartment renters left to become owners, the Toronto apartment vacancy rate hit a 30-year high. And apartment owners are now doing everything possible (slashing rent, offering three- to six-months free rent) to get tenants back. All those investors who bought condos to rent for investment purposes only increased the rental supply.

From what I saw, I would not be surprised to see this market fall another 10% to 15% at the minimum. If interest rates start to rise, the price decline will be more rapid. Can this happen in other major urban centers? The question for me is not "if," but "when."

Oh, I almost forgot to mention that Donald Trump is building a major condo building in Toronto's financial core. I just received an invitation in the mail from Donald to get in before the general public does. He's asking US$500 per foot and banking on the Trump brand. From what I saw in Toronto, my guess is that he'll have a very difficult time with sales.