The rookie agent was all business, despite the blue streak in his hair.
On weekends he climbed up outdoor staircases that led to raves in abandoned downtown Toronto industrial buildings, dancing to Tina Turner.
But on Monday morning, arriving at his Yonge Street and St. Clair Avenue office in a Volkswagen sports car, Steve Fudge, then 27, would face the mess of the recent Toronto real-estate crash.
He had to tell sellers their homes were worth tens of thousands of dollars less than what they bought them for, and called lenders on behalf of owners who couldn’t make mortgage payments.
In between, he’d gather with his colleagues around the water cooler and chat about the latest technology set to transform the industry — the pager — and wonder when things would get better.
The year was 1989.
“The market tanked, and we were in the exact same predicament as we are right now — oversupply, lots of investors and lots of huge losses,” Fudge remembers.
He found himself at the centre of a storm.
In the mid-’80s, a glut of condo investors spurred a steep run-up of home prices in Toronto.
The fear of missing out, long before that phrase was ever coined, led buyers to pile in. They were convinced they needed to secure property or be shut out forever, and that prices would never go down.
Between 1985 and 1989, average home prices in Toronto-area went up a whopping 151 per cent, from about $109,000 to a high of roughly $274,000, according to the Toronto Regional Real Estate Board (TRREB).
But by 1990, some investors and first-time homeowners were handing their keys over to the bank, no longer able to afford their mortgages.
Prices slid for seven years in a row to a low of about $198,000 in 1996, an almost 30 per cent drop. Power of sales, where the lender sells a home because the owner hasn’t kept up on payments, spiked.
New construction halted, and suddenly Toronto real estate didn’t seem like a safe bet.
It’s all feeling somewhat familiar in 2025, as higher interest rates and falling prices drive developers to pull the plug on condo projects, some buyers face trouble closing, and investors pull away.
Prices haven’t dropped as much (according to the last TRREB report the average price across all property types has fallen around 21 per cent since the winter 2022 market peak). But sales slumped for a year and a half before picking up slightly in the last couple of months, resting at well below the 10-year average.
This has led many to ask, in social media posts and hushed conversations around the dinner table: is the city headed for a similar crash?
And what we can learn from the last one?
A good price for a ‘world-class’ city
In the summer of 1989, right around when Fudge got his real-estate licence, the market went quiet.
“It was almost an exhaustion moment. Basically the prices had gone up so much that buyers just said ‘forget it.’”
He hadn’t been around for the lead-up so it was easier to explain to young couples that the home they paid $330,000 for was now worth $210,000. Often they needed to sell because one of them had recently lost their job.
“We’re talking about a collapse of an entire household,” he remembers. “It was overwhelming.”
To understand how they got into that mess, you have to go even further back.
In the early ’80s, the cost of homes was more in line with what middle-class Canadians could afford, said Carolyn Whitzman, an adjunct professor and senior housing researcher with the University of Toronto’s School of Cities.
Prices started going up “precipitously” towards the end of that decade.
In Toronto, there were strict zoning rules in much of the city, and “there just wasn’t any room for new single-family homes,” she said.
Condos were built in a frenzy.
They were considered great starter homes. But they were also limited in stock and where they could go, which put pressure on prices, Whitzman added.
Mathieu Laberge, chief economist and senior vice-president of housing insights at the Canada Mortgage and Housing Corp., said the boom was driven by speculative builders starting construction with only half, and sometimes less, of units sold.
Local mom and pop investors “jumped on the bandwagon” and bought up condos as a hedge against inflation, Fudge added, which was very high at the time. Sometimes whole families would encourage each other to buy units in the same buildings.
This coincided with credit cards becoming more popular, he said, and the conspicuous consumption the ’80s are famous for.
The hair was high, the shoulder pads were broad, and the spending was big.
A March 1987 story on the front page of the Star chronicled a “thunderous market, fuelled by low interest rates, high demand and insufficient supply,” with exhausted realtors, and discouraged buyers.
One agent quoted in the piece swore that prices weren’t out of line if you thought of Toronto as a “world class” city on par with Paris or New York.
In January 1989, columnist Gary Lautens bemoaned the fact his house made more money than him, despite not knowing “two words of French,” or having a high school diploma.
“It just sits there all day, not moving a shingle,” he wrote.
It was easy to think the champagne would keep flowing.
“Canadians have tended to have a belief that home prices are going to go up inevitably, kind of like a magic stock that will never fall,” added Whitzman.
“But it is like any other stock, what goes up must come down.”
The market shifts
Laberge sees the price drops that began in 1989 as a “condo problem” that spread into the wider market as fundamentals shifted.
“Super high inflation led to very sharp monetary tightening in Canada,” he said, with higher interest rates making borrowing more expensive.
The bank rate, the Bank of Canada’s key policy rate at the time, rose from an annual average of 8.40 per cent in 1987 to 13.04 in 1990, per Statistics Canada.
Back then, Fudge had to go into the office to pick up messages.
Without the internet, there was a big book that had all of the listings, with “a black and white photo on one side and the details on the other,” he recalled.
Clients would page through it and then he’d take them to see the houses they liked.
It was a “local economy” and Toronto real estate was for people who lived there. But they weren’t lining up to buy anymore.
Fudge got “quite a few power of sales” during that era.
“I also had friends who were losing their homes,” he remembers.
One of the saddest things, Fudge said, was watching people struggle to hold on to houses for years, and have to let go of them just before the market started to turn around again.
He tried to stay detached and professional. But he does remember the palpable shame of owners who were losing grip on their properties.
In the pages of the Star at the time, there were stories of houses with the heights of kids scribbled on the wall, sold under power of sale.
It wasn’t just speculators, one article noted, but families, particularly first-time buyers who’d purchased at the peak and were over-leveraged, who were struggling.
The hike in interest rates left some owners underwater — paying off a mortgage for more than the value of their home.
In 1990, a recession arrived that lasted about two years, with declines in Gross Domestic Product (GDP) and employment, and lots uncertainty.
Job losses and sinking prices left some in a “bad situation,” where they wanted to sell or were forced to by the bank, Whitzman said.
She got a job in policy with the City of Toronto in 1989. One of the last employees to get in before a hiring freeze, she still remembers the feeling of belt tightening in the province and her peers being unable to find work.
Laberge called the early ’90s recession “deep and prolonged.”
People lost their jobs and weren’t buying homes they otherwise could have afforded.
That led to a sense of uncertainty, which is never good for business.
“Developers need certainty. When you have that kind of economic uncertainty, and I think you can see the parallels with today, you have a big downturn in construction,” Whitzman said.
Eventually, as interest rates eased and the recession lifted, prices began to creep up again.
But it took years.
For example, a two-bedroom condo on Maitland Place near Jarvis Street and Wellesley Avenue sold for $172,000 in March 1989. After multiple attempts and price changes, the next time it sold was for $95,500 in July 1995.
It wasn’t until 2004 that it finally went for over the 1989 price, at $206,000, according to Multiple Listing Service (MLS) data provided by Fudge.
What can we learn?
In the early ’90s, Whitzman bought a semi-detached house in Parkdale with her partner for $185,000.
Even though they were in their 30s with two incomes, she remembers that her mother had to co-sign because the banks were still wary of lending.
Her own adult children, she noted, don’t have a shot at buying a house in Toronto now.
“Nobody under 40 is going to be able to afford a home unless they’re in the top income quintile or they have a generous bank of mom and dad,” she said.
“I’m a boomer, and I clearly benefited generationally. I got in just under the wire.”
There are many differences between the crash of the late 80s and what’s unfolding today, most notably that the former was accompanied by a faster and steeper climb in price, and a deep recession.
There are plenty of investors in the current Toronto condo market (about 65 per cent of smaller units built after 2016 were investment properties in 2022, according to StatsCan). However, CMHC’s Laberge said investors were an even larger factor 36 years ago.
He said the current-day condo boom was driven more by recent demographics, as projects take a few years to complete.
“When current builders started building a lot of condos, we had very high, some would say even historically high (numbers of) new Canadians coming. Immigration was really high.”
As well, about 70 per cent of units are now typically pre-sold before construction starts, compared to sometimes less than half in the ’80s, he added.
In contrast to the deep recession of the early ’90s, Laberge said CMHC predicts a “mild” recession towards the end of this year.
Rishi Sondhi, an economist with TD, agrees the macroeconomic backdrop is much different now, with a “deep economic and employment downturn in the early ’90s.”
The Bank of Canada was also hiking rates “while housing was deteriorating,” he said.
There was no mortgage stress test, or the ability to extend a mortgage to 30 years to lighten the monthly payments in the ’90s, Fudge noted.
But today’s housing crisis, Whitzman said, is much worse.
It was not until 2002, that average Toronto home prices surpassed the peak of 1989, according to TRREB.
Since then they have enjoyed a long rise, with a couple of small blips, and a period of intense growth during the pandemic — not out of line if you consider Toronto a world-class city, the president of a global commercial real-estate firm told the Star in 2017.
There’s been a cost to that.
Home prices and even rents have become out of reach for many. Evictions and homelessness have swelled. And, like in the crash at the end of the last century, the people who were caught out when the music stopped are paying the price.
Current home prices have not dropped enough to get back to a more affordable level. But they have slid, as they did in the late ’80s and early ’90s, just enough to hurt first-time homebuyers, Whitzman said.
“It’s the worst of all possible worlds.”
Both what’s unfolding today and in the late ’80s crash centred around condos.
Investors, often middle-class people who thought they’d found an unbeatable opportunity, are particularly hard hit.
As for the question everyone has been asking, no one knows what’s going to happen next. If this is the bottom, or if prices will plunge further.
Laberge said CMHC forecasts about a 4 per cent price drop in Toronto-area home prices by end of the year, and a recovery starting around the second quarter of 2026.
Scaled to population, sales are already “plumbing the depths of what we saw in the early ’90s downturn,” added Sondhi.
“It’s hard to fall off the floor.”
But, just like in 1989, the changing whims of investors, who’ve turned off the condo market for now, does show how quickly “animal spirits” — a term to describe the emotional and psychological whims of economic decisions — can shift, he added.
Fudge’s perspective, for one, has been shaped by his early career.
“There’s a whole bunch of realtors that think the market is going to come back any day now,” he said. “I just don’t think that’s the case myself.”
