Whether or not Toronto is in a housing bubble — and whether or not it's already burst — is a hot topic in the city.

But one economist says we've definitely popped that bubble, which could make things a bit easier for would-be buyers in the months ahead.

Doug Porter, chief economist and managing director of BMO Financial Group, shared his thoughts on the city's real estate market on CBC's Metro Morning on Friday.

Metro Morning: Some people were not convinced there was a housing bubble. Why do you believe there was?

Doug Porter: For those who aren't convinced, I'm not sure what it would take to convince them. By any traditional definition, we were in the grips of a full-on bubble earlier this year.

Just one statistic to point to: We saw in a short space of about 15 months, average home prices across the wider Toronto region — not just the city of Toronto — rise by about 40 per cent, and we haven't seen the likes of that kind of increase in such a short amount of time, other than the late 1980s, which pretty much fit everyone's definition of a bubble.

Experts in the field had never seen anything like it — the wild bidding wars, and the frenzy we saw at the start of the year.

MM: Why do you think the bubble has burst?

DP: There were a few things that unfolded at once, but I do think the measures brought in by the Ontario government had the biggest sways of all.

It changed the psychology. It was just the sense that the government was highly uncomfortable with how hot the market was... and I do believe the market had just been so incredibly hot that folks were stepping back and calling a time out. But Ontario's measures really did change the conversation.

MM: It seems to have happened very quickly.

DP: We saw similar measures out of British Columbia when Vancouver's market was as hot — if not hotter — last year. And the effects on the market were almost instantaneous. So I wasn't surprised at how quickly things changed in Ontario, but I was surprised at the depth to which it's affected things over the last few months.

I didn't expect prices to drop 13 per cent in four months, which is what we've seen, but prices are still well up from what they were a year ago — but that's a very steep correction in a short amount of time. Even in August, we're seeing declines in sales from about 40 per cent from a year ago.

Some buyers have been forced to forgo home inspections and endure bidding wars to snatch a home in Toronto's hot housing market. (David Donnelly/CBC)

Q: Who's most affected by rapid cooling?

DP: Anyone who bought near the peak probably has a bit of buyer's remorse now. But anyone who bought a year, two years ago, or much longer ago than that, to some extent it's a bit of easy come, easy go, and the value of their property is still above what it was, say, 10 or 15 years ago.

MM: What about people trying to get in the market?

DP: Clearly, they're the big potential winners here. Having said that, we're still looking at an average detached home price in Toronto that's still hovering around a million dollars. But at least we're taking a few steps in the right direction.

Just the fact that calm has settled on the market — you don't have to buy a house without an inspection or get involved in these bidding wars — it just brings some sanity to the process.

Affordability is still stretched, but buyers can take their time and make a reasoned decision, and that's healthier for everyone.

MM: You mentioned single detached homes, but what about the city's condo market?

A: This is where things get interesting. For years and years, we were told — especially by experts outside the city — that Toronto had this wild over-building problem on its hands because of all the condo towers.

But lo and behold, it's actually the condo market that's held up the best in the last six months and the last year. Condo prices are still up 25 per cent from where they were a year ago.

In the detached market, that's where the correction has been the deepest. Simply put, the condo market has held up the best.

MM: What happens from here? Is this just a blip? Will we see this cool down for months, or years?

DP: My own view is we'll see further softening in prices. We're on the edge of being in a full-on buyer's market as we speak.

There will be a softening of prices for a short amount of time, then they'll stabilize... I wouldn't be surprised if we're talking about a few years before prices get back to their peak, and not a few months. I don't believe the market is going to come roaring back in a short period of time.

The one wrinkle is that we've had an uptick in interest rates in recent months, and I don't believe the Bank of Canada is finished on that front. The general trend will be mildly higher rates.

MM: So how does that affect the market?

DP: That adds more of a head wind to the market. It does somewhat reduce affordability for the average buyer.