Our house is 16 feet wide and 130 years old. It has a postage-stamp front yard and a patio backyard. It is attached on one side to the neighbour's identical narrow Victorian. It is so close to the neighbour on the other side that I can just barely roll a medium-sized recycling bin through the dim passage between the houses.

We bought it in 1989 for more than a quarter of a million dollars. When the deal closed I woke up in the middle of the night thinking, "What have we done?" It seemed like an impossible sum for a drafty old place in a shabby downtown neighbourhood.

Today it would probably fetch north of a million. A very ordinary two-storey, three-bedroom house around the corner, right next to an old-age home, has been fluffed to within an inch of its life and put on the market for $1.5-million. A rotting fixer-upper three doors up from us went for $700,000-plus a couple of years ago. The guy who bought and renovated it is confident he could sell it for twice that now.

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Real estate agents keep sticking cards in our mailbox saying something along the lines of, "Your house is gorgeous. Sure you don't want to sell?" Or, "Look at what the garbage house down the street just went for. Imagine what you could get."

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How are we, the lucky ones, supposed to feel about all of this? Well, lucky, for one thing. We have won the real estate lottery. As anxious-looking young couples walk up the street to the latest open house, we can sit back and thank our stars that we got in when you didn't have to be rich to afford a house in Toronto.

But along with that sense of good fortune comes more than a little disquiet. What does it mean for the health of the city if it is divided into land-rich homeowners and frustrated would-bes? What does it mean for young families who love this city but can't break into the sky-high housing market?

We have two kids in their twenties and another in her teens. They love our neighbourhood. It would be nice to think that they could have a place like ours one day, in a walkable, central part of town where you don't have to commute forever to work or get in the car to buy a loaf of bread. Like just about everyone in our position, we worry about their future even as we enjoy our windfall.

Rising property values are a good thing, to a point. They show that Toronto is a place where people want to be. Hundreds of thousands have come from around the world to live here because it is welcoming, secure and prosperous.

One reason houses like ours cost so much now is that people, especially young people, want to live where the action is. That shabby downtown neighbourhood has become a hopping district of galleries, restaurants and shops. The process sneeringly called gentrification has brought new life and new investment to this corner of the city, as it has to the older parts of big cities around the world. That can't be a bad thing.

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But in the past year or so, something different has been happening. The steady climb in prices has turned into a swooping ascent. When prices rise more than 20 per cent in the span of 12 months, when houses are going for $100,000, $200,000, $300,000 over their asking price, when bidding wars rage over pathetic junkers, you know that we have crossed the border into crazy town.

I've seen a couple of housing bubbles. One was in Hong Kong in 1997, the year the British returned the colony to Chinese sovereignty. Soaring prices made Hong Kong real estate the most expensive in the world. People were lining up just for the right to bid on luxury apartments.

The other was when we bought our house in 1989. It was the same then: bidding wars, wildly rising prices and a desperate feeling that if you didn't jump on board the real-estate train then it would pass you by forever.

I remember the graph that our agent pulled out to overcome our first-time jitters. It showed how Toronto house prices had risen over the decades. If they had risen then surely they would keep on rising. They couldn't possibly drop. They did. Practically the day after we bought, prices went into a famous plunge. A sheepish man from the bank came around a few years later to say his bosses were nervous about renewing our mortgage. On paper, the house was worth less than we owed.

It came back, of course. Now, instead of being bankrupt on paper, I am a paper millionaire. It should feel great. It doesn't, not any more. It feels as if the city has been seized by a strange but familiar mania. We have been here before, even if the memory has faded. Desperation and greed are in the air, feeding on each other. Buyers bid their financial future away for a stack of bricks and mortar that they can call home. Sellers hold onto their properties because the devil on their shoulder tells them they will get even more next year. That holds down supply, and prices spiral higher.

We all sense at some level that things are out of control, but nobody knows what to do. Hey, how about lashing out against those shadowy "foreign buyers," even before we have the evidence to know they are to blame?

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All we can say for sure is that, whether prices keep soaring for a while longer and push home ownership out of range for countless others, or whether it all comes crashing down, this is likely to end badly.