The selloff in real estate has morphed beyond a correction of overheated individual markets into a broad national slump, with prices posting their worst decline in nearly 20 years in November.

In the face of a collapse in consumer confidence, the number of resale homes sold in Canada plummeted by 42 per cent year-to-year to 27,743, the lowest level since January, 2001.

Between May and November, the average price of an existing home in Canada fell by 11 per cent, matching the drop in 1990 that coincided with the onset of a painful recession. Housing prices would go on to fall by about 20 per cent and it would be another decade before they managed to make new highs.

All markets across Canada will likely fall further in the coming months as confidence continues to fade, said Benjamin Tal, economist at CIBC World Markets.{sidebar id=1}

"This is clearly a market that is extremely risk averse, and this is not the ninth inning of this game, this is just the beginning. I think that any hope of a quick turnaround ... is misguided."

Across Canada, the average price of a resale home now sits at $280,880, compared with $316,896 at the peak in May, according to data from the Canadian Real Estate Association.

Mr. Tal said he expects average house prices to fall by another 10 per cent over the next 12 months, and to remain relatively flat after that. This levelling out would be similar to what happened in the mid- to late 1990s, he said.

Until recently, much of the falloff in the national house price measure has been the result of a plunge in sales in Vancouver, the country's priciest housing market.

Now the sales freeze has become widespread, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.

"The broad brush here is hardly surprising, but what I find interesting is how sweeping the declines are.

"The broader deterioration of the economy has caught up with the housing market in a big way," Mr. Porter said.

"The overhang of unsold homes is clearly a negative for prices looking into 2009. When you couple that with the likelihood the economy is going to be in recession over the next year, it's awfully tough to be optimistic for the housing market in the year ahead."

Housing sales reached their monthly peak of 45,774 in July of 2007. November's sales fell by at least 24 per cent from a year earlier in every province, with the sharpest declines in British Columbia at 62 per cent and Ontario at 44 per cent.

The parallels to the early 1990s are compelling, but there are differences.

Mr. Tal said the distinguishing characteristics of the economy then were economic recession, steep job losses and higher loan delinquencies - all of which he expects will characterize the current downturn as well.

The big difference is interest rates, which remain at historically low levels. The resulting low mortgage rates should help homeowners, and moderate this downturn, Mr. Tal said.

Working against this cycle, however, is new home construction, which he said could decline more significantly on a year-to-year basis than it did in 1991, and that will likely spill over to hurt the economy.

In November, housing starts fell by 19 per cent, the slowest pace of residential construction since late 2001.

Last month resale home listings moderated to 53,622 from 79,777 at their highest level in May.

At 2.72, the ratio of new listings to sales is much lower than it was in much of the early 1990s, according to data from CREA. At the peak of oversupply, in May of 1990, the ratio of listings to sales was 3.60.

But in light of declining sales, listings need to fall much further to see a return to balance and the hope of a settling out of prices, Mr. Porter said.

"We've only begun to nibble at listings, while a massive bite has been taken out of sales," he said.

LORI MCLEOD

From Tuesday's Globe and Mail

December 15, 2008 at 11:16 PM EST