"The power is in the hands of the buyer - that's what I'm feeling," said Andria Petrillo, 32, as she and her husband toured a quiet open house in the heart of Toronto, where crowds and chaos once reigned over weekend home showings.

But like most people shopping for a new home, Petrillo has to sell her old one first. And that's where she worries.

"With the economy, I'd like to sell now. I worry about selling because it's a condo, and that market is cooling even faster than houses," said the newly married sportscaster. "We can't sell it for a ridiculous amount of money any more."

Signs are everywhere that Canada's long run-up in house prices is over, hit by a combination of tighter mortgage lending rules and growing consumer reluctance to take on more debt. Sales of existing homes are down steeply, with condo sales hit especially hard, and some long-booming prices have started to fall.

Sales always slump as the real estate market heads into winter. The big question will be whether spring brings renewal, or confirmation that the party is over.

DEBT RISES, GDP FALLS

Canadian households hold more debt than American families did before the U.S. housing bubble burst, which has led the government to tighten mortgage lending rules four times in four years.

And data released on Wednesday showed the Canadian economy shrank in August, an unexpected downturn that bodes ill for housing even as the U.S. economy shows signs of recovering.

The debate in Canada is whether the market will come down with a thud or make a relatively soft landing, as most mainstream economists predict. They see a 10 to 15 percent correction in prices and a slowing in housing starts to 180,000 a year by 2014, down sharply from the 220,000 range today. In that scenario, GDP growth would be cut by 1 to 1.5 percentage points, according to CIBC World Markets.

The Bank of Canada has forecast economic growth of just 2.3 percent in 2013 and 2.4 percent in 2014.

"In a final analysis, not all is well in the Canadian housing market," CIBC economist Benjamin Tal wrote in a report this week, pointing to prices that have overshot fundamentals in large cities like Toronto and Vancouver.

Tal believes slower sales activity will be followed by falling prices in many cities. But he says Canadian lending standards have been higher, and borrowers more cautious, than in the United States before its crash, which will prevent large-scale mortgage defaults and plunging prices.

Mindful of what happened in the United States, the Canadian government has tightened mortgage rules to prevent home buyers from taking on too much debt. While interest rates are low and expected to stay low into 2013, the fear is that eventual rate hikes will drive borrowers out of their homes or into bankruptcy.

Canada's big five banks, which sell and hold the bulk of the nation's mortgages, are adjusting to the slowing mortgage market with a stress on other financial assets, such as credit cards and auto financing, to bolster their lending businesses as the profitable mortgage market shrinks.

The last round of mortgage rule changes took effect in July, forcing home buyers to cut back on their budget and pushing many prospective first-time buyers out of the market entirely.

Economists and real estate agents alike applauded the move.

"It's had a definite impact on first-time buyers. Money is almost free, but you shouldn't give them too much rope," said Ron Carroll, a real estate agent in Toronto.

Home sales have slowed dramatically in the months since the rule change took effect, and prices are expected to follow.

Sales of existing homes were down 15.1 percent in September from a year earlier, and were 6.5 percent lower in the third quarter from the previous three months, according to data from the Canadian Real Estate Association.

Prices, which typically lag sales, have started to come down as well. Overall prices dipped 0.4 percent in September from August, according the Teranet-National Bank Composite House Price Index released last week. While prices are still up 3.6 percent from a year earlier, it was the 10th straight month of decelerating price gains.

As the Canadian real estate market heads into winter, sales are expected to slump, as usual, with hibernation beginning in late November.

SHARP SLOWDOWN

While the national housing market appears to be retreating in an orderly way, the data show pockets of sharper slowdown, particularly in the western Canadian cities of Vancouver and Victoria, which once led the hot housing market.

"Personally I don't see any revitalization of the market in the near future," said Victoria real estate agent Tony Joe, noting that investors have left the market.

Residential sales fell 8.3 percent in September from a year earlier in Victoria and were down 32.5 percent in Vancouver, according to the local real estate boards. Prices were down 2.6 percent in Victoria and 1.4 percent in Vancouver on the year, according to the Teranet report.

The price declines are far smaller than the plunge that hit U.S. homeowners during the crash. Still, buyers are hesitant, wondering if they should wait until next year to purchase.

"Sellers will commonly say, 'I'm going to wait until the spring, when the market is better.' And I warn them that it could be worse," said Joe. "And of course buyers are saying 'It looks like things are bad, I'm going to hold off until the market drops another 10 or 20 percent.'"

Joe, a 21-year industry veteran, does not foresee such a drastic decline, simply because Canadian lenders have been prudent and interest rates are not going up soon. Sellers will pull houses off the market rather than accept a price drop.

But buyers appear ready to wait as well, even in markets such as Toronto, where prices are not yet falling.

"We have all the time in the world, and we're waiting to find some value," said Sandra Blake, a lawyer who moved back to Toronto from Geneva with her husband two years ago and has been waiting for a more sensible market to buy.

Blake spends every weekend touring open houses in Toronto's good neighborhoods, and sees the market starting to slow. Her brother just sold his house in the city's west end, afraid the market would collapse before he could move into a new house.

"He was afraid of waiting," said Blake.

(Editing by Frank McGurty and David Gregorio)

• A Permanent Economic Emergency