It wasn’t that long ago that economists and observers put a brave face on the health of the Canadian housing market, arguing that tighter credit conditions, relatively moderate prices and a healthy economy would keep things humming, even as the U.S. market slid into oblivion.  

Now, there are cracks in this theory: The number of sales is declining even as the number of For Sale signs creeps higher. Are outright price declines next?

That would appear to be the case, judging from the observations put forth by David Wolf, economist at Merrill Lynch Canada – and if the housing market stalls, you can kiss goodbye any pickup in economic growth next year.

“After several years of great strength, the Canadian housing market has weakened materially through the first half of 2008,”