I thought the whole thing was a dream, since the only thing that informed him what was dream and what was reality was meant to be something unique to him and couldn't be touched by anyone else. Leo's characters totem was his wife's old totem.
The chase scene at the begining wasn't even real, buildings don't close in on you in real life.
The kids at the end looked identical to the children as he remembered them, same clothes, same exact scene.
Hence the whole thing is a dream and Leo's character can't escape the dream because he thinks it is real. Presumably his wife did wake up and didn't really kill herself. (Although I am not sure about his wife escaping and still being alive)