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National home prices continue to post bigger-than-expected gains as the still-red hot markets of Vancouver and Toronto skew averages higher, the country’s real estate association said Friday.

Most everywhere else, price momentum is slowing and in the case of some markets, has fallen into negative territory.

Total sales of existing homes trading hands last month moved higher by one per cent, the Canadian Real Estate Association, which represents agents across the country, said.

The rise was in line with expectations as activity remains brisk in some bigger markets and cools in others, like Calgary where a deep dive in oil prices has taken considerable steam out of real estate demand.

Fueled by buyers tapping ultra-low interest rates that have drifted lower this year, the average benchmark price for a home in Canada however continued to rise at a surprisingly strong pace last month, climbing 6.3 per cent, to $431,812.

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Bank of Montreal economists suggested before the release prices would rise by about 5 per cent. “Benchmark prices up could rise 5 per cent, led by, you guessed it, Vancouver and Toronto,” BMO economist Sal Guatieri said.

CREA acknowledged that continued strength in the country’s two most expensive real estate markets is driving national averages higher, while regionally, price growth is slowing across wide swaths of the country.

“The national average home price remains skewed by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets,” the association said.

Cooling off

Excluding those two markets, the average price gain last month would come in at a much tamer 1.5 per cent, to an average price of $326,910.

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Calgary, formerly the hottest housing market in the country as higher oil prices bolstered an active market, still saw average prices climb nearly 6 per cent last month, according to CREA. But “the increase was far smaller than gains posted last year and the smallest since December 2012,” the association said.

“In other markets from West to East, prices were up compared to year-ago levels by between two and two-and-a-half per cent in the Fraser Valley, Victoria, and Vancouver Island, while holding steady in Saskatoon, Ottawa, and Greater Montreal, and falling in Regina and Greater Moncton,” CREA said.

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In contrast, demand for homes in Vancouver and Toronto remains red hot amid historically low borrowing rates, particularly for detached homes which have seen prices surge well ahead of other housing types in recent years.

“While demand has cooled across much of the country, buyers in these two cities continue to outbid each other for coveted detached homes,” BMO’s Guatieri said.

Home prices rose 7.8 per cent in the greater Toronto area, and were 6.4 per cent higher in Vancouver last month compared to February 2014.

“Is it a bubble? It’s hard to say given that demand reflects more strong fundamentals than rampant speculation. But something’s not right. For most goods, high prices discourage demand. But in these two cities, first-time buyers are fearful of getting shut out of the market. So they keep buying despite worsening affordability, a trend last seen in the late 1980s,” the economist said.

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“And that did not end well.”