Getty Images A house for sale in East Gwillimbury, Ont., Jan. 30. 2018. A new report from CIBC says the correction in Canada's housing market is not over yet — though it might finally come to an end next year.

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The report comes as the Canadian Real Estate Association (CREA) said Monday that home sales and prices fell again in Canada in November, dragged down by slower activity in Toronto and Vancouver.

But a new report from CIBC says the correction is not over yet — a bad sign given the country's economy has become more dependent on residential real estate than it has ever been before.

Many in Canada's real estate industry have recently declared that Canada's housing markets have achieved a "soft landing" after the slowdown earlier this year.

Sales of existing homes fell 2.3 per cent last month, and were down 12.6 per cent from the same period a year earlier. That dragged down Canada's national average home resale price to $488,000, which is 2.9 per cent lower than a year earlier.

It marked the third month in a row that sales fell.

"While national home sales were anticipated to recover in the wake of a large drop in activity earlier this year due to the introduction of the (mortgage) stress-test, the rebound appears to have run its course," said Gregory Klump, chief economist at CREA.

The association is now predicting home sales will fall another 0.5 per cent in 2019, making it the slowest year for home sales in nine years.

In a report released Monday, economists at CIBC predicted the housing market would be a drag on Canada's economic growth in the coming year.

"It was a good run while it lasted, but the sun has officially set on the days of heady housing market growth fuelling Canada's national economy," Benjamin Tal and Royce Mendes wrote.

And that could be bad news because housing investment is more important to Canada's economy "than at any other time on record," Tal and Mendes wrote.

Residential investment accounts for 7.5 per cent of Canada's economy, just off a record high. The share of people employed in home construction and real estate is also near a record high, the CIBC economists noted.

"As a result, any slowdown will be magnified in terms of its impact on the Canadian economy," at least compared to previous downturns, they added.

"The rebound appears to have run its course."CREA chief economist Gregory Klump

It takes a year and a half for interest rate hikes to be fully felt in the housing market, so most of the rate hikes from the Bank of Canada since last summer have yet to have an impact, Tal and Mendes wrote. The fact that the market has turned down so sharply even before the interest rate hikes' impact is "concerning," they added.

Market observers say rising interest rates and a new mortgage "stress test" were the prime reasons for the slowdown. Between them, they reduced the amount of mortgage Canadians can borrow, resulting in a historic slowdown in household borrowing, which is now running at the slowest pace in 35 years.

That is proving good for the overall stability of the economy. The Bank of Canada noted last month that the percentage of mortgage borrowers who are taking on excessive amounts of debt has fallen sharply since the new mortgage rules came into effect.

But Tal and Mendes note that most of the mortgages out there are "still largely based on past, less restrictive lending rules" — implying that there is still plenty of risk on Canadian households' balance sheets.

Toronto, Vancouver to remain weak

The Toronto condo market, which managed to avoid the correction and has seen price growth in the past year, will follow the rest of the city's housing market and turn down next year, the CIBC economists predict.

Vancouver's housing market will continue to struggle as well, more so than Toronto because its population is growing more slowly than Toronto and because there is evidence of condo overbuilding, Tal and Mendes wrote.

Not everyone sees the correction continuing. In a client note responding to Monday's housing data, TD Bank economist Rishi Sondhi predicted home sales will grow next year.

"Still, only a modest gain is expected, as rising interest rates take their toll," he wrote.