The Teranet-National Bank house price index fell by 0.5 per cent in November. It was the largest drop for the month of November recorded outside of a recession, National Bank economist Marc Pinsonneault said in a statement .

House prices in Canada fell for the third month in a row in November, pulled down by weakness in Toronto and other parts of Ontario, according to data released Wednesday.

With tougher new home-buying and mortgage rules and somewhat higher interest rates in place, Canada's once-hot housing market seems to be losing some of its mojo.

Prices in Toronto, Canada's largest real estate market, fell by 1.4 per cent, while nearby Hamilton saw prices fall by 1.6 per cent, suggesting that Toronto's housing cool-down has spread to surrounding areas.

House prices also fell in Ottawa-Gatineau (down 0.8 per cent) and Edmonton (down 0.7 per cent). They were unchanged in the two British Columbia markets covered by the index, Vancouver and Victoria.

Prices rose in all the other cities covered by the index, including Montreal ( up 1.0 per cent), Quebec City (up 0.9 per cent), Halifax (up 0.8 per cent), Calgary (up 0.7 per cent) and Winnipeg (up 0.5 per cent).

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Toronto's market has seen a significant cooldown since the province introduced its Fair Housing Plan in April, which includes a 15-per-cent tax on foreign home buyers, as well as expanded rent controls.

But National Bank's Pinsonneault notes that sales in the city grew from October to November, something that usually doesn't happen. It's a sign that some buyers are racing to purchase ahead of tougher new mortgage rules that will come into force in January.

"Therefore, a resumption of the downward price trend early next year cannot be excluded," Pinsonneault wrote.

"Be that as it may, market conditions turning from extremely tight at the beginning of the year to balanced is good news for affordability."

But in Vancouver, "market conditions remain tight," Pinsonneault wrote, noting that the city's condo price index has risen by 19 per cent in just the past 10 months.

Starting in January, borrowers of uninsured mortgages (those with 20 per cent or more down) will have to pass a "stress test" to see if they can afford their mortgage at interest rates about 2 percentage points higher than the rate they are being offered.

Of all the mortgage rule changes enacted in recent years to cool the housing market, industry insiders say this one will have the most impact. It's expected to reduce home-buying power by around 21 per cent.

No agreement on where prices are headed

In a report released this week, realtor Royal LePage predicted the new rules would slow down home sales, but "insufficient housing supply in Canada's largest cities" will keep prices rising.

Royal LePage predicts prices will rise 4.9 per cent next year.

However, not every forecast agrees with that. In a client note Wednesday, Capital Economics predicted that the new mortgage rules will end Canada's run of rising house prices.

"Higher interest rates and tougher mortgage rules will depress prices next year," economist David Madani wrote.

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