Hamilton homes are just as overvalued as Toronto and Vancouver's according to the latest Canada Mortgage and Housing (CMHC) quarterly housing market assessment.

While the number of houses sold last month in Hamilton fell 21 per cent compared to a year ago, the prices are still too high.

And while "evidence of overvaluation at the national level remains moderate" the evidence seen in Hamilton, Toronto, Vancouver and Victoria remains strong, says Wednesday's report.

Factors taken into account in determining if the Hamilton market is overvalued include income levels, employment and population growth, says Anthony Passarelli, CMHC analyst for Hamilton.

"The population is not growing to the extent that you'd expect to see with these prices," he said. "Same for employment."

But Hamilton's proximity to Toronto is the main cause behind overvalued Hamilton prices, Passarelli said.

"Because Hamilton is so close, it causes Hamilton's prices to go up and be overvalued in relation to its local income, population growth and area employment," he says. "When you look at the prices, you would have thought those factors would have grown."

In other words, when you look at just Hamilton's population, income and employment growths, they don't justify the prices homes are selling for.

"Double digit annual growth rates in a number of house price measures for Hamilton continued to outpace growth rates in real personal disposable income per capita, employment and the young adult population of 25 to 34 years of age," the CMHC report states.

It also says the ratio of full-time jobs to part-time jobs in Hamilton didn't increase much, putting little upward pressure on real wages.

Passarelli said the factors are strong — the population growth is coming from people moving here from Toronto and employment figures are positive, but they are not at the level that justifies the housing prices here.

The CMHC's assessment of the Canadian housing market is one with "strong evidence of problematic conditions" because of slow growth in the young adult population, a decrease in disposable income and the pickup in home price growth.

Its report acts as "an early warning system" for the market, it states.

Passarelli says the 'problematic conditions' means the market is left vulnerable. It doesn't necessarily mean you'll lose your house if conditions worsen, but it could mean a period where house prices slow down for incomes to catch up, he said for example.

He notes however, that the market has changed in recent months, with price growth slowing down.

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