STEPHEN POLOZ, the governor of the Bank of Canada, has been warning Canadians about piling up debt to buy overpriced houses since he took office four years ago. At first he used bankerly language, pointing to the risk of a “disorderly unwinding of household-sector imbalances”. Lately, with household debt at record levels and house prices in Toronto and Vancouver continuing to rise, he has started to speak clearly. “It’s time to remind folks that prices of houses can go down as well as up,” he said on April 12th.

Various levels of government have been trying to restrain house prices (which Mr Poloz has encouraged to rise by keeping interest rates low). The federal government has tightened conditions for the mortgage-insurance policies it sells to lenders, which cover more than half of mortgages by value. Last year the government of British Columbia, Vancouver’s province, slapped a tax of 15% on foreign buyers. Ontario, whose capital is Toronto, brought in its own version this year.

These measures have been slow to affect the market. House prices in Toronto rose a record 26.3% year-on-year in April, according to the Teranet-National Bank index. Vancouver’s prices rose 9.7%. Household debt, two-thirds of which is mortgages, is the highest it has ever been. Canadians owe C$1.67 for every dollar of disposable income (see chart). Now there are signs that the market may have peaked. Property agents in Toronto report that after dropping for nearly a decade the amount of time that houses spend on the market is lengthening. Houses that used to attract a dozen bidders, they say, now get a handful. Google searches for the term “housing bubble” have spiked. There are more “for sale” signs and fewer actual sales. These are signs of a market at a turning point. The question is whether the turn will be smooth or scarily abrupt. Alarmists see similarities to the United States just before its housing market crashed in 2007, causing a global financial crisis. Home Capital, Canada’s largest subprime lender, suffered a run on deposits this month after the Ontario stockmarket regulator said it had not dislcosed a possible fraud. Canadian households’ debt-to-income ratio looks higher that of the United States at its peak. On May 10th Moody’s, a ratings agency, downgraded Canada’s six large banks. Yet the dangers in Canada are smaller than those in the United States a decade ago. Its housing boom is concentrated in a few large cities. Alternative lenders like Home Capital, which serve borrowers who do not meet the credit standards of normal banks, are responsible for just 11% of mortgages. Institutions regulated by federal and provincial governments, mostly banks, account for the rest. The comparison between the United States’ debt-to-income ratio and that of Canada is misleading, since the two calculate the measure differently. Canada’s well capitalised banks are among the world’s most creditworthy despite the downgrade. “We don’t think the sky is falling,” says David Beattie, an analyst at Moody’s.

But even a gentle end to the housing boom could hurt. Many profit from it, including builders, lawyers and any firm that sells things to people who feel richer because their houses are appreciating. The economy grew at an annual rate of 2.6% in the final quarter of 2016 largely because of consumer spending and residential investment. A drop of 10% in house prices nationwide would reduce economic growth by a percentage point, reckons Mark Chandler of RBC Capital Markets, an investment bank. It would also hit governments’ finances. Ontario is counting on C$3.1bn ($2.3bn) this year in revenue from the land-transfer tax, about 3% of revenues.

Exports, the third main source of growth besides housing and consumption, are now under threat from American protectionism. Donald Trump says he wants a “massive” overhaul of the North American Free-Trade Agreement (NAFTA) between Canada, Mexico and the United States. The Trump administration may soon tell Congress that it intends to renegotiate the agreement, beginning a 90-day period before talks can start. An economic downturn may begin not with a drop in house prices but with a mangling of NAFTA: the United States buys three-quarters of Canada’s exports. It might then spread to households and banks. “Even a good bank can run into trouble if it’s operating in a bad environment,” says Mr Beattie. If Toronto and Vancouver don’t knock the economy, Washington might.