The average price of a Canadian home sold in May was $509,460, a 13% increase in the past year and the highest on record.
The strong gains are largely tied to hot markets in Ontario and British Columbia, according to the Canadian Real Estate Association.
Without Ontario and British Columbia, the average price declined 0.7% in the past 12 months, and sold for $310,007 in May.
Sales activity dropped about 70 % in May from the previous month, led by those in British Columbia and Ontario where the number of homes listed for sale has fallen to multi-year or all-time lows according to CREA.
The President of CREA Cliff Iverson said there are housing markets where sales continue to reflect cautious among homebuyer and uncertainty of the local economy.
The drop in sales and new listings in those cities are concern for policymakers they could be a sign that high prices are convincing buyer not to bother at this hot and high prices and sellers won't sell because they can't afford to move up after they sell.
According to CREA's house price index housing costs in Vancouver is eye popping with increased of 29.7 % in the year to
May and in Fraser Valley 31.7 %.
The figures are 17 times more than current iflation rate of 1.7 %.
The warnings are piling on the Canadian housing market, Bank of Montreal economists Doug Porter and Robert Kavcic put it in a separate report on Canada's housing market on Wednesday.
While record low borrowing costs are the most obvious factor behind high home prices, the fact that the surge in prices is so heavily concentrated in just two cities (and their environs) means that there are other important factors at play as well " BMO said.
Among the factors the bank cites are foreign buyers, who many watchers claim are driving prices out of reach. While BMO says more hard data is needed on the topic, the bank makes it clear that foreign money is a factor.
Recent changes to downpayment rules requiring 10 per cent minimum up front will make it harder for locals to buy, while doing little to curb foreign buyers, the bank says.
The new rules will make it harder for the domestic buyer and leave the field wider open for foreign capital inflows.