Price declines in Vancouver dragged the national average home price lower in July, even as most markets saw slight increases compared to the same month a year ago.

The Canadian Real Estate Association said Wednesday the national average price for homes sold in July 2012 was $353,147, down two per cent from the same month a year earlier.

"Prices are off their recent peaks in Greater Vancouver and Greater Toronto, but remain above year-ago levels in most markets," the agency said in a release.

Overall, the sales activity was up 3.3 per cent across the country, meaning more homes sold in July 2012 than changed hands in the same month in 2011. But the number of newly listed homes fell 3.3 per cent in July compared to the previous month.

'[A] correction is now beginning to take place'—TD economist Francis Fong

The average price was higher in seven out of 10 markets, CREA said, but declines in the large Vancouver market dragged the national average lower. Stripping Vancouver out of the equation would have resulted in a 1.1 per cent average annual gain, CREA said.

"The national housing market remains firmly entrenched in balanced market territory," CREA said.

The slight real estate slowdown is a reflection of Canadians' wariness of taking on more debt, TD Bank said in a note following the release of the data. Job growth has effectively stalled over the last few months, owing to an uncertain outlook for the global economy, the bank noted.

"From an economic risk perspective, the moderation in the resale housing market is a positive development," TD economist Francis Fong said. "Slowing the pace of debt accumulation and housing activity now reduces the risk that households will get into financial trouble down the road when interest rates do eventually rise."

TD has been calling for a "modest correction" of between 10 and 15 per cent for some time, Fong says. "Today’s report provides some evidence that that correction is now beginning to take place," he noted.