Bank of Canada Governor Mark Carney used unusually blunt language Wednesday to warn that "excesses" may exist in parts of the Canadian housing market.

Carney made the remarks during a speech to the Vancouver Board of Trade — in a city where the average home price rose by 25.7 per cent to $831,555 between May 2010 and the same month this year, according to data from the Canadian Real Estate Association.

Carney said housing in some cities is "severely unaffordable."

On average, he said, national house prices have risen 31 per cent from their trough in early 2009, and are now 13 per cent above their pre-financial crisis peak.

The central bank governor did not suggest that house prices in general are unsustainable, but he warned of the "possibility of an overshoot," or correction in prices, in the condo markets in some major cities, mainly because of ample development already under way and heavy investor demand, especially from foreign buyers and investors.

The average level of house prices nationally is now nearly 4.5 times average household disposable income, Carney said. This compares with an average ratio of 3.5 over the past quarter-century.

Home ownership costs creating 'financial vulnerabilities'

The cost of home ownership is close to its highest level since records were first kept in 1949, he said, creating 'financial vulnerabilities," should there be an economic downturn.

In fact, the bank estimates that the proportion of Canadian households that would be highly vulnerable to a downturn has risen to its highest level in nine years, despite an improving economy and low interest rates.

Carney suggested some parts of the Canadian housing market risk being dominated not by forces or supply and demand, but by the emotions of greed and fear.

"Greed among speculators and investors — and fear among households that getting a foot on the property ladder is a now-or-never proposition," he said.

Without making any reference to the bank's intentions on interest rates, Carney repeated his previous warnings that, in general, over the life of a mortgage, interest rates will often rise.

At its last meeting on May 31, the bank's monetary policy committee held its benchmark interest rate steady at one per cent, the sixth straight time the bank has opted to stand pat.