Sharp gains in the Calgary and Vancouver housing markets are unsustainable, leaving the two cities vulnerable to a "significant moderation" in prices, a TD Bank economist warned Thursday.

Edmonton is also seeing "explosive" price growth — up 31 per cent in July from last year for resales homes — but house affordability is still good, TD Financial Group deputy chief economist Craig Alexander said in a commentary.

On the whole, housing activity in Central and Atlantic Canada has cooled down without a price correction, but the Western cities are "flashing warnings signs," the bank said.

Alexander, who co-authored the commentary with economist Steve Chan, said the Canadian market has lacked the amount of speculation seen in past cycles, and noted that the "excesses" have been far less than those experienced in markets south of the border.

The Canadian average price for resale homes was up 12.9 per cent in the second quarter of 2006 from the same period in 2005. When Alberta and British Columbia are factored out, however, the increase is a more-modest 7.3 per cent.

"The dominant trends in housing markets outside of the West have been weaker unit sales, greater new listings and more moderate price growth, all of which point to more balanced market conditions and declining real estate risks," Alexander said.

On Thursday, Statistics Canada cited the cooling housing market as one of the reasons why economic growth slowed to an annualized rate of two per cent in the April-to-June quarter.