Canada's housing market will stall in the coming months but not tumble anywhere close to what occurred in the United States during the recent recession, according to a new report from the Conference Board of Canada.

That is because valuations and activity in Canada's residential market grew at a blistering pace over the past decade and were due for some sort of short-term decrease — commonly referred to as a correction.

"The Canadian housing market has generally been booming for about a decade now," wrote Mario Lefebvre, director of the business-oriented think tank's centre for municipal studies.Home building activity has flagged in Canada even as house prices have stayed relatively high (CBC)

"And the Conference Board ... has long claimed that at one point in time, the market would have to come back to more normal levels of activity. This is what’s happening right now."

Market stumble

The evidence that house sales have fallen back to earth is piling up.

For example, sales in 26 out of 28 major Canadian urban housing markets fell in July, and 18 of these cities experienced a drop in activity in June as well, the Conference Board said.

Economists are concerned that a significant fall in Canadian housing prices could mirror the American experience, in which home prices slid approximately 20 per cent in 2009.

Competing visions

Still, the Canadian statistics now have analysts debating how much — not if — the country's housing market will slip in coming months.

In late August, the Centre for Policy Alternatives, an Ottawa-based liberal-think tank, produced three scenarios of falling Canadian home values, one of which was an American-style plunge.

It based its analysis on the fact that home prices in many markets had outstripped the ability of buyers to cover their mortgage payments.

In response, the C.D. Howe Institute said that such a scenario was unlikely, citing the reticence of Canadian banks to lend mortgage money to high-risk lenders, unlike their U.S. counterparts.

Canada's situation has proved different from what occurred in the United States, Lefebvre said.

North of the border, housing prices have generally maintained their value even as home resale activity has decreased, he said.