Canada's housing market churned out another strong month in October with average resale prices rising more than 8 per cent. It was the second-best October on record in nearly six years, led by soaring property values in Toronto and Vancouver, prompting some housing analysts to abandon their long-held predictions for a soft landing and instead issue warnings about the risks of a sharp price correction.

Average resale home prices soared an annualized 15.6 per cent in the Greater Vancouver Area to $947,334, the Canadian Real Estate Association Reported. Prices jumped 7.6 per cent in the Greater Toronto region to $630,876. Outside of the Toronto and Vancouver areas average prices rose just 2.5 per cent. They fell in oil-exposed Western markets, including Calgary, where sales activity plunged 40 per cent compared with the same period last year, pushing down the average price by 4.4 per cent. Average prices fell 4.6 per cent in Regina and 3 per cent in Newfoundland and Labrador.

October continued along a trend that has been driving the Canadian housing market for much of the year. Nationally, the average resale home price hit nearly $456,000 last month.

But prices have been flat or falling in regions most exposed to the energy sector, while the Bank of Canada’s July interest rate cut and a depreciating loonie have boosted demand among both local and foreign buyers in Toronto and Vancouver. The exceptionally strong price growth in those two markets prompted some analysts to once again raise the spectre of a housing crash.

“Following the fourth tightening in mortgage rules in 2012, nearly everyone thought Vancouver and Toronto housing markets would land either softly or with a thud,” wrote Bank of Montreal economist Sal Guatieri, adding that his bank was among those who had been calling for a soft landing. “Instead, they took flight again, greased by falling interest rates. Both are at high risk of correcting when interest rates rise. And, the longer prices climb at unsustainable rates, the greater the risk of a crash.”

Toronto-Dominion Bank economist Diana Petramala warned that “Canada’s hot housing market days may be numbered,” pointing to the strong markets in Ontario and B.C. that are “largely inconsistent with underlying economic conditions” and the risk that rising interest rates that could hammer Canada’s deeply indebted homeowners.

“While interest rates are likely to go up very gradually, elevated home prices and debt levels have left Canadian households far more vulnerable to small changes in interest rates than they have been in the past,” Ms. Petramala wrote. “As such, we continue to anticipate a sharp moderation in housing activity next year as interest rates head higher.”

Nationally, prices for detached houses continued to rise roughly twice as fast as prices of condos, another trend that has been driving the housing market this year and one which CREA economist Gregory Klump predicted is “unlikely to change any time soon” as a shortage of listings for single-family homes continued to put pressure on prices in several cities. Prices for single-family homes were up 9 per cent in October from previous year, compared to 4.4 per cent for condos.

Double-digit price growth wasn’t enough to encourage more homeowners in the Vancouver area to list their houses for sale. New listings fell 8 per cent in the Greater Vancouver Area compared with the same time last year. They dropped 1 per cent in Toronto. Over all, despite a strong month for sales and prices, the number of new listings rose in just six of the 26 markets covered by the real estate association’s housing market index.

The country’s housing market remains near the top end of a range that CREA considers to be a balanced market. The ratio between the number of sales and the number of new listings hit 57.9 in October. CREA considers a range between 40 and 60 to be “balanced,” while anything above 60 is a seller’s market. Eight of the country’s largest housing markets are strongly in seller’s territory, which CREA called the “tightest housing market conditions at the national level in almost six years.”