Mark Carney is issuing a sharp warning that the housing market may be overheating, as his ultra-low interest rates, combined with too much optimism on the part of buyers, fuels prices in the country's hottest markets.

Even as growth in mortgage credit has started to slow and prices are expected to moderate, investment in residential properties nationwide is now near peak levels, Mr. Carney said in a speech to the Vancouver Board of Trade.

Without using the word "bubble" to describe a housing market where prices are now 13 per cent above their pre-recession peaks, and without saying the Bank of Canada will take specific measures to tame the sector, Mr. Carney left little doubt that he is concerned.

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"The risk is that expectations become extrapolative, prompting the classic market emotions of fear and greed - 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.

Tellingly, Mr. Carney noted that in Vancouver, the country's priciest market, as in other "globalized" markets like Sydney and Hong Kong, Asian wealth is coming in as investors diversify and look for hard assets, fuelling valuations that in some cases are "extreme."

That means that even as the central bank sees domestic demand for housing moderating because debt-strapped consumers are tapped out and interest rates will eventually rise, the real estate market could still be buoyed by foreigners, over whom he has little control.

Mr. Carney's warning about the housing market comes a day after a report from the Certified General Accountants Association of Canada showed household debt has hit a troubling $1.5-trillion, sparking new fears that the heavy burden on Canadian consumers could crimp spending and hurt the economy. If household debt were distributed evenly across all Canadians, the report said, a two-child household would owe an estimated $176,461, including mortgage costs.

Moreover, a report Wednesday from Statistics Canada showed Canadian families' income from earnings, investments and private pensions fell 3.2 per cent in 2009 to $63,000 - the first "significant" drop in market income since the early 1990s, an illustration of how much worse off some families are because of the recession.

Fresh data on Wednesday from the Canadian Real Estate Association bolster the notion that Vancouver may not be the only market that's overvalued. The overall market isn't wildly hot - the pace of actual sales is in line with the 10-year average - but prices in continue to escalate, rising 8.6 per cent nationally in May to $376,820 from $346,950 a year ago. And prices are surging in other big cities, with gains of 8.7 per cent in Toronto and 6 per cent in Montreal.

"Some excesses may exist in certain areas and market segments,'' Mr. Carney said. "The elevated level of 'multiples' inventories, the ample pipeline of developments under way, and heavy investor demand (much of it foreign) reinforces the possibility of an overshoot in the condo market in some major cities."'

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"Do we obsess about specific real estate markets in Canada? No," Mr. Carney told reporters at a press conference following his speech. ``Our job is to manage policy for the country as a whole."

Indeed, Mr. Carney hinted he is no closer to raising rates than he was two weeks ago, when he kept his benchmark at 1 per cent for a sixth consecutive time, saying "some" of the stimulus in the system will be "eventually withdrawn." The central banker used similar language Wednesday, and also fretted about the European debt crisis and said Canada's annual pace of economic growth in the second quarter may have been less than 2 per cent.

Mr. Carney strongly suggested that the central bank continues to see narrow financial regulation, like steps taken by the Finance Department to make it harder for some Canadians to get a mortgage, as a more appropriate tool than rate hikes for taming the domestic side of the equation.

Repeating warnings he has sounded for more than 18 months as Canadian borrowers binged on cheap credit, Mr. Carney said the share of households "highly vulnerable to an adverse economic shock" has risen to its highest level in nine years and urged borrowers and banks to be careful.

Indeed, while the mortgage market in Canada is more conservative than in the United States, where the subprime lending collapse triggered the 2008 financial crisis and Great Recession, Mr. Carney said real estate loans now make up more than 40 per cent of Canadian banks' assets, compared with 30 per cent a decade ago, a situation he called "unprecedented exposure."

"The central position of housing assets and liabilities on the balance sheets of both households and financial institutions means that any housing excesses could generate important vulnerabilities in the financial system,'' Mr. Carney said. "Historically low policy rates, even if appropriate to achieve the inflation target, create their own risks."

As long as rates are so low, Canadian authorities will "need to remain as vigilant'' and watch for financial imbalances, he said.

Vancouver is Ground Zero, with prices up an astounding 25.7 per cent to $831,555 - more than 11 times the city's average family income - from $661,745.

Realtors point to immigrants from China as a major factor in neighbourhoods on the city's west side. Although this has never been quantified with hard numbers that are publicly available, the anecdotes colour all talk of real estate in the city. When Mr. Carney was asked how policy makers know that Asian wealth is helping to fuel the biggest price gains, he responded that the central bank has access to all data on insured mortgages across the country.

"The buyers who are making the market move, their appetite isn't necessarily controlled by Mark Carney," said broker Mike Stewart of Century 21 in Vancouver. "And he's kind of got his hands tied, with the dollar so high."

In any case, while prices are soaring, Mr. Stewart said there isn't the "exuberance" he remembers from the 2003 to 2006 period when the market was white hot. The number of homes sold in B.C. in May actually slipped slightly from a year ago.

"Everyone realizes it can't go up forever, but like any market there's bears and bulls," he said.