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Royal Bank of Canada's housing economist fears the Toronto market is heading for another round of froth.

"It’s looking more and more like early 2016 all over again for the Toronto housing market," senior economist Robert Hogue warned in a recent report.

"This is not a good sign," he added.

"Those were the days when things started to heat up uncomfortably, propelling property values sky-high in the ensuing year."

Mr. Hogue was commenting on the Toronto Real Estate Board's most recent statistics, which showed sales and prices climbing as the number of listings declined.

As The Globe and Mail's Rachelle Younglai reports, sales in the Toronto area rose 15.4 per cent in January.

New listings fell 17 per cent from a year earlier, with active listings tumbling 35 per cent. Put it all together, agreed Bank of Montreal senior economist Robert Kavcic, and it suggests “supply-starved market conditions are returning.”

As Mr. Hogue noted, the benchmark, as measured by the MLS home price index, climbed in Toronto in January at an annual rate of 8.7 per cent, to $828,200, faster than December’s 7.3 per cent.

This price gain came amid low inventories, Mr. Hogue said, and suggested that the ratio of sales to new listings, which can measure a market's tightness, topped 0.7 in January.

That's a level that "usually sets the stage for even stronger price gains in the near term," he said.

And, thus, that benchmark price could "increase at a double-digit pace within the next couple of months if the market tightness persists," Mr. Hogue said.

"And that’s a real possibility because new listings continue to be scarce as we head into the spring season."

Inventory of both new and existing homes will, of course, help determine where things go next, Mr. Hogue said.

"If it stays low, prices will likely keep ramping up beyond the next couple of months," he said.

“Worse, if supply shrinks even further, prices could spiral upward like they did in 2016 and early 2017."

The federal government is reviewing housing measures because affordability issues have shut so many people out of high-priced markets like the Toronto and Vancouver areas.

Housing markets in Canada have been rebounding from the lows that were driven by federal, B.C. and Ontario tax and other measures, notably the federal bank regulator’s mortgage-qualification stress tests.

CIBC World Markets senior economist Royce Mendes believes the Toronto market is more sustainable this time around.

"From our view, the market is more balanced now," Mr. Mendes said.

"The sales-to-new listings ratio has rebounded, but that’s only a result of unit sales not slowing as much as new listings," he added.

"So while Toronto is back to seeing growth, it appears more sustainable this time around, a positive for home goods retailers and construction companies."

Several local real estate boards have reported their January numbers, and we'll get the full national picture Friday when the Canadian Real Estate Association releases its statistics.

Benjamin Reitzes, BMO's Canadian rates and macro strategist, expects that report to show national sales up 13 per cent from a year earlier.

“The tightening market is causing prices to heat up once again, with average prices up about 11 per cent year over year, which would mark the strongest pace since 2016,” Mr. Reitzes said.

"And, the quality-adjusted MLS [home price index] likely accelerated to 4 per cent year over year, the highest since early 2018."

The national market "has rapidly moved back into sellers’ territory, with sales rebounding and new listings falling sharply," Mr. Reitzes added.

"Record population growth, driven by immigration, is the major driver of housing’s resilience."

Vancouver, Victoria and the Fraser Valley have posted marked sales increases from the depressed levels of a year earlier, BMO said. Sales in Ottawa actually dipped for the first time in about one year.

“And, in Montreal, price growth pushed into double digits for the first time in about 15 years,” BMO’s Mr. Kavcic noted.

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