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A Conference Board of Canada report concluded that record household debt levels will slow domestic consumer spending, and since the bulk of this debt is mortgage-related, I went in search of a connection between the housing market and consumer spending.

The past 17 years has seen a close relationship between retail spending and housing prices. If it holds, this might be bad news for indebted homeowners.

The chart compares the year-over-year change in domestic retail sales (using a six-month moving average) with the annual change in the Teranet-National Bank Home Price Index Composite 11. Correlation calculations support the thesis of a consistent relationship between the two measures. The data alone does not, of course, prove a causal relationship such as "housing prices drive consumer spending."

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The final portion of the chart shows a distinct divergence between home prices and retail spending. The housing index continued higher while year- over-year sales growth flagged. It's possible, but not guaranteed, that the Conference Board's contention that the Canadian consumer is tapped out and looking to repay debt rather than spend, is set to extend to the housing market. If consumers are scrimping at the shopping mall, it's not a huge jump in logic to assume they are increasingly not inclined to take on mortgage debt to buy a home.

The implications of the chart are open to interpretation to some extent, but there is cause for concern, in my opinion. Falling interest rates between the fall of 2013 and mid-2016 made it easy for Canadians to add debt. The five-year Government of Canada bond yield, on which mortgage rates are based, fell from a high of 2.2 per cent in September, 2013, to a low of 0.49 per cent in February, 2016. This trend made monthly mortgage payments lower and helped spur the housing boom.

The reverse process – rising interest rates – is now evident and mortgage debt is getting more difficult to service. The five-year bond yield has climbed to 1.1 per cent and major lenders are slowly raising mortgage rates.

The real test will come if domestic economic growth picks up and retail spending doesn't. This would be a clear sign that Canadians are tightening their belts and repaying debt, and falling demand for housing would threaten to put the real estate rally in reverse. Foreign investment in sufficient scale, of course, could hide this trend by replacing waning domestic housing demand.

There are many ways things could play out – retail spending, for example, could start a recovery that closes the divergence on the chart and makes rising home prices more economically explicable – but the relationship between retail-spending growth and national home prices will remain an important indicator to watch.

Scott Barlow, Globe Investor's in-house market strategist, writes exclusively for our subscribers at Inside the Market online. Subscribe to Globe Unlimited at globeandmail.com/globeunlimited.

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