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A house that was sold recently in downtown Toronto.

Fred Lum/The Globe and Mail

The number of existing homes changing hands in Canada softened for the fifth month in a row in January, but prices continue their upward climb.

Sales of homes over the Multiple Listing Service dropped 3.3 per cent from December to January on a seasonally adjusted basis, according to data released Friday by the Canadian Real Estate Association, which represents the bulk of the country's real estate agents.

January's sales were 0.4 per cent above those during January of 2013. Sales activity has fallen 9.1 per cent since its peak in August, the association said. In part it blames weather.

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"A number of buyers likely waited out January's deep freeze before going house hunting, particularly where I'm from in Southern Ontario," CREA president Laura Leyser stated in a press release.

The majority of Canadian cities saw sales decline in January both from December and a year earlier.

The local real estate board in Vancouver, where the market was in a steep slump a year ago, reported earlier this month that January's sales were 30.3 per cent higher than a year earlier but down 9.9 per cent from December. Sales in the Vancouver area remain 7.2 per cent above the 10-year average. Sales in Calgary, which is currently one of the strongest markets in the country, were up 17 per cent from a year ago, marking the best showing for January since 2008. But sales in Toronto were down 2.2 per cent from a year earlier, and sales in Ottawa were virtually the same – with five more houses selling and 10 fewer condos than January 2013.

Realtors remain optimistic that the chill on the market will subside.

"Canadian housing market performance in January was a weather report of sorts, with January's Polar Vortex having dented both resale activity and new construction," CREA chief economist Gregory Klump stated in a press release. "We'll be keeping a close eye on February's numbers for signs of a rebound in Southern Ontario, where sales reflected deferred home purchases due to cold weather rather than home buyers getting cold feet."

Nationally there was 6.4 months of inventory (the length of time it would take to sell the number of homes currently for sale on the market at the current rate of sales) in January, up from 6.3 months at the end of December.

Despite the softening, prices continued their trek upwards. The average price that homes sold for in January was 9.5 per cent higher than a year earlier, at $388,553.

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"Prices remain surprisingly sturdy," Bank of Montreal economist Doug Porter wrote in a research note. "However, given the sustained slowdown in sales, we would continue to look for an eventual cool-down in price gains. The old rule of thumb is that prices follow sales with about a six-month delay."

The MLS Home Price Index, which seeks to account for changes in the location or type of homes that are selling to create a more apples-to-apples comparison, was up 4.8 per cent. Calgary and Toronto had the largest increases. The Vancouver area has now seen year-over-year price gains for three months in a row, on the heels of more than a year of price declines.

The Canadian government has taken numerous steps to cool the housing market. While that's dented sales it's the rise in prices that keeps tongues wagging among international economists, policy makers and pundits who continue to debate the degree to which home prices here are overinflated.

Earlier this week the Teranet-National Bank house price index showed that prices rose more than economists had expected in January, reaching a new high and marking the strongest gain in prices for the month of January since 2010.

"No doubt the frigid temperatures and heavy snowfall across much of the country prevented many from diving in to the January market," Toronto-Dominion Bank economist Francis Fong wrote in a research note. "As such, when the spring thaw (finally) makes its way across Canada, a bounce back in sales activity would be entirely unsurprising. Indeed, the upcoming spring market could get an additional boost as prospective buyers lock-in to the recent pullback in mortgage rates."

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