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A for sale sign sits in front of a Mississauga residential home, April 16, 2012.

J.P. MOCZULSKI/j.p. moczulski The Globe and Mail

For the first time since the beginning of the year, the number of home sales in Canada dropped in May, falling about 3 per cent from April.

Prices too appear to be softening. Home-buyers last month paid an average of $375, 605 for their new home, slightly less than those who purchased a year ago, the Canadian Real Estate Association said Friday.

Signs of a cooling housing market may be welcome news to economists who are watching closely for signs of price correction in Canada's over-valued real estate market.

Story continues below advertisement

But a closer look at CREA's figures shows that while the housing market may be softening in some areas of the country, at least one of the typical problem spots remains.

The number of sales in Toronto, which just yesterday was singled out by Bank of Canada Governor Mark Carney for causing serious concern because of over-inflated condo prices, was still higher than sales levels recorded for the city over most of last year.

"Activity in greater Toronto is stronger this spring than it was last year, and higher-priced homes are still selling quickly," Gregory Klump, the chief economist at CREA, said in the report.

Across the country, home sales were up 9 per cent from last May, which is in part a reflection of last year's slowdown after stricter mortgage rules were put in place. In general, the housing market in Canada does appear to be softening.

May's dip in sales combined with only a slight 0.3 per cent increase in the number of new homes listed last month is having a balancing effect.

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