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A house that has been sold in Toronto's East end on Dec. 16, 2013.Deborah Baic/The Globe and Mail

Toronto home sales edged down in the bitter chill of January, but prices surged, again throwing up red flags.

Sales fell 2.2 per cent from a year earlier to 4,135 as new listings plunged 16.6 per cent, the Toronto Real Estate Board said Wednesday.

The average selling price, in turn, surged more than 9 per cent to $526,528. The so-called benchmark price climbed 7.1 per cent from a year earlier.

"Looking forward, it is possible that strong price growth, and therefore an increase in home equity, will act as a trigger for more households to list their homes for sale," said the group's president, Dianne Usher, projecting price increases again this year.

"This is especially the case for households whose lifestyles are changing, including those with an expanding family looking for a larger home or empty nesters looking to downsize," she said in the group's monthly report.

Senior economist Sal Guatieri of BMO Nesbitt Burns warned that the price growth in Toronto – as well as houses, condo prices surged 4.8 per cent – could spell trouble down the road.

"After a brief pause, Toronto's home prices are once again outpacing family incomes, raising the risk of a correction when interest rates normalize (sometime in the next century)," he said in a research note.

That last bit was, of course, tongue in cheek, as he was referring to the eventual rise in the Bank of Canada's benchmark overnight rate.

Home sales in Calgary, meanwhile, climbed 17.2 per cent in January, with the benchmark price up 9.5 per cent.

In Vancouver, sales surged 30 per cent, and prices 3.2 per cent.