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A man walks past houses in east Vancouver, B.C., on Sunday September 20, 2015.

DARRYL DYCK/The Globe and Mail

Canada's federal housing agency is finally joining the chorus of housing market analysts raising red flags about Vancouver's scorching housing market.

Canada Mortgage and Housing Corp. said it had identified what it called "moderate evidence of problematic conditions" in Vancouver thanks to prices that have soared higher than even the region's strong economy should be able to support.

"Fundamentals are actually quite strong in Vancouver, there has been a lot of employment and income growth and population growth," said CMHC chief economist, Bob Dugan. "But prices are increasing by even more in that market."

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It is the first time the federal mortgage insurer has issued a warning about Vancouver, even as prices for single-family homes have jumped nearly 50 per cent in the past three years. Home resales in the region hit a record in March, the Real Estate Board of Greater Vancouver said, while the benchmark price of a detached home rose more than 27 per cent from a year earlier.

"Better to ring the alarm bell late than never," wrote Bank of Montreal senior economist Sal Guatieri. Home prices have been outrunning incomes in the Greater Vancouver Area for much of the past 10 years, he said, although a jump of nearly 20 per cent in resale condo prices over the past year likely helped trigger the warning from Ottawa.

With the addition of Vancouver, the federal housing agency highlighted problems in 10 out of the 15 largest local housing markets in the country. It renewed its warnings of "strong evidence" of problems in the housing markets of Toronto, Calgary, Regina and Saskatoon and said it found "moderate evidence" of similar problems in Edmonton, Winnipeg, Ottawa, Montreal and Quebec City.

CMHC's views on the Canadian housing market matter in large part because the federal agency effectively backstops much of the country's mortgage market. The corporation said its local market assessments are one of the factors it considers when deciding whether or not to approve an individual application for mortgage insurance.

"Insured borrowers in high-risk markets are more likely to be declined, be asked to put down more money or have their loan amount reduced," said Robert McLister, a mortgage planner at intelliMortgage and founder of RateSpy.com.

The government's assessment also serves as a warning to lenders, investors and policy makers, potentially leading to less money flowing into the regions of the country that CMHC deems high risk. "Anecdotally, I'm hearing more stories of appraisals coming in under expected value in Alberta, loans being scaled back in Alberta, more requests for co-signers in Toronto," Mr. McLister said. "But there is no panic."

In Toronto, industry officials commended the Crown agency for raising issues that have long plagued some sectors of the market, such as eroding affordability and a supply of single-family homes that has not kept pace with intense demand.

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"It's good to see CMHC confirming the facts around the Toronto housing market," said Bryan Tuckey, chief executive officer of the Building Industry and Land Development Association, which represents developers. "What would be useful is if CMHC could start to look at and assess the real underlying causes of why the prices are increasing."

He pointed to provincial anti-sprawl legislation that has encouraged municipalities to shift away from single-family home development and a lack of available land for low-density housing.

While some industry players are taking stock of the federal government's opinions on the housing market, some say buyers and sellers are increasingly turning a blind eye to the growing collection of housing market warnings as home prices have continued to defy all predictions of a slowdown.

"It used to have an effect," said Dianne Usher, senior vice-president of Royal LePage Johnson & Daniel. "People would listen and would react. Then certain market drivers just started to take hold and all of a sudden the predictions were not valid any more."

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