Although conditions in Canada’s housing markets are showing some signs of improvement, Canada Mortgage and Housing Corporation (CMHC) is still holding the official overall rating of the country’s housing market at “strong evidence of problematic conditions.”

CMHC’s quarterly Housing Market Assessment (HMA) reported evidence of overvaluation at the national level has been downgraded from strong to moderate, and is now present in six Census Metropolitan Areas (CMAs), rather than eight.

“While the overall assessment for Canada has not changed from the previous quarter, the level of overvaluation has been downgraded to moderate,” said Bob Dugan, CMHC chief economist, in a press release. “Regionally, eastern markets show weak evidence of overvaluation while this factor is stronger in western centres and markets in southern Ontario, where economic fundamentals have not kept pace with recent price growth.”

In Victoria, evidence of overvaluation has climbed from moderate to strong, as fundamentals are not keeping up with higher prices. There is also moderate evidence of price acceleration and overheating in this region, leading to strong overall evidence of problematic conditions. Meanwhile, home prices have improved in Regina, Montreal and Quebec CMAs.

Overbuilding has declined from being detected in eight CMAs to six. In Moncton and St. John’s, the supply of homes is adjusting to the demand, but in the Prairies, urban centres continue to show moderate to strong evidence of overbuilding.

In Toronto and Hamilton, price acceleration, overvaluation and overheating is present. Price growth has intensified and demand outweighs supply in the rental, resale and new home markets. In Vancouver, strong evidence of problematic conditions has been detected due to moderate evidence of price acceleration and strong evidence of overvaluation.