"You've got a tug-of-war," Gregory Klump, CREA's chief economist, said Monday, with fewer sales over $1 million in Vancouver in March weighing on the national average, while high-end sales in Toronto picked up the pace.
"A year ago at this time, high-end sales in Vancouver were running at unusually high levels and they've since fallen back to earth and as a result you've got a year-over-year decline in average prices," he said.
Meanwhile in Toronto, Klump said sales of single detached homes over $600,000 as a percentage of total sales have picked up as well as the high-end condo market.
"It's the sales mix," he said.
The association said the national average home resale price in March was $369,677, down from just under $373,000 in February and $371,591 in March 2011.
That compared with an average residential price in Toronto last month of $504,117, up from $456,147 in March 2011, and an average residential price of $761,742 in Vancouver last month, down from $786,311 in March 2011.
However, Klump noted that the number of sales across the country reached their highest mark in nearly two years.
The association said the number of sales conducted through the industry's MLS system was up 2.5 per cent from February, making last month the busiest sales month since April 2010.
For the first three months of 2012, a total of 108,373 homes traded hands — a heavier volume than the five- or 10-year averages for first-quarter sales volume.
BMO deputy chief economist Douglas Porter noted Toronto is not Canada, nor is Vancouver.
"Excluding these two wildly divergent markets, average prices and sales across the rest of the country posted modest gains from year-ago levels in March," Porter wrote in a note to clients.
"For most cities, the market looks well balanced, and is broadly moderating on its own accord."
The busy spring real estate market comes as both Finance Minister Jim Flaherty and Bank of Canada governor continue to raise concerns about household debt.
TD economist Sonya Gulati said the market will face negative headwinds from households beginning to curb their spending in light of interest rate hikes to come and record-high household indebtedness.
"It was around this time last year that Vancouver was labelled the hottest housing market in the country. Back then, high-end home sales were driving up out-sized sale and price gains," Gulati said.
"The 2012 data suggest that the accolade has now been given to Toronto. But, both urban cities should experience weakness in 2013-14 as interest rates begin to inch up from current lows."
Last month, several of Canada's big banks raised their posted mortgage rates signalling that the era of cheap borrowing may be drawing to a close.
Fixed-rate mortgages are influenced by the bone market. Higher bond yields increase the cost of funds for lenders, who in turn pass them on to customers.
Variable-rate mortgages are more influenced by the Bank of Canada's trend-setting overnight rate, which is used as a benchmark for the commercial banks' prime rate.
The central bank's policy rate has been set at one per cent since September 2010, low by historical standards. The rate is expected to remain unchanged Tuesday when the Bank of Canada makes its latest policy announcement.
Note to readers: This is a corrected story. An earlier version said last month's average price was up from March 2011.
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