The latest Scotiabank Global Real Estate Trends report released Wednesday found that the inflation-adjusted national average home price fell by 1.6 per cent in the first quarter of 2012 compared to the same period of 2011.
That compared with a 1.3 inflation-adjusted year-over-year gain in the fourth quarter of 2011.
"Price trends are relatively steady in the majority of local markets, though a few, notably Toronto, continue to report strong appreciation," Warren writes in the report, released Wednesday.
Demand has cooled due to moderate income growth and tighter mortgage insurance rules. In addition, there are more houses up for sale in most parts of the country.
Scotiabank said it expects the number of sales and average prices will be flat in the latter half of 2012.
By comparison, it found global property markets remain under stress, especially in recession-plagued European countries. Ireland saw prices fall a whopping 18.9 per cent and prices in Spain, which has experienced a housing crash, fell 9.1 per cent year-over-year.
Over the weekend, eurozone finance ministers offered to make C$100 billion available to Spain to revive banks crushed by bad real estate loans. However, market reaction suggests many observers didn't feel the relief was enough.
Most countries covered by the Scotiabank report saw prices decline during the quarter.
"The intensifying euro zone debt crisis, increasing financial market strains and moderating global growth suggests there is more downside risk to property prices in the near-term," Warren said.
"Eventually, however, improved housing affordability and pent-up demand will put many of these markets on a firmer footing."
Scotiabank projects that the era of ultra-low borrowing costs will continue in most developed economies, while many developing economies are moving to reverse prior hikes.
The latest figures on Canada's housing market from the Canadian Real Estate Association are due Friday, measuring the strength of sales and prices in May.
In April, the average home price in Canada was up 0.9 per cent from a year ago at $375,810, while sales on a year-over-year basis were 49,480, up 11.5 per cent from 44,370 a year ago, CREA said.
Continued strength in the housing market, largely due to the staying power of low interest rates, has led some economists to warn the market is overvalued. That could make homeowners vulnerable to a downturn, especially those who have used low interest rates to borrow more than they could otherwise afford.
A report released earlier this week by the Toronto-Dominion banking group projected Vancouver and Toronto home prices will probably experience a downturn of about 15 per cent in two to three years, but not the dramatic drop that hit the United States a few years ago.
The Bank of Canada and federal Finance Minister Jim Flaherty recently stepped up their warnings to Canadians to moderate borrowing on real estate, declaring household debt to be the domestic economy's number one enemy.