In the midst of more news about the continuing struggles of the U.S. home market, the news from Ottawa last week is that Canadian home prices rose 1.3 percent in May, their largest monthly gain since last September.

Canadians should be proud that their lenders, builders, buyers and sellers have managed their real estate market responsibly. Obviously, our model is flawed. But Canadians shouldn't be too fast to congratulate themselves, because I sense trouble ahead. According to the Teranet National Bank composite house price index, prices are unlikely to continue at that pace in months ahead.

The same survey also showed that prices have now advanced for 13 straight months. On an annual basis, prices rose 13.6 percent and are now 4.2 percent higher than their pre-recession peak. But why, you might ask?

The yearly gains have been mostly in Canada's major urban areas, with Vancouver up 17.1 percent year over year and Toronto up 16 percent. According to the article in Canada's The Financial Post, the Teranet survey differs from other national surveys by focusing solely on price variations in Canada's six major urban markets. It also filters out such factors as an increase in larger home purchases that can skew average prices. Year-over-year prices also gained in the other four city markets surveyed (7.8 percent in Calgary, 8.5 percent in Montreal, 11.4 percent in Ottawa, and 5.6 percent in Halifax).

For example, senior economist Marc Pinsonneaul noted that there is some indication the slowing has begun: "The number of existing homes sold has declined in each of the three months ending last June, and it did so to a much larger extent than the number of new listings".

The U.S. boom year numbers were also strongly influenced by advances in major markets, such as that in our Phoenix metropolitan area. In any event, these are large appreciation numbers by any measure, and are obviously unsustainable.

The consistent increases are very similar. Yes they are more moderate, but ultimately the Canadian market has had above average appreciation compared to historical norms.

We can only hope that Canadian prudence will prevent the type of "equity killing" plunge that has resulted in values falling 50% and more in some areas of the Valley of the Sun.

You can read more about the Teranet National Bank report and the Canadian market in The Vancouver Sun www.vancouversun.com/business.

Mr. Kramoltz, JD, GRI, CIPS is a dual Canadian/U.S. citizen, and is the owner and Designated Broker of SimplySold Arizona, a full service real estate brokerage located in Scottsdale, Arizona.

Mr. Kramoltz writes articles and a blog that provide valuable information on local and national real estate issues. Written from his perspective as a real estate attorney with more than 25 years experience, a Department of Real Estate certified instructor, and an active broker, his articles avoid the inaccuracies commonly found in real estate writings. You can reach him at (480) 675 0112.