Housing bust in Canada are off the mark as the real estate market is showing signs of stabilizing, according to economists at RBC.

In RBC's latest Housing Trends and Affordability Report, the economists throw cold water on the calls for a major correction in housing prices, saying that the housing market "appears to have stabilized at lower levels," but added that the market is "cooler than it was just a year ago."

While they highlight the 13-percent decline in home sales during the first quarter compared to the same time last year, they say there is "mounting evidence" the housing-related activity is no longer weakening.

"Much of the decline in resale’s took place in the months following the implementation of the latest changes to government-insured mortgage insurance rules in July 2012; however, activity appears to have stabilized on a quarter-to-quarter, seasonally adjusted basis most recently," they write. They expect housing activity to remain "subdued" through this year, but "see scope for some mild strengthening from recent quarterly levels as the effects of the changes in mortgage insurance rules dissipate."

Last July, Ottawa shortened the maximum mortgage amortization period to 25 years from 30 years and lowered the amount homeowners can borrow against their house to 80 percent from 85 percent, among other changes. Many real estate insiders quickly blamed the subsequent slowdown in sales – which were particularly severe in once booming real estate markets like Vancouver – on the rule changes.

A recent report from the Canadian Association of Accredited Mortgage Professionals said Ottawa's move to apply the brakes to the country's real estate market will have a dramatic negative impact on the economy in the coming years. The group argued that the number of new housing starts will fall by as much as 30 percent over the next two years.

The group also said the slowdown in the housing market – which in recent years has helped to boost the Canadian economy in the wake of the financial crisis – will result in as much as 150,000 job losses.

Although home sales have slowed over the past year, prices have largely continued to move higher, but at slower pace. The average price of a home in Canada increased 1.3 percent in April from the same time last year, according to recent data.

"Home prices in Canada gave up some ground after they peaked in June 2012 but generally have held up in 2013 because demand and supply remain in balance in most of the country," the economists at RBC say in their report.

They expect home prices to "ease slightly,” falling 0.4 percent in 2013.

Information taken from the Globe & Mail