TORONTO - There is now convincing evidence that Canada's housing market has come off the boil, Bank of Nova Scotia economists say.

Home resales have fallen for four consecutive months, and the inflation-adjusted average resale home price registered its first quarterly decline in seven years during the first three months of this year, Scotia Economics noted in a report Thursday.

"Cracks are appearing on the new home front as well," the bank said, as demand for new residential building permits has fallen sharply and price increases are moderating as inventories of unsold homes trend higher.

"We expect overall sales volumes in 2008 to total about 15 per cent below last year's record levels, and home prices to increase on average by about five per cent," said Scotiabank economist Adrienne Warren.

"Price gains should slow further in 2009 with the return of a balanced market for the first time in a decade."

Meanwhile, housing starts are projected to decline to about 180,000 annually by the end of the decade, from the current 225,000-unit range.

The report observes that the cooling market is most notable in many of what had been Canada's hottest markets, including Calgary and Edmonton.

But Warren said a major national correction - like the slumps that followed the housing booms in the 1970s and 1980s - is not in the cards.

"Our long-term housing price model puts average home prices in 2007 at about eight per cent above their long-term trend, compared with a premium of 12 per cent and 18 per cent, respectively, at the 1976 and 1989 housing cycle peaks," she said.

Canada's real estate market is not overbuilt and households are not excessively indebted, Warren added.

"At the end of the day, we predict a soft landing for the Canadian housing market, with somewhat lower sales and construction, and a period of relatively flat inflation-adjusted home prices."

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