TD Bank is estimating Canadian home prices are about 10 per cent overvalued given the expectations for rising interest rates.
The bank says a combination of softer demand and rising supply of homes for sale will likely pull some steam out of home prices.
While 2014 is likely to see stable prices on average, the bank estimated prices are expected to edge down by two per cent per cent in 2015-16.
It says markets like Toronto, Vancouver, Montreal and Ottawa are likely more overvalued than markets in the Prairie and Atlantic regions and will likely see more of an impact.
Economist Diana Petrumala says no matter which indicators you look at, current interest rates, future interest rates or long range interest rates, Toronto is 'unaffordable' compared to other markets.
But she says there is a slew of condos set to be completed, and that will help bring housing prices back in line.
The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.
Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.