Canadian home prices declined for the second straight month as surging borrowing costs spur a reversal in what had been one of the world’s hottest housing markets.

Canada’s benchmark home price fell 0.8% to C$822,900 (about $635,000) in May from the month before, according to data released Wednesday by the Canadian Real Estate Association. Cities in Ontario showed the biggest declines.

Sales also dropped sharply, falling 8.6% from the previous month, the association said.

The drop comes after Canadian home prices shot up more than 50% over a two-year period as ultra-low interest rates and demand for larger living spaces led to bidding wars for properties.

Now, as the Bank of Canada tries to rein in inflation that’s running at nearly 7%, mortgage rates are rising quickly and policy makers have identified high house prices and heavily-indebted homeowners as major vulnerabilities in the economy. The central bank has raised its key policy rate from 0.25% to 1.5% since the beginning of March, while signaling even more aggressive increases could be coming next month.

“May picked up where April left off, with sales activity continuing to slow and softening prices in many parts of the country,” CREA Chair Jill Oudil said in a statement. “We are in a period of rapid change, but one that should settle to a more balanced housing market in time.”

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Last week, at its annual review of the financial system, the central bank said those who bought homes during the pandemic could become vulnerable as rates rise because they took on high levels of debt to do so, and the meager equity they’ve built up so far could be wiped out as prices fall.

The markets driving the national price decline are smaller cities in Ontario that experienced the biggest gains during the pandemic boom, as buyers priced out of Toronto looked further afield. Cambridge, Ontario, about an hour outside Toronto, saw benchmark prices fall 4.6% in May from the previous month, while home prices in North Bay, almost four hours away, fell 4%, the data show.

In a sign the pain is starting to spread, the same pattern held around Vancouver, where the biggest losses in surrounding markets like Chilliwack, British Columbia, where prices fell 3%.

Still, the cooling in the national market has only brought activity back to levels that are more in line with historical norms. The number of sales in May was slightly above the 10-year average for the month, for example.

The ratio of sales to new listings, a measure of market tightness, fell to 57.5% — a three-year low that is close to its longer-term average, data from the real estate association showed.

Even with the market shifting and the number of listings rising, though, Canada still had just 2.7 months of housing inventory available on the market at the end of May, about half the longer-term average, the data show.

A separate report released Wednesday by the Canada Mortgage & Housing Corp. showed supply ramping up. Housing starts rose 8% in May to an annualized pace of 287,300 units, exceeding economists’ expectations.