TORONTO -- Evidence of overvaluation is moderating, however Canada's federal housing agency maintained its "strong" overall risk rating for the country's housing market in its quarterly assessment.

Canada Mortgage and Housing Corp. said Wednesday that evidence of overvaluation — which occurs when house prices are not fully supported by economic fundamentals such as incomes — at the national level has been downgraded to moderate, from strong.

The agency said overvaluation is now present in only six markets, rather than eight, based on its quarterly housing market assessment, which tracks 15 local markets plus the national housing market.

Meanwhile, evidence of price acceleration, which may indicate speculative activity, remains moderate, according to the report. There is weak evidence of overbuilding or overheating on the national level.

"We have seen evidence that some of the previously identified housing market imbalances have unwound," CMHC's chief economist Bob Dugan said during a conference call.

"For example, in Regina, evidence of overvaluation has shifted from moderate to weak, and the overall evidence of problematic conditions has been lowered from strong to moderate. This follows similar trends in Calgary and Edmonton that we reported in our previous release."

The agency first raised its overall risk rating for the national housing market to strong from moderate last October, citing growing evidence of overvaluation.

The housing market assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country's real estate markets.

It gauges the overall level of risk by evaluating evidence of four problematic conditions: overheating, price acceleration, overvaluation and overbuilding.