TORONTO - The housing market may be recovering, but is experiencing an undersupply of homes for sale in southern Ontario and elsewhere in Canada.

That's according to the latest house price survey by Royal LePage.

It says with the recession retreating, home prices are stabilizing and unit sales are increasingly driven by improved affordability.

Royal LePage says the average price of a two storey home in Canada is up just 0.1 per cent from a year ago at $409,335.

Average bungalow values grew 0.06 per cent year-over-year to $341,146, while the price of an average condo increased 0.09 per cent to $243,748.

Royal LePage says a shortage in housing supply is leading to bidding wars in several cities, including Toronto, Montreal, St. John's, N.L.; St. John, N.B. Moncton, Edmonton, Calgary, North and West Vancouver, and Victoria.

While the Atlantic provinces saw a strong recovery in home prices, western provinces have been slower to recover from significant price corrections in 2008, particularly in British Columbia and Alberta.

Ontario and Quebec saw home prices stabilize or gain slightly year-over-year with much of the recovery occurring in a strong third quarter.