Canada’s resale home market will move towards balanced conditions over the next two years as MLS sales ease and inventory levels increase, says Canada Mortgage and Housing Corp.’s (CMHC) second quarter Housing Market Outlook, Canada Edition.

In late 2009 and early 2010, sales activity included some pent-up demand from early 2009, the federal agency says. Once this demand is exhausted, and as mortgage rates gradually rise, the pace of activity in the resale market will ease. As a result, existing home sales will be in the range of 484,000 to 513,300 units in 2010, and then move slightly lower in 2011 to be in the range of 443,500 to 504,900 units, says CMHC.

With an improved balance between demand and supply, the average MLS price is expected to stabilize through the end of 2010 and then rise modestly in 2011, it says.

Housing starts rebounded in the second half of 2009 and early 2010 and will stabilize over the next two years, CMHC is forecasting. Following a total of 149,081 units in 2009, housing starts are expected to be in the range of 166,900 to 199,600 units in 2010. In 2011, housing starts will be in the range of 148,600 to 208,800 units, says CMHC.

“Canadian housing markets have recovered from the low levels posted in early 2009,” says Bob Dugan, chief economist for CMHC. “Moving forward, housing starts will moderate as activity becomes more in-line with long term demographic fundamentals.” He says new measures for government-backed mortgage insurance that took effect on April 19 will continue to support the long-term stability the market.