The association said these changes are being prompted by weaker than anticipated sales activity during the crucial spring home buying season in Canada's four most active provincial markets. "The decline is consistent with the exhaustion of pent-up demand from deferred purchases during the economic recession, and sales having been pulled forward into early 2010 due to changes in mortgage regulations," CREA said in a statement.

CREA is now forecasting that national sales activity will reach 459,600 units in 2010, representing an annual decline of 1.2%. The realtor group also believes expected interest rate increases will keep homebuyers in a cautious mood, causing the market to slow over the second half and into 2011. Weaker growth and slowing consumer spending will see a further decline of 7.3% in the housing resale market next year. Annual sales will fall to 426,100 units.

"The Bank of Canada recognizes that inflation remains well contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many homebuyers," CREA president Georges Pahud said, although he did not that local market trends do not always follow national trends.

Average prices have remained stable even though the number of new listing on market has begun to decline. CREA believes supply will continue to adjust to lower demand, which should keep the market balanced throughout the country.

The national average home price is forecast to rise 3.5% in 2010 to $331,600, with increases in all provinces.

"Slowing first-time home buying activity means lower- and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result," CREA chief economist Gregory Klump noted.

"It also means pricing momentum will lose steam due to rising competition among current homeowners looking to trade up," he added.

Although modest average price gains are forecast in 2011 in most provinces, the national average price is forecast to ease by 0.9 per cent to $328,600.

"The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability," said Klump. "Sales activity and new supply are both expected to continue to ease, so inventories are unlikely to pile up the way they did during the recession.

"Transitory factors that resulted in big swings in housing supply and demand may now be largely in the rearview mirror, so while resale housing activity is expected to ease, the pace of declines should begin to slow," he continued, adding, "Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year."