Sluggish sales have forced the Canada Real Estate Association to revise its housing forecast downward for the rest of this year and 2011.

The Ottawa-based group, which represents about 100 boards across the country, now says 442,200 existing homes will be sold via the Multiple Listing Service in 2010. Back in February it was forecasting 527,300 sales. The forecast for 2011 calls for a further decline in sales, down to 402,500. CREA had previously forecast sales would reach 490,100 next year.

"I wouldn't characterize it as a big drop," said Gregory Klump, chief economist with CREA. Even with the revised forecast, sales for this year would only be off 4.9% from 2009.

Despite what CREA described as "momentum for home sales activity," thirdquarter sales proved to be weaker than the real estate industry had been expecting.

Since its February forecast was made, the real estate industry has had to grapple with some new realities. The Bank of Canada removed its promise to not raise rates and the federal government tightened mortgage conditions.

By 2011, weak economic and job growth, low consumer confidence, and rising interest rates are likely to continue to take some steam out of the housing market. As well, the country's larger markets are expected to skew average sale prices on a national basis.

CREA said the national average home price will rise 3.1% this year to $330,200 but by next year it will drop by 1.3% because of declines in British Columbia, Ontario and Alberta. Every other province is expected to experience an increase in average price in 2011.

Supply is beginning to shrink in recent months which should provide support for prices over the coming months. "Housing demand and supply is stabilizing," Mr.

Klump said. "That's good news for home buyers, who will feel less hurried to make an offer than they did when transitory factors ignited housing demand in early 2010."